Behind the Curtain: What Hospice Owners Should Know About the Strategic Buyer's Process
By Mertz Taggart | Featuring insights from Alex Ferguson, Senior Vice President of Mergers and Acquisitions, Agape Care Group | September 2026
At a Glance A hospice buyer’s offer is a statement about risk, not just earnings. Before an IOI (Indication of Interest) buyers want the owner’s story and no surprises on CAP, audits, or the 36-month rule, and culture and clinical quality decide whether an agency is considered for a top-tier multiple at all. Sellers hold maximum leverage until the LOI (Letter of Intent) is signed, which is why Mertz Taggart works to get every issue surfaced and addressed before that point. |
Most hospice owners will sell a business once. Buyers do it every month, which means the two sides come to the table with very different visibility into what happens next. Our Behind the Curtain webinar series exists to close that gap. On September 3, Cory Mertz and Michael Lloyd hosted Alex Ferguson, Senior Vice President of Mergers and Acquisitions at Agape Care Group, a hospice operating company that has grown from 3 states to 11 and completed about 20 acquisitions since 2022.
We asked Alex to take owners inside a strategic buyer’s process, from the first teaser through the letter of intent. That is the stretch of a deal where a seller holds the most leverage, and where an owner’s decisions carry the most weight. What follows is what we took away from the conversation, and what it means for an owner preparing to sell.
What is a buyer actually pricing when they set the multiple?
The multiple is a measure of risk. It reflects how confident a buyer is that the cash flow they are inheriting will still be there after closing, which is why two agencies with similar revenue and EBITDA can command very different multiples.
Owners tend to think of the multiple as a market rate, something that trades in a tight range. In our experience it is closer to a confidence score. Transition risk and sustainability risk sit at the center of it, and payer mix, referral diversity, management depth, growth trajectory, and margin profile all move it. So does the competitive leverage an advisor brings to the table.
Alex confirmed it from the buyer’s side. There is no black box. Agape has paid what he called an “infinity multiple” for a business that was close to break-even, because the culture, clinical quality, and trajectory gave the team high confidence in where it was headed. And before Agape will consider a top-tier range at all, an opportunity has to clear two gates: culture and clinical quality. If either one is weak, the numbers do not rescue it.
For an owner, the implication is that the work of earning a strong multiple happens long before a buyer sees the financials. It is done in the referral relationships, the management team, and the clinical record a buyer will read as a proxy for risk.
What should an owner have ready before buyers see the teaser and CIM?
A clear story and clean data. Buyers can size up a hospice’s metrics in a matter of days. What takes longer, and what they weigh most heavily, is whether the story behind the numbers holds together.
Why is the owner selling, and why now? Is this a quick flip, or a business someone built over decades? Is there a team that can carry the culture forward, or does everything depend on one person walking in at 8 AM? A good advisor knows those answers before the first buyer call, because the first thing an experienced buyer does after reading the materials is call the advisor and ask what is really going on.
On the data side, the early checks are predictable: CAP exposure, PEPPER reports, referral source diversification, audit history, and whether the deal can clear the 36-month rule. Alex’s advice to sellers on all of it was blunt. Come clean now. Buyers do not like surprises, advisors do not like surprises, and an issue disclosed early can be planned around. The same issue discovered in diligence becomes a negotiation.
What happens inside the buyer’s process before an indication of interest?
Inside a strategic buyer’s evaluation, an opportunity gets reduced to one page and one question: does this feel like a fit, and how hard do we want to run after it?
Agape’s deal team distills the history, the reason for selling, KPIs, and the P&L into a one-pager, with upside on one side and open diligence questions on the other, then huddles with the executive team. Every opportunity has entries in both columns. What the owner controls is the ratio.
Our job as the advisor in that window is to make sure the upside column is complete and well supported, and that nothing lands in the diligence column we did not already know about. Then we stack the IOIs. In a well-run competitive process there will be several, and the spread between them can be wider than owners expect.
