Mertz Taggart Home Health, Home Care & Hospice M&A Update for Q2 2021 After dropping slightly in the first quarter of 2021, M&A activity for home health, hospice and home care rebounded significantly in Q2. Overall, there were 37 transactions completed in the second quarter. That marked the largest number of deals in a quarter on record outside of Q4 of 2020, which saw a record-breaking 53 total. “M&A activity ticked back up in a major way in the last quarter, as was expected,” Mertz Taggart Managing Partner Cory Mertz says. “Unfortunately, a lot of agency owners are burned out and thus looking to sell. The pandemic has undoubtedly taken its toll.” It’s not just about burnt out agency owners, however. There are other reasons why 2021 has the chance to be one of the most significant dealmaking years ever. Mertz sees two main causes. First is the spotlight that shone on these providers during the pandemic, which increased the value of many at-home care agencies nationwide. Second are recent tax legislation considerations. The Biden-Harris administration has introduced a new tax bill that will have significant implications on transactions. The bill proposes moving the tax rate on long-term capital gains from 23.8% (including the 3.8% Medicare tax) to 43.4%, and if passed, would be expected to go into effect on Jan. 1, 2022. Under the current 23.8% rate structure, a $10 million transaction would result in $7.62 million of after-tax proceeds. To net the same $7.62 million after taxes under the new proposed rate, a deal would require $13.46M million in cash proceeds. “Sellers’ anticipation of an increase in the capital gains tax rate is something that is undoubtedly the biggest driver of the current market,” Mertz says. Home-based care tailwinds derived from the pandemic will also continue to drive up the value of select agencies as the public health emergency wanes. “I expect we’re going to see this kind of velocity and perhaps acceleration as we close out 2021, barring anything unforeseen,” Mertz says. “This is setting up to be another record year for the sector.” As for the actual buyers, private equity (PE) players continue to lead the way, accounting for 24 of the 37 deals overall, including six (6) platform transactions. Note: Total industry transactions does not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. While PE remains a major player, health care providers looking to build out more substantial capabilities across the care continuum could become competitors in a buyers’ market. Home Care M&A Skyrockets The deals made in the home care sector played a big part for the Q2 uptick. The parity between home care, home health and hospice is also an unusual detail of this quarter’s transaction numbers. One reason for that is the home care market — which had the most deals — heating up. “Non-medical home care has become a hotter market,” Mertz says. “The 17 total non-franchise deals in Q2 were the highest number we’ve seen in home care in the last five years.” Arosa — formerly known as Arosa+LivHome, and backed by Bain Capital Double Impact — continued a busy 2021 in Q2, acquiring the Tennessee-based Family Staffing Solutions. In Q1, the Los Angeles-based Arosa entered the New Jersey market following the acquisition of Aveanna Concierge Services. Family Tree In-Home Care acquired HomeCare of the Rockies, aiming to take greater control of the private-pay market west of its Texas base — in states like Colorado. Chicago-based Help at Home, a provider of home- and community-based services, is also rumored to be going public by the end of the year. If true, that reveals the immediate impact of Centerbridge Partners and The Vistria Group, which acquired Help at Home last November. Home Health Agencies Get Aggressive The 15 deals in home health during the second quarter were also underscored by some larger moves in the sector. In May, home care provider Aveanna (Nasdaq: AVAH) went public, and also announced plans to become a player in the Medicare space by acquiring Doctor’s Choice Holdings, LLC for an aggregate cash consideration of $115 million. “We believe that Doctor’s Choice is a perfect fit to our strategy because it deepens our penetration into the traditional home health market and brings us greater density in the state of Florida,” Aveanna Executive Chairman Rod Windley said in a statement. “Our pipeline of acquisition targets currently remains robust for traditional home health as well as private duty services.” Going public is an exit strategy that a handful of other providers could be weighing, leveraging the valuations of the current public operators. The home-based care provider that was the most active in Q2 was The Pennant Group (Nasdaq: PNTG) — parent company of affiliated home health, hospice, home care and senior living companies — which closed three deals, include Pasco Southwest in Colorado. Mertz Taggart provided exclusive transaction advisory services in this transaction, representing the seller. Despite staffing pressures and other challenges tied to the COVID-19 pandemic, the Eagle, Idaho-based Pennant clearly sees the present as the right time to acquire. As more buyers come to market, prices will likely be less favorable, which bodes well for the companies getting into M&A earlier. Hospice Hospice dealmaking was in near lockstep in Q2 with the home health sector, totaling one more transaction, with 16. “Demand is still very high in hospice, but there aren’t all that many options for buyers,” Mertz says. “Although there was still significant activity in Q2, I suspect it will level off and create more demand for home health and home care sellers in the near-term.” Pennant was also active here, acquiring the Sacramento, California-based First Call Hospice in mid-June. For companies like Pennant that provide care across the spectrum, having multiple capabilities such as home health and hospice in the markets they serve appears to be a key motivator. LHC Group Inc. (Nasdaq: LHCG) was the most notable active player in hospice, acquiring Heart of Hospice, an end-of-life care provider with locations in five states, and Heart ‘n Home Hospice before that. Overall, while 16 deals in the second quarter represented an increase from Q1, that number represents the lowest we’ve seen since Q2 2020, which also saw 16 deals. Looking ahead If 2021 is going to be a record-breaking year in M&A as predicted, it would point to a very busy second half of 2021. After all, the year initially got off to a slow start with just 22 total deals in the first quarter. Between the first two quarters, 59 total deals have come to a head. There were 82 total deals in 2017, 131 in 2018, 112 in 2019 and 143 in 2020.

I recently had the privilege of sitting down with Dr. Matt Keck, the visionary founder of Cielo House eating disorder treatment programs, which were acquired by Refresh Mental Health in 2020. Dr. Keck is now breaking new ground with an innovative online treatment program at Cielomar Recovery. The Immersive Virtual Program, as he calls it, blends the power of simultaneous video conferencing with the engagement of an online video game. Could this unique approach be the next big thing in virtual treatment for eating disorders? Read the transcript below to discover how Dr. Keck is revolutionizing the field. The interview with Dr. Matt Keck Kevin Taggart : Hi, Dr. Keck, thank you for joining me today. I’ve been hearing a lot of buzz about the new Immersive Virtual IOP Program at Cielomar Recovery. It’s such a fascinating concept. Can you tell us how you came up with the idea? Dr. Matt Keck : Absolutely, Kevin, and thanks for having me. The idea actually came from a pretty everyday moment in our home. My wife Sofia and I were watching our teenage daughter play an online video game. What struck me was how she wasn’t just playing—it was how she was engaging and interacting with her friends. They were strategizing, laughing, and really connecting over the game. Sofia suggested, why not harness this kind of interaction and apply it to eating disorder treatment? We’ve always emphasized community and cohesion in our programs, so this felt like a modern way to enhance those principles. Kevin : That’s such an innovative leap. So how does the program actually work? What’s the technology behind it? Dr. Keck : The program itself takes place in the afternoons on weekdays from 3:30-7PM.  Each day involves a therapy group and a supervised meal group, with individual sessions throughout the week.  In terms of the technology component, it’s surprisingly accessible. The software for the program can be downloaded on any standard PC, making it easy for participants to join from their own devices. For those who might not have the necessary equipment, we can ship them a laptop with the software preloaded. Once set up, participants join a videoconference where they interact face-to-face while simultaneously engaging in the online video game. It’s this dual interaction—real-time video conferencing combined with the game—that drives engagement and creates a sense of togetherness. Kevin : What type of treatment methods are you integrating into this immersive program? Is it vastly different from what you’ve been doing over the years? Dr. Keck : The treatment methods are evidence-approaches we’ve been using over the past 15 years in eating disorder care. The difference lies in the addition of the video game component, which amplifies engagement. In traditional treatment, a lot of the magic happens in the unstructured moments—those transition times between groups, or when clients are just arriving and connecting with one another. This program recreates those moments through a positive, interactive experience without having to go to an in-person treatment center. The game gives participants a way to bond, have fun, and build those crucial connections that support recovery. Kevin : That sounds brilliant. Can you give us a sense of what participants can actually do in the game? Dr. Keck : The game is designed to be fun, creative, and therapeutic. Participants can cook meals, build and decorate their own houses—or even help decorate each other’s houses—garden, mine for precious stones, catch butterflies, collect teddy bears, and embark on quests set by non-player characters. They can also team up to help one another achieve various milestones, earning points and coins they can spend on features within the game. It’s all about creating positive, shared experiences. Kevin : I love the idea of building and decorating houses—it feels very symbolic of recovery and creating a safe space. What do you think makes the video game component so effective in treatment? Dr. Keck : The beauty of the game is that it provides therapeutic engagement and opportunities for growth both during and outside of treatment time. It’s a space where clients can engage in something enjoyable, develop trust, and work together toward shared goals. These shared experiences mirror the kind of bonding and cohesion we see in in-person treatment settings but in a way that’s accessible from anywhere. Plus, clients can access the game even outside of scheduled program hours, allowing them to focus on their recovery and feel connected even when they are not in program. Kevin Taggart : We all know about the virtual treatment boom, but that has been mostly relevant to traditional outpatient therapy. How does virtual treatment apply for higher levels of care, such as Intensive Outpatient Programs (IOPs)? Dr. Matt Keck : That’s a great question, Kevin. Virtual one-on-one outpatient therapy has proven to be very effective, but when it comes to higher levels of care, like IOPs, the challenges are different. Asking clients to sit for 3-4 hours on a static Zoom meeting simply isn’t ideal. The general feedback about other virtual IOP programs has been a mixed bag—engagement tends to drop off because it’s hard to maintain focus and connection over such long stretches. That’s why the dual-interaction component of our program, where clients engage in both the videoconferencing and the game, is so important. The game makes the experience dynamic and interactive, enabling clients to remain engaged and even look forward to treatment. It’s novel, it’s cool, and it resonates with clients, especially younger ones. Study after study shows that engagement in treatment is key to treatment efficacy, and this approach keeps that engagement front and center. Kevin : It’s incredible how you’ve merged technology with treatment in such a meaningful way. What kind of feedback have you received so far? Dr. Keck : The response has been overwhelmingly positive. People love how engaging and fun the program is, and they feel more connected to their peers. For many, it’s been a game-changer—no pun intended—in making treatment feel less daunting and more like a community they want to be a part of. Kevin : It sounds like a transformative approach to treatment. Dr. Keck, thank you so much for sharing your insights today. I’m excited to see how this program continues to evolve and make a difference in the lives of your clients. Dr. Keck : Thank you, Kevin. It’s been a pleasure talking with you. We’re thrilled to be pioneering this program and making recovery more engaging and accessible for those who need it. Closing Thoughts Dr. Matt Keck’s Immersive Virtual IOP Program  at Cielomar Recovery  is redefining what’s possible in virtual treatment for eating disorders. By blending real-time video conferencing with interactive gaming , this innovative approach keeps clients engaged, fosters community, and enhances the recovery experience in ways traditional telehealth struggles to achieve. As virtual treatment continues to evolve, could this be the future of higher-level care?  One thing is certain—Dr. Keck is pushing boundaries and creating a space where healing feels less like treatment and more like connection. Want to learn more? Visit Cielomar Recovery  and explore this groundbreaking program.

The Future of M&A: Key Insights from Our Final Webinar On November 15, 2024, Mertz Taggart and Maxwell Healthcare Associates wrapped up their insightful three-part webinar series with a deep dive into emerging technology trends, strategic innovations, and the evolving landscape of M&A in home health and hospice. Led by Jennifer Maxwell, this session featured expert panelists Cory Mertz, Managing Partner at Mertz Taggart, and Jay Duty, COO at Maxwell Healthcare Associates. Top Highlights & Trends to Watch Tech Integration is Now a Must-Have Jay Duty emphasized, "The integration of technology is no longer a luxury—it’s an operational necessity." He highlighted how advanced tools like AI-driven automation and predictive analytics are reshaping care delivery and improving efficiency. Key trends include: The growing adoption of AI for process optimization  and clinical decision support. Increased use of telehealth and remote patient monitoring  to enhance patient touchpoints and reduce costs. EMR Compatibility and Usage Matter More Than Ever Both panelists agreed that while EMR systems can vary widely, buyers are increasingly focused on how effectively sellers are using them. Cory noted, "The EMR you’re on matters less than how you’re leveraging it. Good data and clean reporting can set your agency apart in a crowded market." Value-Based Care as a Key Driver With 80% of strategic buyers surveyed already implementing value-based care models, Cory explained, "Buyers are no longer just looking for revenue—they want agencies with scalable operations and a proven ability to deliver cost-effective, high-quality care." Leveraging Data for Strategic Growth Jay encouraged agencies to view data as a strategic asset: "Clean, well-managed data helps buyers see your value clearly. It’s not just about operational efficiency—it’s about showing a track record of quality care and outcomes." Private Equity and Strategic Buyers are Evolving The role of private equity is shifting as strategic buyers become more discerning. "The land-grab era is over," said Jay. "Today, it’s about finding well-managed assets with a clear commitment to innovation, clinical quality, and operational efficiency." Final Takeaway As the M&A landscape continues to evolve, the message is clear: technology, data-driven decision-making, and value-based care models will be critical for agencies looking to stand out and maximize value. Early preparation, combined with strategic investments in the right innovations, will be key to positioning for a successful transaction. If you are interested in watching the entire Looking Ahead: Innovation, Technology, and the Future of M&A in Home Health & Hospice webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com  to arrange a confidential discussion about your exit strategy!