→ Related: If a Buyer Approaches You Directly, a Competitive Process Will Almost Always Get You More Money
How should an owner approach the management meeting?
The management meeting runs in both directions. The buyer is testing whether the seller will be straightforward once the deal is under LOI, and the seller is deciding whether this is the right long-term home for the business.
Once a buyer crosses the IOI threshold, they are spending real money and flying senior people in to sit across from the owner, so they arrive prepared. A buyer like Agape will ask for a short call with management beforehand and for as much data as possible in advance: patient days, admissions, blinded referral sources, diagnosis mix.
In the room, the questions are about people. A hospice is its clinicians and the team supporting them, so buyers want to know how the agency attracts and retains staff, and how the culture will hold up after a transition. They also want the warts. As Alex put it, if the lead salesperson gives notice, will the owner bring the news and a plan? That is a seller a buyer can work with.
The owners who come out of these meetings in the strongest position are the ones who ask hard questions back. What does integration look like? Where will my people land, and how will they be treated? Can I talk to owners who have already sold to you? Buyers read those questions as a sign the seller is proud of what they built, not as an obstacle. In Alex’s words, everybody lives in choice, and the buyer has to earn the right to keep the deal alive at every step.
Why does the window between the management meeting and the LOI matter so much?
Sellers hold maximum leverage right up to the moment they sign a letter of intent and grant exclusivity. Everything that can be resolved before that signature should be.
In the two to three weeks before an LOI deadline, a serious buyer does confirmatory diligence at its own expense: a request for the full data set, a look at quality indicators such as PEPPER reports, CAHPS scores, and HOPE data. The goal is conviction. When a buyer submits an LOI, we want the number in it to be one they have already pressure-tested, so it holds through closing.
Our philosophy matches the buyer’s here. More information pre-LOI is better, with clear exceptions. Trade secrets, patient information, employee information, and referral source detail stay protected until the deal is under LOI and the buyer has earned that access. Nearly everything else is fair game, and the more comfort a buyer has before signing, the more confidence an owner can have that the deal will close on the terms they agreed to.
Michael noted that this is where we earn our role as intermediary. A strong buyer will usually ask for more than a client is comfortable sharing early. Our job is to give the buyer enough to reach a premium valuation and full conviction, while protecting the company in the market.
How can a seller tell whether a buyer will actually close?
Deal certainty has two parts, whether the buyer can close and whether they will. The first is easy to verify, and the second shows up in behavior.
By the time a buyer is at the LOI stage of one of our processes, we know they can close. Their financial sponsor and funding are typically a matter of record. What owners worry about is intent, and the signals there are consistent: responsiveness, thoughtfulness when a problem surfaces, and visible spending of time and money on the project. A buyer who goes quiet or stops pursuing the deal consistently is telling you something, even if nobody says it out loud.
Alex’s example of how a good buyer handles a post-LOI surprise is worth keeping. Suppose diligence turns up a hypothetical $250,000 CAP liability. His approach is to call the advisor before anything is papered, flag the quality of earnings impact, and propose walling it off in a special indemnity bucket rather than cutting the enterprise value. A buyer who retrades a deal, in his words, is a buyer who will not get the next one.
There is a structural reason to expect that behavior from serious buyers. Once the LOI is signed, the buyer starts paying for clinical compliance work, a quality of earnings review, and legal drafting, and every dollar spent increases their own incentive to get to close. It is also why we stay engaged after the LOI rather than stepping back. Getting a deal to closing as quickly as possible, with minimal surprises, is the third part of our job, not the end of it.
What should an owner expect after closing?
The businesses buyers pay the most for are the ones they intend to keep intact, which is why questions about integration, the brand, and the owner’s own role are worth asking early.
Agape’s guiding principle after closing is to retain everyone who wants to stay, and it runs a dedicated integration team whose sole job is that transition, starting with one-on-one conversations with every employee. Not every buyer works that way. Some assemble an integration team from good people with other day jobs, and the difference shows up in retention. It is a fair thing to ask any buyer about.