After a historically slow first quarter that saw only 13 total deals in the home-based care space, M&A picked up significantly in the second quarter, albeit not in every aspect. Home health, home care and hospice saw 20 total deals in the second quarter, with the home health and hospice sectors leading the way at 10 and nine deals, respectively, while home care dealmaking mostly held steady at seven. (Note, many transactions include more than one service line.) Home-Based Care M&A Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. Dealmaking generally picks up in the second half of the year due to rate setting, particularly in home health and hospice. Both proposed payment rules are now out for each respective sector. But this year, there could be additional factors contributing to back-half activity. For instance, inflation has continued to cool, and investors have renewed optimism around a rate cut or two from the Federal Reserve in the back half of 2024. That in turn would clear the runway for more deals, particularly for private equity. Private equity only accounted for six of the 20 deals in the second quarter, a smaller proportion than usual, notes Mertz Taggart managing partner Cory Mertz. “We saw fewer private equity-backed strategic transactions hit the wire relative to the whole,” says Mertz. “This is primarily tied to the tightened credit markets, and an increasing number of smaller, in-market transactions that don’t get reported.” The second quarter did see a few large, standout deals announced, including Addus ’ agreement to acquire Gentiva’s personal care business, Amedisys ’ agreement to divest approximately 100 locations to VitalCaring and Pennant’s deal with Hartford HealthCare . These transactions have been announced, but have not yet closed and therefore do not contribute to the totals. However, “We’re seeing optimism around a thaw in dealmaking,” Mertz commented. Home Health M&A Over the last few years, the reduction of quality home health assets going to market has contributed to a dealmaking downturn. There was a decent amount of home health activity in the second quarter, but the proposed payment rule — released at the end of June — will likely affect M&A the rest of the year. That said, determining how proposed and finalized payment reductions will affect the market is always difficult. The Centers for Medicare & Medicaid Services (CMS) proposed a 1.7% aggregate cut to 2025 payments, or about $280 million. “Industry stakeholders are justifiably up in arms over the proposed cut, which includes another ~4% permanent cut,” Mertz said. “From an M&A perspective, it’s another step towards certainty, which helps unlock transactions.” The Pennant Group (Nasdaq: PNTG) agreed to a partnership with Hartford HealthCare at Home (HHCAH), the home health and hospice segment of Hartford HealthCare, in the second quarter. That deal would take Pennant into Connecticut, bringing the company into the East Coast for the first time. Pennant had previously not had any home health locations east of Wisconsin. Amedisys Inc. (Nasdaq: AMED) also agreed to divest approximately 100 locations to VitalCaring . The exact location count and price tag have not been announced, but that deal would be a major one. It will only go through if UnitedHealth Group’s takeover of Amedisys goes through. But the divestment likely clears the path for the UnitedHealth Group-Amedisys deal, which was receiving antitrust scrutiny from regulators. Amedisys stock jumped from $92 to $97/share on the news. Finally, HCS-Girling — which recently acquired the personal care assets of Addus HomeCare Corp . (Nasdaq: ADUS) in New York — agreed to acquire Pinnacle Home Care , a large Medicare-certified home health provider with locations throughout Florida. Home Care M&A Home care was the slowest of the three categories in the second quarter, but Mertz also notes that some PE-backed strategics don’t always disclose personal care add-ons as they happen. “These same strategic buyers are still active, but many of them are sourcing their own transactions, which include some smaller deals which don’t ever get reported,” says Mertz. While Addus exits the New York market, it immediately set out to gain significant personal care market share elsewhere. If its $350 million deal for Gentiva’s personal care assets is finalized, it will become the largest home- and community-based services (HCBS) provider in Texas, a state it did not previously have a significant personal care presence. Addus also entered other states for the first time, including Missouri and North Carolina. Other notable deals from the home care world in the second quarter: ● HouseWork’s acquisition of AccordCare’s Connecticut personal care division ●  Family Resource’s acquisition of Specialty Service Solution in Washington state ●  Commonwise Home Care’s acquisition of Caregivers of Charleston Hospice M&A While the home health industry continues to face cuts, hospice providers have mostly had a stable payment environment. In March, CMS proposed a 2.6% increase to hospice per diems for 2025. The Pennant Group was also one of the more active buyers in hospice, acquiring South Davis Home Health & Hospice in Utah and Texas-based Nurses On Wheels . There were also more pure-play hospice deals in the second quarter than there were in the first quarter. One of the larger home-based care companies got involved too, as BrightSpring Health Services (Nasdaq: BTSG) agreed to acquire the nonprofit Haven Hospice , based in Florida.. Other notable hospice deals in the quarter: ● Northrim’s acquisition of Noble Hospice and Palliative Care , based in Phoenix ● Dover Health’s acquisitions of Centered Care Hospice and Palliative , based in Illinois ● Vitas Healthcare’s acquisition of the previously-announced Covenant Care , with locations in Florida and Alabama, for $85 million. "It's one quarter worth of data, but it's encouraging to see," Mertz said. "We talk with buyers and private equity regularly. The general opinion is that we saw the bottom in healthcare services M&A transactions in Q1. We'll be monitoring the inflation numbers and the Fed's comments over the next few months." If you are interested, you can also download the Q2 2024 Home-Based Care M&A Report via the following link:

In mid-September, the Federal Reserve slashed interest rates for the first time since March 2020. And, with that news, there are signs of life in home health, hospice and home care M&A. Though there are certainly internal issues affecting each sector, recent macroeconomic pressures have impacted the number of transactions more than any other factor. Home-Based Care M&A After a flurry of deals in 2020 and 2021, home-based care M&A plunged. That low level of dealmaking bottomed out in Q1 2024 ( Home-Based Care M&A Report Q1 2024 ), with just 14 total transactions closed. Transaction volume has since picked up, with 24 deals closed in Q2 ( Home-Based Care M&A Report Q2 2024 ) and 19 in Q3. Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. Dealmaking is expected to continue its positive momentum.  However, that is assuming the Fed will continue to lower rates over the next 6-9 months. “Many folks assume since the fed started lowering rates, that they will just continue down this path going forward,” Mertz Taggart Managing Partner Cory Mertz said. “We are optimistic, but rates will still largely depend on inflation, which the Fed is watching closely.” Overall, there were six home health deals, six hospice deals and eleven home care deals completed in the third quarter. (Note:  The sum of the sub-industry transactions is greater than the total number of deals reported, as many transactions include more than one sub-industry.) Private equity accounted for more than half of all the deals executed in the quarter. “We’re climbing out of the slump and confident there was a bottoming out in Q1 2024 in terms of deal activity, but the recovery may not be perfectly smooth when looking at quarter-to-quarter data,” Mertz said. The third quarter did see a few large deals completed, however, including BrightSpring Health Services’ (Nasdaq: BTSG) $60,000,000 acquisition of Haven Hospice and The Pennant Group’s (Nasdaq: PNTG) acquisition of Signature Healthcare at Home’s assets. Home Health M&A Since the 2020 and 2021 flurry, there have been fewer quality home health agencies that have gone to market. That, combined with the macroeconomic environment, has led to fewer deals in the home health space. There’s also rate pressure pushing down on home health providers. The Centers for Medicare & Medicaid Services (CMS) has reduced payment over the last few years in traditional Medicare. Meanwhile, Medicare Advantage (MA) penetration has continued, and MA plans tend to pay at a lower rate for home health services. Still, the demand for solid home health organizations has not waned. “Home health M&A activity remains slow. There just aren’t very many attractive targets that have come to market over the past eighteen months or so,” says Mertz. “Demand remains strong, and the constant reimbursement pressure has not deterred buyers.” “Home health remains central to nearly all the larger strategic buyers’ value-based care strategies ,” Mertz continued. “Some include personal care, some include hospice, but they almost all include home health.” In the quarter, The Pennant Group acquired Signature Healthcare at Home’s Washington and Idaho assets from Avamere . The $80 million purchase price represented the largest deal in Pennant history. The deal is one of many that Pennant has executed of late. It has been one of the more active acquirers during a quiet M&A period. Ascension Health/TowerBrook Capital-owned Compassus also stayed on track with its joint venture strategy, forming an agreement with OhioHealth that includes four home health locations that the former will now operate. The company has also recently agreed to JVs with the health systems Ascension and Providence . “We are seeing much more interest from historically strategic acquirers in exploring joint ventures with health systems,” Mertz commented. “It just makes sense, for both the operator and the health system.  And LHC has successfully proved the model out.” Home Care M&A Home care M&A remains the most active of the three sectors, with 11 reported transactions closed. Despite the Medicaid Access Rule being finalized, and the looming 80-20 provision being included, buyers have not backed off of inorganic growth. Many of the home- and community-based services (HCBS) strategists believe that significant scale is necessary to survive under 80-20. “On the personal care side, deal activity remains pretty steady, buoyed by government-funded personal care agencies, predominantly HCBS, which has not slowed despite the 80-20 provision,” says Mertz. “If the provision were to take effect in January 2025, we would be telling a different story. But so much can – and likely will – happen between now and when this is supposed to take effect, including at least one or maybe two changes in administration.” Vistria- and Centerbridge-backed Help at Home – one of the largest home and community-based providers in the country – has continued to acquire, announcing three more deals in the third quarter: acquisitions of Care By Your Side , AA Medcare and One Care Health . “Growth continues to be really strong in what we do, both organic growth and M&A activity,” Help at Home President Tim O’Rourke recently told Home Health Care News. “We continue to see that as a big opportunity for us, not only today, but in the future.” Avid Health at Home , backed by Havencrest Capital Management, also logged another deal, acquiring Central Illinois Care Services . InTandem Capital-backed HouseWorks , too, stayed busy, acquiring Bridge City Home Care . Hospice M&A Hospice M&A transaction volume remains low, but it is not a reflection of buyer sentiment.  “Of the three home-based care service lines, hospice still commands the highest multiples, and it’s largely a reflection of a historically stable reimbursement environment,” Mertz added. “However, we are seeing, and expect to see, more regulatory scrutiny in hospice. This has forced the buyer universe to become much more discerning about which opportunities they will pursue and, ultimately, close on.” The U.S. Government Accountability Office (GAO) urged CMS to step up hospice oversight earlier this year, and steps are being taken to reduce fraud in a number of states already. In the third quarter, Ridgemont Equity’s Agape Care acquired Crossroads Hospice , while Gilchrist Hospice Care acquired Hospice of Washington County . “We’re encouraged to see the continued positive momentum in home-based care M&A, both in terms of data and real-time buyer sentiment” Mertz said. “And Q4 is historically the strongest of the four quarters. But continued momentum will be largely dependent on the Fed and what they are expected to do, and ultimately do, with interest rates. Inflation can be stubborn and difficult to tame. We’ll know over the next couple quarters if they have done enough to continue to lower rates.” If you are interested, you can also download the Q3 2024 Home-Based Care M&A Report via the following link:

Unlocking Value: Key Takeaways from Our M&A Webinar On October 16, 2024, Mertz Taggart and Maxwell Healthcare Associates presented the second webinar in a three-part series, diving into how advisors evaluate and enhance the value of home health and hospice agencies. Moderated by Jennifer Maxwell, the discussion featured insights from Cory Mertz, Managing Partner at Mertz Taggart, and Jay Duty, COO at Maxwell Healthcare Associates. Highlights & Key Takeaways Plan Early to Maximize Value:  Cory emphasized the importance of early engagement with advisors, noting that sellers who start planning well in advance can bridge gaps in valuation and improve their market readiness. Focus on Financial Fundamentals:  The speakers underscored critical financial metrics: Revenue matters:   Larger agencies typically command higher multiples. Target margins:  Gross margin should ideally be 45-55% for home health and 50-55% for hospice. EBITDA margins:  Adjusted EBITDA margins between 15-25% for home health and 18-25% for hospice are seen as attractive. Operational Efficiency Drives Value:  Jay highlighted how optimizing intake, scheduling, and revenue cycle management can enhance an agency’s appeal. Addressing workforce management and clinical quality ensures better performance and valuation. Technology is No Longer Optional:  Both panelists agreed that technology plays a crucial role in valuation. Cory noted that EMR compatibility reduces transition risks, while Jay pointed out how advanced tech solutions, such as predictive analytics and workforce management tools, can increase efficiency. Cultural Alignment Can Seal the Deal:  Beyond numbers, buyers look for cultural fit. Cory shared how sellers often choose slightly lower offers from buyers who align with their values and are committed to preserving the agency’s legacy. Final Thoughts Maximizing value in M&A requires early preparation, thorough assessments, and a focus on cultural fit. By addressing financial, operational, and technological factors, agencies can better position themselves for a successful sale. If you are interested in watching the entire Maximizing Value: How Advisors Evaluate Home Health & Hospice Assets webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com  to arrange a confidential discussion about your exit strategy!

Discover the journey behind the sale of For Papa’s Sake Home Care—a story of legacy, family, and commitment to compassionate care. Named in honor of a promise to family, this top-rated agency became a beacon of excellence in senior care. Yet, when it came time to sell, the path was more than a business decision; it was a deeply personal mission. Through the dedication and support of Mertz Taggart, the agency’s founder, Becky Reel , found the right partner to carry on its legacy. Read the full story to see how empathy and expertise came together to honor a lifetime of care. Honoring a Promise and a Legacy For Papa’s Sake Home Care was born from a promise and a mission close to my heart. Named in honor of my grandfather, who I called Papa, who endured a tragic experience in a nursing home, the agency represented our commitment to create a better option for seniors—one rooted in dignity, safety, and genuine care. My promise to my parents was equally important: to build and grow the agency to a point where its sale could fund their fulfilling retirement. Over my 10 years, we grew by 300%, was ranked the number 1 agency in North America by Home Care Pulse (now Activated Insights), and received the Leader of Excellence award for seven consecutive years. Selling this agency was not just about a transaction; it was about finding someone who would continue this legacy of care. Balancing Family, Legacy, and the Demands of the Sale The journey to sell was a long and intensive process. As a mother to two young children and a wife, I still had my day-to-day responsibilities: running the agency, being present with my family, and somehow balancing all this with the intense demands of the sale process. The emotional weight of parting with something so personal was heavy, compounded by the need to maintain the agency’s standards and focus on my family’s needs. Bruce , my advisor from Mertz Taggart, recognized this balancing act and stepped in as more than a business guide; he became my greatest advocate and support system. Empathy and Strategic Expertise Bruce and the Mertz Taggart team brought a unique blend of empathy and strategic acumen to every aspect of the process. Bruce understood that selling our agency was not just about numbers—it was about preserving a legacy. His focus was not only on maximizing the agency’s value but also on finding a buyer who respected the values that built it. He guided me with skill and precision, making complex decisions easier and ensuring I felt confident at each step. Ongoing Support During Critical Moments One of the most telling moments was when a potential buyer arranged a meeting that could determine the future of the agency. The stakes felt high, and I was nervous about facing such a pivotal moment alone. Without hesitation, Bruce booked a flight the very next day to be by my side, offering both his strategic insights and his steadfast support. His presence turned what could have been an overwhelming experience into one where I felt empowered and reassured. Client-Centered for Every Step of the Journey Throughout the 14-month process, Bruce and Mertz Taggart never made me question their commitment to me and my goals. In moments of doubt and exhaustion—when the balance of family, agency responsibilities, and the emotional toll of the sale felt like too much—Bruce reminded me of the impact we had made and the legacy it would leave behind. His encouragement and compassion kept me grounded and helped me see the journey through to the end. A Partner Who Truly Cares Selling For Papa’s Sake Home Care was one of the most significant and emotional decisions of my life. Bruce’s empathy, dedication, and strategic guidance made it possible to honor my promise to my parents while ensuring the agency’s legacy would continue. For anyone considering the sale of a home care agency they’ve poured heart and soul into, Mertz Taggart is more than an M&A firm—they are partners who truly care about their clients’ well-being and success. Conclusion We are delighted to have received this incredibly in-depth testimonial from our client, Becky Reel . It shows us just how much our work means to our clients. Testimonials such as this one motivate us to continue our hard work on bridging the gap between healthcare agency owners and a successful exit strategy, all while maximizing value, minimizing surprises, and keeping our clients in control throughout the process. For similar stories from our other clients, visit our Testimonials page Planning an eventual sale of your healthcare business? Contact us: info@mertztaggart.com To stay up-to-date with our day-to-day activities, follow us on LinkedIn