On the brand, most Agape branches now operate under the ACG name, and an acquired agency may migrate over time. On the owner’s role, most sellers we work with are ready for whatever comes next, whether that is retirement, family, or another project, and buyers have latitude to accommodate that. The typical ask is to help preserve the culture and stay reachable. Owners who want to stay through the next chapter can have that conversation too. Either way, it is part of the discussion when we take a company to market, not an afterthought.
What should an owner two to three years out do now?
Run the business as if it will never be sold, and check in on it with an advisor once or twice a year.
That was Alex’s advice, and it matches how we work with owners years ahead of a transaction. Most operators are heads down, doing good work and rarely pausing to articulate it. A buyer, though, wants to hear the narrative and see the data that supports it, and the owner who can connect the two walks into the process with a clear advantage.
Structured time with an advisor, on a quarterly or semiannual rhythm, is where blind spots and weak spots get identified while there is still time to address them. It is also where strengths get documented in a way a buyer can verify. The businesses a strategic buyer most wants are the ones that have been doing the right things for patients and employees all along, because that is where the clinical quality, the culture, and the economics tend to line up.
Questions owners asked
Can two hospices combine under a holding company to command a higher multiple?
Rarely in a way that pays off. Two agencies bring two cultures, two care models, and often two EMRs with no shared platform, and buyers do not see that supporting an extra half turn or full turn. Alex’s read was that the juice is seldom worth the squeeze, though two like-minded operators who both clear the culture and quality bar have effectively vetted each other. If two companies truly integrate into one operation, a somewhat higher multiple is possible, but the work and risk involved are significant.
How can a seller protect confidential information during a process?
Share information in stages, and be deliberate about which buyer sees what, and when. Referral sources, employee detail, and trade secrets do not need to be shared early, and much of it can be de-identified as Facility A, B, and C. That staging is part of what we manage for clients. Alex added a practical test: check the buyer’s track record. A group that has never done a deal and is asking detailed questions about referral sources is telling you something.
Does it matter whether the agency is a C corporation or an S corporation?
Yes. Buyers generally prefer not to hold assets in a C corporation, and the seller of one faces double taxation that the buyer expects the seller to bear. Converting to an S corporation requires a seasoning period before the full benefit applies, so this is a conversation to have with an advisor and a tax professional years ahead of a transaction, not months. Have someone run the math. The valuation premium a buyer might pay for a C corporation rarely makes up the difference.
Are hospice deals structured as asset or stock purchases?
Mostly stock, on Agape’s side and in what we have seen across the market over the past couple of years. Alex explained the “our watch, your watch” construct: the buyer takes responsibility for the entity after closing, the seller remains responsible for activity before it, and the indemnity escrow and purchase agreement are structured so that a tax clawback or audit tied to a prior period lands where it would have if the owner had never sold.
Do buyers value a hospice on a per-ADC basis?
No. Value rests on the cash flow today and the cash flow the buyer is inheriting, with culture and clinical quality driving confidence in both. A per-patient number can be derived from an offer by dividing it by average daily census, but it is an output, not an input, and neither Agape nor Mertz Taggart treats it as a way to value a hospice.
Is the current moratorium pushing hospice valuations higher?
Not in Alex’s view, even though it limits de novo growth and puts more weight on organic growth and quality M&A. The reason is scrutiny. Audit activity is up, surveys are up, and more states are under a provisional period of enhanced oversight, so buyers have to be careful about who they acquire, indemnifications or not.
Key Takeaways
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Every buyer sees your agency a little differently
Every buyer runs a slightly different process, with its own hot-button issues. The more an owner understands how buyers evaluate an agency, the better prepared they can be when the time comes, and the more leverage they carry into the process. If you own a hospice agency and want to know how the buyer universe would see it today, we would welcome a confidential conversation. Mertz Taggart has advised healthcare services owners for over twenty years, through hundreds of transactions.
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