The healthcare mergers and acquisitions (M&A) marketplace is undergoing a dynamic transformation, driven by shifting industry trends, heightened scrutiny on asset quality, and the strategic pursuit of value-based care. These developments were the focus of our recent webinar series, Home Health & Hospice M&A – Webinar Series , where industry experts shared actionable insights and strategies to navigate today’s M&A environment effectively. Hosted by Jennifer Maxwell , the discussion featured insights from Cory Mertz , managing partner at Mertz Taggart, and Jay Duty , COO at Maxwell Healthcare Associates. The session provided a comprehensive exploration of the latest M&A trends, challenges, and forward-looking opportunities in home health and hospice care. Here are the key takeaways that can shape your approach to M&A in this evolving marketplace. Emerging Trends Shaping Healthcare M&A A Post-Pandemic Reset The COVID-19 pandemic significantly altered the M&A landscape. After a slowdown during the early stages of the pandemic, a surge in transactions followed, fueled by low interest rates and government stimulus. However, rising inflation and higher borrowing costs have shifted priorities. Buyers are now more discerning, focusing on assets with robust financial and operational performance. Increased Demand for Quality Assets Today’s buyers prioritize quality over quantity. Clinical and operational efficiency, data-driven insights, and a clear demonstration of value are critical factors. Sellers must prepare thoroughly, ensuring their businesses meet these elevated standards to stand out in a competitive market. Strategic Considerations for M&A Success Adapting to Consolidation Trends The move toward value-based care is a driving force behind healthcare consolidation. Strategic buyers aim to enhance existing operations and expand service lines through acquisitions that align with their long-term objectives. Optimizing Margins and Metrics Private equity firms are continuing to target high-quality assets with strong margins and scalable operations. As competition intensifies, sellers must ensure their business metrics and processes are optimized to attract top-tier interest. Preparing for Market Success Proactive Operational and Financial Planning Preparation is paramount in today’s M&A environment. Conducting thorough operational assessments, optimizing revenue cycle management, and addressing inefficiencies are critical steps for enhancing valuation. Sellers who invest in readiness build buyer confidence and mitigate transaction risks. Early Exit Strategy Development Successful exits don’t happen overnight. Engaging with M&A advisors and consulting firms well before a potential sale can provide actionable guidance to improve operational metrics and unlock hidden value. Understanding your business’s unique strengths ensures a stronger position during negotiations. Opportunities on the Horizon Data and Technology as Growth Enablers Data collection and analysis are increasingly pivotal. Organizations leveraging patient outcome data can strengthen relationships with payers, ACOs, and Medicare Advantage plans while improving operational efficiency. Service Integration for Value-Based Care Innovative service offerings, such as infusion therapy and physician-at-home care, are becoming essential to building comprehensive care portfolios. Integrating these services into value-based care contracts enhances profitability and market appeal. Key Takeaways for Sellers Plan Ahead : Begin preparing for a sale early. Building operational readiness and addressing inefficiencies takes time but delivers substantial returns. Leverage Expert Guidance : Engage M&A advisors and consultants to maximize asset value and navigate the transaction process effectively. Understand Your Unique Value Proposition : Clearly articulate your market position and competitive advantages to stand out during buyer evaluations. Optimize Financial and Operational Metrics : Ensure strong EBITDA margins and operational efficiencies to attract premium valuations. Looking Ahead With interest rates stabilizing and private equity poised for increased activity, the healthcare M&A marketplace is on the brink of renewed momentum. Organizations that prioritize preparation, operational efficiency, and strategic alignment with market trends will be best positioned to thrive in this competitive landscape. If you are interested in watching the entire Navigating the M&A Landscape: Key Trends and the Role of Advisors webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com to arrange a confidential discussion about your exit strategy!

Adjusted EBITDA is an estimate of the normalized pre-tax cash flow to all providers of capital (debt and equity) for the business. ‘Normalized’ means it is the expected cash flow under normal conditions in the immediate future – it excludes one-time, extraordinary events. Let’s begin by defining EBITDA, which is an acronym for Earnings Before Interest Taxes Depreciation and Amortization. E : Earnings = Revenue minus Cost of Sales minus G&A (General & Administrative) expenses. In other words, net income. B : Before = Illustrates the requirement to exclude or back out certain expenses included in the earnings definition above. I : Interest = Interest paid on debt and interest received. Since the calculation of earnings above includes interest, we will add back interest expenses and subtract interest income. T : Taxes = State and federal income taxes. We will add back state and federal income taxes because another owner may have different tax implications. D : Depreciation = Depreciation expense. This is a non-cash expense. A : Amortization = Amortization expense. Another non-cash expense. Next, we will make the appropriate adjustments to arrive at Adjusted EBITDA. We can group adjustments into four categories: One-time extraordinary income or expenses Business expenses that will not reoccur in the future Non-business-related expenses Personal expenses run through the business that a buyer will no longer incur One-time extraordinary income or expenses include: Gain/loss on sale or disposal of an asset. If it is a gain, then you would subtract it from EBITDA. If it is a loss, then you would add it to EBITDA. Restructuring expenses such as moving expenses, severance packages, etc. Legal expenses – due to a lawsuit Consulting expenses for a specific project Accounting expenses for an audit Non-business-related expenses include: Owner’s compensation relative to fair market. Suppose the owner is the administrator, and has a salary of $225k. Assume the salary market rate for an administrator of an agency with similar characteristics is $100k. The adjustment would add the difference between these two amounts ($125k) to EBITDA. Non-market rent expense. Suppose the agency owner owns the building and leases the office to the business. If the rent charged to the agency is greater than the market rate, then you will add the difference to EBITDA. If it is lower, you will subtract it from EBITDA. Personal expenses include: Owner’s non-business meals and entertainment Owner’s personal auto expenses Owner’s cell phone bill Owner’s non-business travel expenses Family members who are paid by the agency, but who are not necessary for operations Once we have completed the list of adjustments, we add or subtract each to EBITDA to arrive at Adjusted EBITDA. Why is Adjusted EBITDA important, and what is its role in your hospice or home health valuation? It provides a future cash flow estimate for potential acquirers to build their valuation models, specifically discounted cash flow models (DCF). It is the industry standard for valuing home health and hospice agencies, and provides a method for buyers to project their expected cash flow of the agency and the ability to pay for the acquisition. Finally, “the multiple” often quoted in home health and hospice M&A deal announcements is a risk-adjusted number that is applied to the Adjusted EBITDA to determine Total Enterprise Value, or purchase price. For a confidential valuation of your home health or hospice, please email us at info@mertztaggart.com

Mertz Taggart follows the publicly traded home-based care companies and reports on their earnings calls each quarter. As a group, public company performance and share price serve as a proxy for industry performance and investor sentiment, respectively. Historically seen as the “ultimate consolidators”, the publicly traded home-based care trading multiples have a downstream effect on lower middle market home-based care M&A. Addus Homecare (Nasdaq: ADUS) Highlights Addus' top-line growth continued with a 10% revenue gain in Q2 2024 vs. Q2 2023, driven by a 57% increase in the Home Health segment, an 11.6% gain in Hospice revenue, and a 7% rise in its Personal Care segment compared to Q2 2023. The revenue increase in the hospice and home health segment was primarily due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023. Admissions and patient days increased in Q2 2024 compared to Q2 2023.  In Q2 2024, ADUS saw a slight increase in gross profit and operating income margins compared to Q1 2024, with gross profit margin rising from 31.4% to 32.5% and operating income margin growing from 8.4% to 9.1%. This increase was driven by higher margins in home health and hospice segments due to the acquisition of the operations of Tennessee Quality Care.  For the three and six months ended June 30, 2024, the company received ARPA funding totaling $2.0 million and $12.2 million, respectively, for supporting caregivers and boosting recruiting and retention efforts. Key Financial Figures M&A Activity On May 21, 2024, the company agreed to sell its New York operations to HCS-Girling for up to $23 million, with the transfer contingent on regulatory approvals. Addus CEO Dirk Allison stated, "We are pleased to divest our New York personal care operations and exit the state, as this challenging market no longer fits our growth strategy.”  Acquisition: On June 8, 2024, the company agreed to purchase the personal care operations of Gentiva (Curo Health Services, LLC) for approximately $350 million in cash, pending regulatory approvals. The acquisition spans seven states and serves approximately 16,000 patients. Addus CEO Dirk Allison stated, “Once this deal is closed, Addus will be the number one provider of personal care services in the state of Texas, which is primarily a managed Medicaid market.” On June 28, 2024, Addus raised $175.6 million through a public offering of 1,725,000 shares at $108.00 each. The company used $81.4 million to repay debt and may allocate the rest for general purposes, including acquisitions like Gentiva's personal care assets.  Guidance For 2024, ADUS anticipates maintaining a stable gross margin percentage; however, ongoing caregiver shortages may potentially impact the levels of service provided. Aveanna Healthcare (Nasdaq: AVAH) Highlights Q2 2024 revenue reached $505.0 million, a $33.0 million (7.0%) increase compared to $471.9 million in Q2 2023. This growth was driven by the following segment performance: Private Duty Services revenue increase by $30.2 million (8.0%), driven by approximately 10.3 million hours of care, reflecting a 4.8% increase in volume compared to the previous year. Medical Solutions revenue increased by $3.6 million (9.3%), while Home Health & Hospice revenue declined $0.8 million (1.4%). Gross margin improved by 1.9% to $158.3 million compared to Q2 2023, reflecting the improved payer rating environment as well as cost reduction efforts taking. Operating income margin improved 9.5%, reaching $37.1 million. The improvement in operating income margin was primarily due to reduced branch and regional administrative expenses (restructuring portions of the branch and regional operating structure). Adjusted EBITDA was $45.6 million, a 27.3% increase as compared to the prior year period.  Demand for home and community-based care remains strong, with governments and managed care organizations seeking solutions to expand capacity. AVAH results show its continued alignment with the objectives of the preferred payers and government partners. Key Financial Figures M&A Activity In Q2 2024, AVAH made no comments on potential acquisitions. The company's current priorities are to improve profitability through organic growth, expand payer partnerships, strategic cost reductions and continue to invest in its caregivers. Guidance The company expects adj. EBITDA to ramp up throughout 2024 as reimbursement rates and caregiver hires increase. The company is looking for continue to leverage their growth through strategic cost reductions and lower overhead while building on the success of our preferred payor strategy and Government Affairs rate improvements. According to Jeff Shaner, CEO of Aveanna, “The labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong”  2024 full year projections: Full Year 2024 Revenue guidance increased to over $1,985 million. Full Year 2024 Adjusted EBITDA guidance raised to over $158 million.  The Pennant Group, Inc. (Nasdaq: PNTG) Highlights Q2 2024 total revenue reached $168.7 million, up $36.5 million or 27.6% compared to the same quarter last year. The Home Health and Hospice Services segment generated $125.3 million in revenue, marking a $30.3 million increase or 31.9% year-over-year. Adjusted EBITDA for the quarter was $13.2 million, a rise of $3.1 million or 30.6% from the previous year.  Home health admissions totaled 14,140 in Q2 2024, up 3,699 or 35.4% from Q2 2023, while Medicare home health admissions increased by 889 or 18.3% to 5,738. The hospice average daily census grew to 3,220, an increase of 726 or 29.1% year-over-year. Revenue for the Senior Living Services segment reached $43.4 million, up $6.2 million or 16.6% compared to the same quarter last year, supported by a higher occupancy rate and higher average monthly revenue per occupied room. Key Financial Figures M&A Activity Since the beginning of the year, the company expanded its operations with the addition of four home health agencies, two hospice agencies, and three senior living communities. The company also acquired the real estate of two of three senior living communities.  Brent Guerisoli, CEO & Director of PNTG, reported, “In the process, we've added more than 2,200 lives under the Pennant umbrella through acquisitions and organic growth, along with approximately 4,000 lives under the Hartford management agreement. Collectively, this represents a greater than 50% increase in the number of lives we touch each day as compared to the end of 2023. And this does not include the impact of the Signature transaction, which will add an additional 2,500 lives.” On August 1, 2024, The Pennant Group, Inc. announced the successful completion of its acquisition of Signature Healthcare at Home’s assets in Washington and Idaho. Guidance Management updated its annual guidance, projecting total revenue to range from $654.0 million to $694.5 million. Full-year 2024 adjusted EBITDA is expected to be between $50.7 million and $53.8 million. The company’s updated guidance anticipates organic growth, strong operational performance for the remainder of the year, hospice reimbursement rate adjustments, and the contributions from the joint ventures and management agreements.  Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights Q2 2024 total revenue slightly decreased by 0.6% vs Q2 2023. In the Home Health segment, revenue declined $3.6 million or 1.7%, primarily due to lower Medicare re-certification.  The company’s payer innovation strategy continues to drive non-Medicare growth, with non-Medicare admissions up 25.2%, leading to a total admissions increase of 6.4% year-over-year. Currently, 43% of non-Medicare visits are under payer innovation contracts at improved rates. In the hospice segment, the company has seen consistent progress in census growth, with the average daily census increasing each month since January 2024, resulting in a 2.7% year-over-year increase. The company's focus on recruitment and retention continues to support long-term growth.  This quarter, the company reduced bank debt by $15 million and opened a new home health location in Florida in April. Key Financial Figures M&A Activity EHAB is actively evaluating potential acquisition opportunities but is currently constrained by its credit agreement, which limits its ability to pursue acquisitions due to existing leverage or debt levels. The company remains focused on its long-term goals and is not allowing these short-term limitations to affect its overall strategic outlook. Guidance The company expects home health admissions and hospice volumes to grow in the mid to high single digits annually over the next three years, driven by investments in case management and team development. According to Barb Jacobsmeyer, President & CEO, ”In our Home Health segment, our payer innovation strategy continues to succeed, with our field teams successfully shifting admissions out of historically lower-paying contracts to better paying contracts that recognize our better way to care.”  The company has revised its full-year 2024 guidance: Net Service Revenue: Updated to a range of $1.05 to $1.06 billion, down slightly from the previous forecast of $1.07 to $1.10 billion Adjusted EBITDA is now projected to be between $100 million and $106 million, up from the previous range of $98 million to $110 million. This update reflects improved cost performance, leading to a more refined adjusted EBITDA range. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights Q2 2024 total revenue was $2,730 million, up 26.0% compared to $2,167 million in the second quarter of 2023. Net revenue growth was driven by strong performance in both segments, particularly Specialty and Infusion Pharmacy. Adjusted EBITDA reached $139.1 million, a 17% increase year-over-year, exceeding internal forecasts. Pharmacy Solutions revenue was $2.1 billion, growing 32% compared to the second quarter of last year. The segment growth was driven by ongoing execution supporting specialty product ramp-ups and launches from 2023 to 2024, infusion patient and volume growth and strength in home and community pharmacy volume.  The Provider Services segment generated $616 million in revenue, reflecting an 8% increase compared to Q2 2023. The average daily census in home health care increased 13% year-over-year to 44,246 in the second quarter, while Rehab billable hours increased at a high single-digit rate. The company's success in the second quarter is attributed to its focus on timely, preventative, and coordinated care for seniors and specialty patients in the home and in low-cost settings. Key Financial Figures M&A Activity During the six-month period ending June 30, 2024, BTSG successfully completed four acquisitions in the Pharmacy Solutions and Provider Services segments. The company had entered these transactions to expand their services and geographic offerings. The total aggregate consideration, net of cash acquired, for these acquisitions amounted to approximately $43.9 million. The company is currently evaluating the fair value of the assets acquired and liabilities assumed. The recent acquisitions contributed approximately $15.1 million to the company’s revenue for the second quarter of 2024.  Jon Rousseau, President & CEO, commented, “We've been focused on deals that are very accretive here in the last year in particular that are four times pro forma EBITDA or less typically. And that's really where our focus has been. And we believe we can continue to augment our growth rate through very accretive M&A combined with organic growth to achieve our growth objectives.”  Guidance BTSG has revised its revenue and Adjusted EBITDA guidance for the full year 2024 as follows: Revenue: Increased to a range of $10.45 billion to $10.90 billion. Adjusted EBITDA: Revised to a range of $570 million to $580 million, reflecting anticipated growth of 12% to 14%. Option Care Health, Inc. (NASDAQ: OPCH) Highlights The company’s top-line performance remains strong, with a year-over-year revenue growth of 14.8%. In Q2 2024, OPCH reported net revenue of $1,227.2 million, up from $1,069.1 million in the same quarter of 2023. Growth was well-balanced across the portfolio, with particularly strong performance in the newer limited distribution and rare orphan therapies within the chronic portfolio. Gross profit for the quarter was $249.4 million, or 20.3% of net revenue, compared to $250.8 million, or 23.5% of net revenue, in Q2 2023. Adjusted EBITDA of $108.4 million, down 1.5% compared to $110.1 million in the second quarter of 2023.  The decline in gross profit percentage was primarily due to ongoing supply chain challenges affecting certain drugs and inputs, as well as issues related to the Change Healthcare cyberattack, which disrupted pharmacy operations and led to operational inefficiencies.  The company believes it has effectively resolved supply chain issues by the end of the quarter and has made significant strides in mitigating the impact of the Change Healthcare situation. Additionally, the company has made substantial progress in reducing accounts receivable and accelerating revenue collection during the quarter. Key Financial Figures M&A Activity In the second quarter, the company repurchased approximately $78 million of its stock and intends to continue this focus on share repurchase in the near term. According to Mike Shapiro, CFO, “We remain focused on M&A efforts and continue to assess acquisition opportunities. We have also reengaged on share repurchase activities and repurchased approximately $78 million of stock in the second quarter. Our efforts ramped up as our cash flows improved in the quarter and year-to-date we have repurchased more than $118 million of stock. And given the momentum in cash flow generation, we intend to remain focused on deploying capital through M&A and share repurchase strategies.” Guidance According to Shapiro, “We believe we have effectively resolved the supply chain challenges late in the second quarter… we have made significant progress in recovering from the Change Healthcare situation. SG&A was flat in the quarter as we continued to drive efficiencies through investments in technology and operational excellence. SG&A as a percent of revenue dropped to 12.5%, our lowest ratio on record.” Based on the first half results and the revised expectations, Option Care Health has updated its financial guidance for the full year 2024, projecting: Revenue: $4.75 billion to $4.85 billion Adjusted EBITDA: $435 million to $450 million To download the .pdf version of this report, click below.

There has been much talk lately about M&A activity in the addiction treatment industry, prompting questions from many practitioners about the process of valuing and selling a treatment center. The purpose of our “Value Insights” series is to address these questions and more. Before considering a sale, owners should be aware of the numerous factors that can make or break a transaction. In this article, we will focus on the most important issue of all: Trust. Seller Beware In any transaction, it is paramount that the two parties trust each other. Without some level of trust, it will be difficult to move a transaction forward to closing. But what do we mean by trust? And why is it important? Certainly, we can’t expect the parties of a transaction to trust each other as they would a family member or close friend. However, when selling your treatment center, there are a number of critical questions you should ask: Does my company fit into the buyer’s strategic plan? This may be the most fundamental question of all. If you can’t understand why someone wants to buy your facility or program, you will likely find each step in the process to be more difficult to take than the last. Don’t be afraid to ask these questions directly to the buyer: Have you acquired similar treatment providers in the past? What is your plan to integrate my facility into your business? How does my company fit into your overall plan? Is the buyer working in good faith to close the transaction in a timely manner? Or do they seem more interested in learning the details of my company? Does the buyer have the wherewithal to close on the transaction? Do they have a fund established, a credit facility, or cash in the bank? Can they secure the necessary funding if they plan to use a combination of debt and equity? Do they have a track record of closing transactions in a timely manner? Will my legacy be carried on? For many owners, their facility represents a labor of love – they started not only to build a business but to help others. If leaving something behind is important to you, make sure this question is answered to your satisfaction. Will my employees be treated well after the sale? Many small businesses have a family atmosphere where employees have been present through good times and bad; you will want to make sure they are taken care of. Ask this question specifically to the buyer. Valuable employees should be viewed as valuable assets to a future owner. Make sure this is the case. Walk a Mile in the Buyer’s Shoes Remember, there are two parties to the transaction. What will the buyer need from you in order to feel comfortable with the transaction? The buyer will have three main concerns: Have I been given information that is 100% complete and accurate? Buying a treatment center is a big decision for a buyer, and a lot of money is involved. Buyers need to feel comfortable that they have placed the appropriate value on your business. Complete and accurate financials are critical in this respect as they serve as the basis for calculating value. Most credible buyers will want confidence that the value they’re placing on your treatment center will hold up under the scrutiny (and expense) of due diligence. Will the seller continue to focus their energy on the business while the transaction is proceeding? Naturally, this process is time-consuming and distracting. But if the business falls off during the transaction, the buyer could come back and ask for a lower valuation, which would not be in the seller’s best interest. Maintain your focus on running the business to ensure a positive outcome for all parties. Are there any issues lurking in the shadows that could affect the value of the business? Potential litigation? Payor disputes? Compliance or labor issues? A Two-Way Street The further you go into a transaction, the more important the issue of trust becomes. If either party feels uncomfortable, the transaction is in jeopardy and significant time and money have gone to waste. Communication is critical. Proceed cautiously – get all of your questions answered, and remember to see things from the buyer’s point of view. You have poured your heart and soul into building your treatment center. Make sure you walk away with more than just a big payday.

Transaction activity across behavioral healthcare in the second quarter of 2024 was marked by a pair of distinct trends: growth funding continues to flourish, while mergers and acquisitions have dipped to early COVID-19 pandemic levels. A total of 30 deals were reported in Q2, down by nearly a third from the 44 announced in the year’s first 3 months. Investors poured more than $400 million to 11 growth funding-focused transactions—building off a first quarter in which 18 such deals accounting for more than $350 million were completed. Meanwhile, the 19 true M&A transactions reported in Q2 were the fewest since the onset of the pandemic in Q2 2020.  The drop-off has been driven by a decline in private equity-backed portfolio company acquisitions, Mertz Taggart managing partner Kevin Taggart said. To wit: A typical quarter sees about 15 to 20 PE-back strategic deals reported. In Q2, just 5 such transactions were announced. “Private equity has been historically aggressive when trying to get into the industry, and while building out their portfolio companies, most recently on the mental health side,” Taggart said. “As a result, they have historically been the winning bidders when companies went to market.” Addiction Treatment M&A A total of 10 transactions within the addiction treatment subsector were announced in Q2, holding steady with the 12 deals announced in the fourth quarter of 2023 and the first quarter of 2024. Of the 10 transactions announced within the addiction treatment subsector, 4 fell into the category growth equity/venture capital deals: Wayspring (formerly known as Axial Healthcare), a value-based provider of substance use disorder (SUD) treatment services, received a $45 million investment from venture capital investment platform CVS Health Ventures. Boulder Care , a digitally based SUD treatment provider, raised $35 million in a Series C funding round led by Advance Venture Partners, along with participation from growth equity firm Strips and several existing investors. Hope River Ranch , a Park City, Utah-based provider of treatment for co-occurring addiction and mental health conditions, raised $16.7 million in equity funding from undisclosed investors. Marigold Health , a Boston-based virtual peer-support startup, raised $11 million in a Series A funding round led by Rock Health and Innospark Ventures. The following transactions involving addiction treatment provider organizations were also announced in Q2: T&R Recovery Group  completed an acquisition of a portfolio of Origins Behavioral Healthcare  facilities in Texas from the Hanley Foundation. The sale included 2 residential treatment centers, 2 intensive outpatient programs, and a transitional sober living facility. Pathways Recovery Centers  expanded its multi-state portfolio of programs with its acquisition of  Serenity Park Recovery Center  in Little Rock, Arkansas. In May, Tulip Hill Recovery , Louisville Addiction Center  and Lexington Addiction Center announced a merger to create Tulip Hill Healthcare. The aligned organizations will provide partial hospitalization program (PHP) and intensive outpatient program (IOP) services across multiple states. FOXO Technologies  entered into share exchange agreement with  Rennova Health  to acquire equity in Myrtle Recovery Centers , a 30-bed facility in East Tennessee. California-based  Your Behavioral Health , a Comvest Partners portfolio company, announced its acquisition of Insight Treatment Programs , expanding Your Behavioral Health’s network across Southern California to 25 sites. Brightside Health  announced an expansion into virtual intensive outpatient SUD treatment services through an acquisition of  Lionrock Recovery . Mental Health M&A Transaction volume within the mental health subsector fell significantly quarter-over-quarter. A total of 15 deals involving mental healthcare providers were reported in Q2, half of the 30 that were announced the prior quarter. The dip largely was attributed to a decline in private equity-backed strategic deals, of which just 2 transactions were announced in Q2 (vs. 9 in Q1) and a drop in PE platform deals. The following mental health M&A transactions were reported: Refresh Mental Health  acquired CARE Counseling Services  in April, a continuation of parent organization Optum’s strategy to cut patient wait times for behavioral healthcare services, according to a media report . Kentucky Counseling Center  announced the acquisition of Flourish Psychotherapy , an Ohio-based mental health company. As part of the acquisition, Flourish was rebranded as Counseling Now . Texas-based  Mind Body Optimization , a provider of outpatient mental health services, announced in May that it has acquired Mind Body Wellness , a mental health practice with 2 locations in Tennessee. Salveo Counseling Center  sold to an undisclosed strategic buyer. Mertz Taggart provided sell-side advisory services.       The following mental healthcare provider organizations announced growth funding completed in Q2: Talkiatry , the New York City-based provider of telepsychiatry services, secured $130 million in a funding round led by Andreesen Horowitz, along with participation by Perceptive Advisors and debt financing provided by Banc of California. Talkiatry said the funds will be used to help the company scale up its value-based care services. Two Chairs , a San Francisco-based hybrid provider of behavioral healthcare services, completed a $72 million Series C funding round led by Amplo and Fifth Down Capital. InStride Health , an outpatient pediatric behavioral healthcare services provider, raised $30 million in a funding round that included participation from General Catalyst, .406 Ventures, Valtruis, Mass General Brigham Ventures and Hopelab Foundation. Telehealth-based provider Brightside Health raised $33 million in financing that the company said will be applied toward fueling growth in new markets, as well as new product offerings. Participating investors included S32 Kennedy Lewis and Time BioVentures. Valera Health  raised $9 million in equity from undisclosed investors, bringing its total raise to more than $73 million. Grow Therapy , a mental healthcare technology startup company, announced in April that it raised $88 million in a Series C funding round that was led by Sequoia Capital, along with participation from Goldman Sachs Alternatives, PLUS Capital and 3 existing investors. Seven Starling  raised $12.63 million in a funding round led by Ulu Ventures. Backpack Health , a pediatric mental healthcare services provider previously known as Youme Healthcare, raised $14 million a Series A funding round led by PACE Healthcare Capital, along with participation from 9 other firms. Autism and Intellectual/Developmental Disabilities M&A The autism and intellectual/developmental disabilities (I/DD) subsector saw a modest increase in deal volume in Q2, with 8 transactions reported, up from the 5 announced in the prior quarter. In a massive deal reported in May, Tenex Capital Management, a New York City-based private equity firm, acquired Behavioral Innovations for about $300 million. One of the largest providers of autism services in the United States, Addison, Texas-based Behavioral Innovations had been backed by private equity firm Shore Capital Partners of Chicago since 2017. Two additional PE platform deals involving providers of autism and I/DD services were also announced: Private equity firm Optimal Investment Group acquired Orange, California-based autism therapy provider  Spectrum Behavioral Therapies . The deal marked Optimal’s entry into the behavioral healthcare sector. Apollo Behavior  received an investment from Mirimar Equity Partners, a Dallas-based firm that invests in mid-sized businesses. In another notable transaction,  LITALICO , the largest I/DD provider in Japan with 300 locations, announced its entry into the U.S. market with its acquisition of Developmental Disability Centers of Nebraska for $50 million. Other deal involving providers of autism and I/DD-related services included the following: Amazing Care Home Health Services announced in April that it acquired Straka Pediatric Therapies . Opya , a multidisciplinary early intervention autism therapy provider, acquired the Center for Autism Spectrum Therapy , an early intervention autism therapy clinic located in Los Angeles. 1Care Hospice , part of 1Care Health, expanded its presence in Nevada with its acquisition of Reset Behavior Health . FullBloom , a youth-focused education and behavioral health platform, acquired 2 locations from Lexington Life Academy  in Arizona. “Strategic and financial buyers are still hungry for acquisitions, but there is a lack of ‘quality’ deals for them to look at,” Taggart said. “How they define quality deals is different today than it was 2 to 3 years ago. They have gotten much more discerning about which deals they will pursue and ultimately close on. This is somewhat driven by the debt markets, which have gotten tighter.” Looking ahead to the remainder of 2024, Taggart said the firm is seeing signs of optimism in the M&A marketplace. "Recent inflation and employment data have significantly increased the likelihood that the Federal Reserve will begin cutting interest rates as soon as September. Credit markets are also poised to ease up, which will also facilitate more deal flow at higher values," Taggart said. “Buyers will have more wiggle room to pay a premium for the right opportunity,” he said. If you are interested, you can also download the Q2 2024 Behavioral Health M&A Report via the following link: