Although mergers and acquisitions are up across the behavioral healthcare sector, relatively tight debt markets and a regulatory environment that is less than ideal for healthcare investment are creating headwinds. A total of 42 deals were reported in the first three months of 2024, the most since the fourth quarter of 2022. This included 24 traditional “control position” M&A deals, and 18 "growth equity” deals in which investors (often venture capital firms) purchase what is usually a minority ownership stake in companies that show great potential for scalability.  Private equity was a large driver of M&A activity, accounting for 18 of 24 M&A transactions reported in Q1, including eight platform deals. Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. U.S.-based private equity firms continue to sit on a significant amount of “dry powder” – nearly $1 trillion in funds that need to be spent or returned to investors – and healthcare services, particularly behavioral healthcare, remain very attractive, Mertz Taggart Managing Partner Kevin Taggart said. While private equity firms have an impetus to invest in behavioral health, their activity is drawing scrutiny from federal and state regulators. Several states have enacted legislation to more tightly regulate private equity involvement in healthcare, and officials from the Federal Trade Commission and Senate Finance Committee have expressed concern that private equity acquisitions could harm patients and payers by reducing options for care and driving up costs. Taggart, however, expressed a differing outlook on PE’s impact on healthcare. "In our experience, the private equity groups who ‘get it’ don’t come in and start finding ways to cut costs and play in the gray area. It’s quite the opposite,” he said. “Smart PE firms tend to understand that those companies that can save the health system money and provide quality patient outcomes will be most attractive. To do that, they need to continue to invest, scale and standardize. This is an incredibly underserved market which needs investment to grow.” How the Federal Reserve handles interest rates will be a key factor that shapes M&A activity within the coming months. Broadly, behavioral healthcare has been somewhat insulated from the effects of interest rate increases. The Fed has hinted at upcoming rate cuts later this year, but if rates aren’t lowered, the more highly leveraged behavioral health platforms will begin to feel the impact, as banks become more diligent, debt financing becomes harder for buyers to obtain, and covenants with financial institutions become stricter. Venture capital firms, meanwhile, have continued investing in behavioral health in Q1 2024, with 18 deals that accounted for more than $350 million. The success of mental health companies such as Talkspace, LifeStance Health, and Refresh Mental Health becoming publicly traded has motivated VC firms to look for “the next big thing” – fast-rising startups that could become big players in the industry in the coming years, Taggart said. Such investments are high risk/high reward propositions for venture capital firms. “To use a baseball metaphor, while private equity hits singles and doubles more consistently by either acquiring a majority interest in established behavioral health companies or buying them outright, venture capital firms are swinging for the fences with these types of growth investments in startups,” Taggart said. “That approach yields a lot more strikeouts, but also the occasional grand slam.” Addiction Treatment M&A A total of 11 transactions involving addiction treatment providers were announced in Q1, on par with the 12 reported in the prior three months. Most notably, Acadia Healthcare made two acquisitions, the company’s first deals since January 2023. In February, Acadia closed on an acquisition of Turning Point Centers , a 76-bed specialty substance use disorder and primary mental healthcare treatment program in Utah . A month later, Acadia acquired three North Carolina-based comprehensive treatment centers (CTCs) from Sellati & Co. , a Mertz Taggart client. The acquisition of the Sellati & Co. CTCs was part of a strategy to expand Acadia’s presence in North Carolina, a state with an “immense need and progressive approach to behavioral healthcare treatment programs,” CEO Chris Hunter said during Acadia’s most recent quarterly earnings call. The organization now operates 10 CTCs in the state and 160 locations in 32 states overall. Other transactions involving addiction treatment provider organizations included the following: Avesi Partners invested in First Steps Recovery , a Fresno, California-based provider of adult-focused SUD treatment services. Mertz Taggart served as the exclusive M&A advisor to this transaction, representing First Steps. Principles Recovery Center  was acquired by  Miramar Equity Partners . Eleanor Health  raised $22.23 million from an undisclosed investor, bringing the company’s total raise to about $104 million. Pyramid Healthcare  acquired Mountaineer Behavioral Health  in a private equity-backed strategic deal. Tennessee-based  Summit BHC expanded its network into New England with its acquisition of Sobriety Centers of New Hampshire in a private equity-backed transaction. QuickMD , a national provider of telehealth-based addiction treatment, acquired Project Recovery , an addiction treatment clinic in South Dakota. Blended Health , a private equity-backed, Texas-based outpatient services provider, acquired Connections Primary Care . Mental Health M&A In the first quarter, 28 transactions involving mental healthcare providers were announced, up slightly from the 26 reported in each of the final three quarters of 2023. Venture capital firms showed a particular interest in mental healthcare companies in Q1, with 14 providers in the subsector announcing funding rounds. Chief among them was Accompany Health , a Bethesda, Maryland-based startup that raised $56 million in a Series A funding round led by venture capital firm  Venrock , along with participation from  ARCH Venture Partners , IVP , Granite Capital Management , and Evidenced . Accompany Health is using the funds to build out an integrated behavioral, physical, and social care platform. Other mental healthcare provider organizations that announced funding rounds in Q1 included: Vita Health , a provider of suicide prevention services, closed on a $22 million Series A funding round led by CVS Health Ventures , along with participation from: LFE Capital , Athryium Capital Management , Flair Capital Partners , CU Healthcare Innovation Fund , Connecticut Innovations , and HopeLab . Headlight , a startup formerly known as Sokya Health, raised $18 million in new funding that was led by Matrix and Epic Ventures . Blackbird Health , a provider of youth mental health services, announced it raised $17 million in a round led by Define Ventures . LifeGuides , an employee wellness company, completed a $16.5 million funding round. Participating investors were not announced. Virtual mental health company Tava Health  raised $16 million in January, according to SEC filings. In March, the company announced that it raised an additional $4 million in a Series B funding round led by Catalyst Ventures . Virtual eating disorder treatment provider Arise raised $6.5 million in a funding round led by BBG Ventures . Being Health , a mental health organization based in New York that offers in-person and virtual services, secured $5.4 million in funding from 18 Park  and  HDS Capital . FamilyWell Health  announced that it has secured $4.3 million in seed financing in a round led by .406 Ventures , with participation from  GreyMatter Capital  and  Mother Ventures . InSite Health , a New Jersey-based psychiatric care provider, raised $2.9 million. Investors were not disclosed. The following deals involving mental healthcare providers were also announced: Senior Care Therapy , a provider of psychology and mental health services for the geriatric population, received an investment from lower middle market private equity firm Madison River Capital . Virtual reality platform XRHealth  raised $6 million in a funding round let by Asabys Partners . HCAP Partners , a California-based private equity firm, announced the acquisitions of Behavioral Medicine Associates , Workers Compensation Psychological Network , and Reservoir Health , which are being merged under the name PAX Health . Acentra Health , a provider of clinical services and technology solutions for government healthcare agencies, acquired EAP Consultants . Beacon Behavioral Partners , a provider of support services for behavioral health practices, announced the acquisition of three organizations: The Neuropsychiatry & TMS Grou p (Mertz Taggart, provided exclusive sell side representation), an outpatient mental healthcare provider based in Tampa, Florida, Genesis Behavioral Health Care Services , and Precise Clinical Neuroscience Specialists . Outpatient mental health platform  Hightop Health acquired  Roots Behavioral Health . ReviveHealth  announced an expansion of its integrated whole-person care offerings with its acquisition of  BHS , a provider of employer and student mental health solutions. Spring Health  acquired exclusive rights to Bloom’s suite of self-guided therapy tools and digital content. Digital mental health provider  UpLift  acquired TAO Connect , an online platform with mental health tools and resources for college students. Parallel Learning received an investment from VC firm Rethink Impact . Uwill , a rapidly expanding on-campus mental health services provider, acquired Christie Campus Health , which offers counseling and mental health and wellness support for students at more than 100 colleges. Ketamine Wellness Clinic of Orange County  has acquired Mind Space Ketamine Infusion Clinic . Autism and Intellectual/Developmental Disabilities M&A Five transactions involving autism and intellectual/developmental disabilities service providers were announced in Q1, with the most notable being a $55 million funding round for Forta , a San Francisco, California-based organization that helps parents become registered behavior technicians and pays them from payer reimbursements for services delivered to their child. The following deals were also announced: The EdTheory Group , a provider of K-12 special education and related services, announced a collaboration with A.G.E.S. Learning Solutions  and Proficio Speech Therapy Group  to form Proficio Therapy Services . California-based Autism Spectrum Interventions  was acquired by private equity firm Fletch Equity . Behavioral Framework , a provider of applied behavior analysis therapy, received an investment from  Renovus Capital Partners . Not-for-profit Children’s Autism Center announced an expansion of its services with its acquisition of Child’s Play Plus  in Northeast Indiana. If you are interested, you can also download the Q1 2024 Behavioral Health M&A Report via the following link:

Mertz Taggart Behavioral Health M&A Report for Q1 2021 Significant tailwinds across the behavioral health sector propelled an active first quarter of 2021 with regards to merger and acquisition activity, keeping up momentum observed in the latter stages of 2020. A total of 29 behavioral health industry transactions were announced in Q1. Outside of a dip in the second quarter of 2020 during which only 19 transactions were announced—a slowdown fueled by the onset of the COVID-19 pandemic—the sector has settled into a pattern of roughly 30 deals per quarter dating back to the beginning of 2020. The volume of deals for Q1 2021 is “telling, but not unexpected,” said Mertz Taggart Managing Partner Kevin Taggart. “And it’s pretty evenly split between addiction treatment, autism treatment and mental health,” Taggart said. “Mental health transaction volume has picked up significantly over the past two quarters, buoyed by the pandemic.” Private equity continues to play a large role in the space, accounting for 22 of the 29 deals announced in Q1, including three platform transactions and 19 add-on transactions. With many private equity-backed strategic companies operating in the space continuing to grow, there is a possibility that one could announce a public offering, either traditionally or through a special purpose acquisition company (SPAC) in the coming months, Taggart said. Many treatment center owners, worn out by the pandemic could be ready to exit the space and sell, but the number of deals across behavioral healthcare to be announced over the rest of 2021 could hinge on the Biden-Harris administration’s stated intention to raise the capital gains tax, Taggart said. The administration’s recently announced infrastructure plan, however, does not directly address capital gains, instead focusing on corporate tax reform. In the meantime, private equity has a mandate to invest and grow. Firms will be watching closely as industries get back on their feet in a post-pandemic world. A key factor to watch will be which structural changes enacted to keep businesses afloat in 2020—both in the behavioral healthcare space and other industries—will stick permanently. Addiction Treatment Based on recent data, demand for addiction treatment services is expected to be high in the coming months. CDC reported that there were more than 88,000 deaths attributed to drug overdose in the 12 months ending in August 2020, the highest total for a 12-month period on record. The 11 transactions announced in the addiction treatment space were down slightly from Q4 2020 (14 transactions), but on par with the prior two quarters. After a busy quarter to close out 2020 , BayMark Health Services stayed busy in the new year, announcing the acquisition of Partners in Drug Abuse Rehabilitation Counseling , a medication-assisted treatment provider in Washington, D.C. The deal for PiDARC was announced between two acquisitions of office-based opioid treatment (OBOT) programs by AppleGate Recovery , a BayMark subsidiary. In February, AppleGate acquired Redemption Recovery , a portfolio of five OBOT clinics in Tennessee, and in late March, the brand announced a deal for Montgomery Addiction Clinic, an OBOT located east of Nashville. Platform deals were announced by private equity firms Health Enterprise Partners , which provided an investment in Aware Recovery Care in January, and Northlane Capital Partners , which announced an investment in global behavioral healthcare provider Empower Community Care in March. Summit BHC acquired The Pavilion , a 66-bed inpatient psychiatric facility, and The Farley Center , a 70-bed substance use disorder treatment provider. Both programs are located in Williamsburg, Virginia. Summit BHC’s portfolio now includes 24 facilities. The owner and CEO of Footprints to Recovery and Vogue Recovery , Michael Milch, added South Coast Behavioral Health to a portfolio that now includes seven facilities for the Costa Mesa, California-based group. Discovery Behavioral Health added to its network of facilities by acquiring Prosperity Wellness Center , a 40-bed residential program in Tacoma, Washington. Prosperity became the 10th brand in the Discovery family, which is backed by the firm Webster Equity Partners. Ohio-based BrightView Health announced a deal for Renew Recovery Centers , an SUD treatment provider with four Kentucky locations. Autism Services & Intellectual/Developmental Disabilities Nine deals in the autism services and intellectual/developmental disabilities space were announced in the quarter, matching the number of deals reported in Q4 2020. Lighthouse Autism Center continued to build its presence as the largest provider of applied behavior analysis therapy in Indiana, acquiring Access Behavior Analysis and A Step Ahead . Lighthouse also opened a new facility in Valparaiso, Indiana, as well as a center in Niles, Michigan. Acorn Health , which operates in seven states, strengthened its position in Florida with a deal for the assets of Sandcastle Centers . Stepping Stones Group acquired EBS Healthcare in Pennsylvania, although while the two organizations are led by one combined executive team, they will continue to function as separate companies. LEARN Behavioral has invested in Behavior Analysis Center for Autism (BACA), although the latter continues to operate as a separate brand. Proud Moments ABA expanded its footprint in the Southwest with a deal for Bridges: Educational Services for Children with Autism , based in Albuquerque, New Mexico. ACES continued scaling its clinical model with the acquisition of the Center for Language and Autism Support Services in Tulsa, Oklahoma. Private investment firm Comvest Partners completed a sale of D&S Community Services to The Mentor Network . After relocating its headquarters to North Carolina from Wisconsin last year, Broadstep Behavioral Health , part of the Bain Double Capital Impact Fund portfolio, added to its 90-plus facilities with a deal for Excalibur Youth Services in South Carolina. Mental Health Although deals in the mental health sector dropped by 33% from Q4 2020, from 15 to 10, activity in this sector was still significantly higher than the second and third quarters of 2020. Moreover, demand for mental health services, much like the addiction treatment sector, is expected to be high in the coming months, as social isolation and anxiety resulting from the COVID-19 pandemic have exacerbated mental health conditions for many individuals. Among the deals commenced in Q1, Marshfield Clinic Health System acquired Oswald Counseling Associates in Plover, Wisconsin, renaming the behavioral health practice Marshfield Clinic Health System-Plover Counseling Center. Philadelphia-based outpatient practice CM Counsel was acquired by the investment and business development firm Centra Capital in a platform deal. Following the investment by Centra, CM Counsel formed a strategic partnership with Savia Community Counseling Services , an in-home care provider in New Jersey. Two eating disorder programs, the Emily Program and the Veritas Collaborative , finalized a merger that allows the two brands to maintain their identities in their respective markets of Minnesota and North Carolina. Meanwhile, Nashville-based eating disorder program operator Odyssey Behavioral Healthcare acquired Shoreline Center for Eating Disorder Treatment , which operates multiple locations in Southern California. Talkspace , a digital and virtual behavioral healthcare company, and Hudson Executive Investment Corp., an SPAC sponsored by Hudson Executive Capital , announced a merger, as well as plans to become listed on the NASDAQ as the first exclusively virtual behavioral health company to be publicly traded. Mental health and wellness platform Modern Health reached a deal for mental health startup Kip , allowing the former to enhance its personalized care plans. Adventist Health Vallejo , a 61-bed psychiatric hospital in Vallejo, California, was acquired by Acadia Healthcare .

Deal volume across the behavioral healthcare sector continued to drop in the third quarter of 2024 to levels not seen since the onset of the COVID-19 pandemic. Analysts at Mertz Taggart, however, say all signs point to a major rebound in 2025. Behavioral Health M&A Even when factoring in venture capital growth deals, just 31 behavioral healthcare transactions were announced 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. “It’s gotten tougher to get deals done in the second half of this year, and the numbers would certainly reflect that,” Mertz Taggart Managing Partner Kevin Taggart said. “A lot of the strategic buyers are sitting on the sidelines right now with regards to both the mental health side and the addiction side.” In the addiction treatment space, larger strategic buyers could be counted on to complete four or five deals in a quarter. Right now, though, some of those buyers are choosing to sit out, and deals that are getting done are often taking longer to complete in 2024, Taggart said. On the mental health side, deal volume has declined significantly from the halcyon days of 2022, when 42 transactions were reported in the third quarter alone. For comparison, just 19 such deals were announced in Q3 of 2024. “Buyers are becoming much more discerning,” Taggart said. “some of the buyers that are still digesting some of the acquisitions they did over the last couple years are sitting on the sidelines. I'm optimistic that they'll be back in the market. It might not happen until 2025, though.” In becoming more selective, buyers are showing a greater affinity for medical practices than counseling-only businesses. Those that provide other types of services, such as ketamine treatments, for example, mixed in with medical and counseling services are also a plus. “As providers are thinking about what services to offer, medical businesses are getting a premium relative to the counseling-only businesses,” Taggart said. Looking ahead, the degree to which behavioral healthcare transaction volume experiences a resurgence in 2025 could hinge on two factors, Taggart said: Whether the Federal Reserve makes good on its pledge to move forward with a series of rate cuts.  The Fed has made two rate cuts since September, and there is optimism that the cuts will continue in the new year. Whether private equity firms finally tap into their large reserves of dry powder they’ve been waiting to put to use.  “They have to do something with that money eventually,” Taggart said. “And returning it to their GP partners, uninvested, is not what anyone wants.” Addiction Treatment M&A Just six deals involving addiction treatment service providers were announced in Q3, a drop from the 11 reported in each of the prior two quarters.  Deals either completed or announced in the quarter include the following: Aware Recovery Care , a provider of in-home addiction treatment services in 11 states, has raised $3.5 million of new capital in a round led by Connecticut Innovations. Tulip Hill Healthcare announced in August that it has taken a majority ownership stake in two detox facilities: Tennessee Detox Center  and  Live Again Detox to expand its presence in Kentucky and Tennessee. DisposeRx announced a sale of its  Coaches vs Overdoses  program to Pennant LLC . The program was developed by DisposeRx to help combat the opioid crisis by raising awareness, reducing stigma, and empowering high school coaches and athletes to become prevention and recovery advocates. Magnificent Legacy Capital and Legacy Quest Partners acquired Windmill Wellness Ranch  in a private equity platform deal. Bradford Health Services  announced it has acquired Lakeview Health , which operates four programs. The acquisition was backed by Lee Equity Partners. In July, Ethema Health Corporation  announced that it had entered into a letter of intent agreement to purchase all of the assets of Edgewater Recovery Center  of Morehead, Kentucky. Two other deals involving facilities that include addiction treatment among their services offered were also announced: Prairie Ridge South , formerly known as Prairie Ridge Integrated Behavioral Healthcare, merged with Substance Abuse Treatment Unit of Central Iowa . The latter will now operate as Prairie Ridge South. San Angelo, Texas-based Shannon Medical Center acquired River Crest Hospital  from Universal Health Services . River Crest is an 80-bed facility that offers behavioral health and substance use disorder treatment programs for children, adolescents, adults, and military members. Mental Health M&A A total of 19 deals involving mental healthcare providers was announced in Q3, roughly on par with the 18 reported in the prior quarter. Five mental healthcare-focused deals were of the growth funding variety: Pomelo Care raised $46 million for its maternal health platform in a Series B funding round led by venture capital firms First Round Capital and Andreessen Horowitz Bio + Health. Patient-matching platform Headway closed a $100 million funding round led by Spark Capital, bringing its valuation to $2.3 billion. Spring Health , a New York City-based mental health solution for employers and health plans, announced that it raised $100 million in a Series E funding round led by Generation Investment Management, along with participation from existing investors Kinnevik, William K. Warren Foundation, RRE, and Northzone. Mental health chatbot company  Slingshot AI raised a $30 million funding round led by Andreessen Horowitz. BeMe Health , a Miami, Florida-based provider of teen-focused digital mental health services, raised $12.5 million in a Series A funding round led by growth capital investor Hesperia Capital. Other deals included the following: Iredell Health System signed a definitive agreement to acquire Davis Regional Psychiatric Hospital from subsidiaries of Community Health Systems, Inc. Vibrant Emotional Health , a New York-based not-for-profit mental health organization, announced its acquisition of  Stars of HOPE , a program of the New York Says Thank You Foundation. Release Recovery , a New York-based substance use and mental health recovery organization, acquired MANUAL , a personal development and wellbeing platform for young men that is currently available in more than 50 colleges and high schools. Lightyear Capital completed a strategic investment in CuraLinc Healthcare,  a provider of employee assistance, student, and workforce mental health programs. Virtual mental healthcare services provider Uwill acquired competitor Virtual Care Group  in a private equity-backed deal.  Fabric , a healthcare technology and care enablement system, acquired MeMD , a provider of virtual behavioral, urgent, and primary care benefits, from Walmart. Beacon Behavioral Partners , a provider of support services for behavioral healthcare practices, announced its first partnership in Pennsylvania with Nexus Group , a Pittsburgh-based outpatient mental health facility. Neuronetics and Greenbrook TMS  announced in August that they have entered into an agreement for Neuronetics to acquire all outstanding common shares of Greenbrook in an all-stock transaction. Riverside Impact Capital made an investment in Denver Mental Health Collective .  Pneuma Behavioral Health  announced a partnership with Crossroads Counseling Center , a behavioral health practice in Hickory, North Carolina. Autism and Intellectual/Developmental Disabilities M&A Although deal volume remained modest in the subsector of autism and intellectual/developmental disabilities (I/DD), Taggart said he sees potential for a surge in demand among investors for providers of applied behavioral analysis (ABA) therapy in 2025. Factors, such as labor costs, that have created headwinds for ABA companies in recent years have started to settle, and the result could be more deals getting done next year, he said. The following transactions involving autism and I/DD therapy providers were announced in Q3: ABA and autism diagnosis provider  Soar Autism  secured $19.3 million in a funding round. Investors were not disclosed. Autism Testing 4 Kids  raised $2.5 million, with 46 unnamed investors participating in the funding round. Beacon Specialized Living acquired  Community Concepts Inc.  and Community Visions LLC , marking Beacon’s first foray into Virginia. ABA Connect announced its acquisition of ABA Therapy of Houston , giving the company two clinics in Katy, Texas, and a network of 12 clinics across Texas and Colorado overall. Behavioral Framework  of Rockville, Maryland, announced that it has acquired Behavior Consultation & Psychological Services , a provider of clinic-, home-, and school-based ABA therapy and autism diagnosis services in North Carolina. If you are interested, you can also download the Q3 2024 Behavioral Health M&A Report via the following link:

Behavioral Health M&A A recent uptick in behavioral healthcare mergers and acquisitions and pent-up demand by private equity to transact has buyers both new and old appearing poised to hit the ground running in 2025. A total of 37 transactions—26 traditional M&A deals and 11 growth deals—were reported in the fourth quarter of 2024, bringing the total for the year to a combined 155 transactions. The 11 growth deals in Q4 had a combined value of about $170 million. Traditional M&A activity for 2024 was fairly consistent with the prior year. As 2024 came to a close, the volume of chatter among potential buyers from all corners increased, Mertz Taggart Managing Partner Kevin Taggart said. “If you look at most active buyers, it's pretty well spread out,” said Taggart. “Buyers who had been sitting on the sidelines for a while reached out to us late in Q4 to catch up before the new year, and we're starting to see some of the old buyers who haven’t been as active the past couple of years show interest in looking at deals again. That's a positive sign. Overall, we’re very optimistic about 2025.” The return to the White House of President Donald Trump for a second term could provide a catalyst for an increased flow in deals, with the Trump administration’s demonstrated preference for deregulation viewed as a positive for deal-making, Taggart said. With that being said, over the last few weeks things have been moving very quickly in Washington, which has given some buyers pause for certain sectors of behavioral health. If behavioral healthcare M&A activity does ramp up in 2025, Taggart pointed to two subcategories that could be poised for a comeback: addiction treatment, which has several strategic buyers showing renewed interest in making acquisitions, and autism, where slightly new models are attracting the attention of different buyers. Addiction Treatment M&A Just 8 deals involving addiction treatment providers were reported in Q4, up from 6 deals reported in Q3. Overall in 2024, 36 addiction treatment provider transactions were announced, a modest increase from 2023, which saw 29 deals, but still an unexpectedly low total and a far cry from the halcyon days of 2021, in which 79 transactions were completed. “If we look at the addiction subcategory, it was pretty anemic in 2023, and it was still slow in 2024,” Taggart said. “But I think that's going to rebound because some of the buyers that are coming back into space are more in the SUD side.” Among those buyers making a splashy return: Acadia Healthcare , which acquired 3 South Carolina-based opioid addiction treatment programs in October. The Franklin, Tennessee-based behavioral healthcare services company acquired Recovery Concepts , Recovery Concepts of the Carolina Upstate , and Clear Skye Treatment Center . Those programs were rebranded as Clinton Comprehensive Treatment Center, Easley Comprehensive Treatment Center and Ridgeland Comprehensive Treatment Center, respectively. Other transactions involving addiction treatment providers in Q4 included the following: Santé Center  in Argyle, Texas, was sold to two staff members—Sam Slaton, MEd, LPC, MBA, MHSM, and Michelle Luttrell, MA, LMFT-S, MBA, MHA—and Keith Klein, MC, CPA. Lawrence Medical Center  acquired  New Horizons Medical , which operates six clinic locations, as well as a mobile clinic. Owner Resource Group, an Austin, Texas-based private equity firm, announced that ORG Opportunity Fund IV and its affiliates completed an investment in Purpose Healing Center . Peace Medical  in Oakland Park, Florida, was acquired by an undisclosed “healthcare professional with an existing general health practice,” according to a news release. Mental Health M&A The fourth quarter of 2024 saw 25 deals involving mental healthcare providers, bringing the total for the year to 99 transactions. When excluding growth deals, transaction volume in 2024 was down from the previous two years. While there is still demand for medical outpatient and psychiatry practices, valuations for outpatient mental healthcare care facilities have come down slightly, Taggart said. Demand for counseling-only practices is down as well, he added. Q4 deals involving mental healthcare providers included the following: Carlyle Group-backed Odyssey Behavioral Healthcare , traded hands for the first time since 2018. JLL Partners acquired the platform in November. Odyssey provides facility-based behavioral health care that addresses substance use, eating, mental health, and process disorders. American Health Partners announced a transaction for Unity Psychiatric Care  in a private equity-backed strategic deal. Los Angeles-based  Amae Health  announced that it raised $6 million through a partnership with nonprofit academic health system Cedars-Sinai Medical Center . Clinica Family Health  announced a merger with Mental Health Partners  to form Clinica Family Health & Wellness. CuraLinc Healthcare  acquired the employee assistance program of Wellspring Family Services in a deal backed by primary investor Lightyear Capital. Family of Kidz  in Westbury, New York, acquired Milestones for Munchkins . Private equity firm Fireside Strategic Corporation made an investment in South Lake Center for Self Discovery in Davidson, North Carolina. Hightop Health , an outpatient mental health group, expanded its network of programs in the Atlanta area to 7 facilities with its acquisition of Georgia Psychiatry & Sleep  in a private equity-backed strategic deal. Neuronetics  completed its previously announced acquisition of Greenbrook TMS . Paramount Health Management  acquired St. George, Utah-based  Life Launch Centers and its four facilities in the state. The Queen’s Health Systems has acquired O‘ahu-based Kahi Mohala  from California-based Sutter Health Pacific. Kahi Mohala is the only freestanding, not-for-profit psychiatric hospital in the state of Hawaii. Mental healthcare provider Resilience Lab  announced an expansion of its services to include medication management and treatment of severe mental illness with its acquisition of AI-enable psychiatry provider Options MD . Stella ,   an interventional psychiatry practice, acquired the 5 Utah wellness clinics of psychedelic-assisted therapy provider Numinus Wellness for $3.53 million in a private equity-backed strategic transaction. Lynchburg, Virginia-based mental health provider Thriveworks acquired Synchronous Health , an AI-powered behavioral health company based in Nashville, Tennessee. Autism and Intellectual/Developmental Disabilities M&A After a slower 2023, the autism and intellectual/developmental disabilities (I/DD) subsector saw 7 deals announced in the fourth quarter of 2024 and 30 total deals for the year. Major bankruptcies, large strategic ABA companies struggling,  and wage inflation for registered behavior technicians (RBTs) were among the factors that have strained the autism and I/DD subsector in recent years, Taggart said. "Many providers struggled post-COVID, but some of the dust has settled on that, and we expect it to continue to improve, as buyers are showing interest in jumping back in,” Taggart said. “We're also seeing some slightly new models in that space that I think are attracting some interest from different buyers.” The following deals involving providers of autism and I/DD services were announced in fourth quarter: Autism Spectrum Interventions  acquired Los Angeles-based applied behavior analysis (ABA) therapy provider Quality Behavior Solutions  in a strategic deal backed by private equity firm Fletch Equity. Goldman Sachs Alternatives acquired autism therapy provider Center for Social Dynamics  in a private equity platform transaction. Helping Hands Family (HHF), a provider of ABA therapy, acquired Mission Autism Clinics  (MAC). The 12 MAC facilities will transition to the HHF brand as part of the deal. Living Innovations Home Care  acquired Momentum , a Maine-based provider of shared living and other behavioral health services to individuals with I/DD. Kelly , a workforce solutions provider, acquired Children’s Therapy Center . The childhood therapeutics company will be integrated into the Pediatric Therapeutic Services arm of Kelly's education workforce solutions provider, Kelly Education. Proven Behavior Solutions , a provider of outpatient therapy services for Massachusetts children with autism, acquired Prism Autism Education & Consultation  of Connecticut. If you are interested, you can also download the Q4 2024 Behavioral Health M&A Report via the following link:

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 reported strong operating results in Q4 2024, with total revenue increasing by 7.5% to $297.1 million from $276.4 million in Q4 2023. This growth was driven by a combination of solid organic expansion and contributions from recent acquisitions.  The personal care segment, representing 74.1% of total revenue, experienced a 5.8% organic growth in Q4 2024 compared to Q4 2023, driven by strong demand and favorable reimbursement across its markets. In Q4 2024, the company successfully expanded its caregiver workforce while maintaining historically low turnover rates.  Home health admissions saw steady growth in Q4 2024, supported by increased physician referrals and expanded partnerships with payers. The company continued to invest in technology and care coordination efforts to enhance service delivery and improve patient outcomes. The company had strong operating cash flow in Q4 2024 enabling them to pursue acquisitions while maintaining disciplined expense management and stable margins. Key Financial Figures M&A Activity Addus continued to grow through strategic acquisitions, completing two major transactions in 2024. The Gentiva Acquisition, finalized on December 2, 2024, expanded the company’s personal care business, while the acquisition of Upstate Home Care Solutions on March 9, 2024, further strengthened its presence in key markets. Acquisitions completed in 2024 contributed $22.6 million in net service revenues for the year, highlighting the company’s successful execution of its acquisition strategy. This compares to $18.8 million in net service revenues from acquisitions completed in 2023. “As we continue to look for acquisitions that align with our growth strategy, our primary objective is to find operations and markets where we can leverage our strong personal care presence and add clinical services so we can offer all three levels of home-based care,” CEO Dirk Allison stated. Guidance Illinois' FY 2025 budget raises in-home care service rates to $29.63 per hour, effective January 1, 2025, benefiting AddusHomeCare's revenue and profitability in the state. The company had a strong Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. Aveanna Healthcare (Nasdaq: AVAH) Highlights Revenue for Q4 2024 totaled $422.2 million, reflecting a 9% increase compared to Q4 2023. Aveanna achieved growth across all three operating divisions, with Private Duty Services increasing 10% & Medical Solutions rising 5% y-o-y. EBITDA for the quarter was $54.9 million, representing a 70% increase y-o-y. This growth was primarily driven by higher core volume, an improved payer rate environment, and the successful implementation of cost-reduction initiatives. Aveanna recognizes that the primary challenge remains the labor environment, particularly the shortage of available caregivers. In the past quarter, the company made notable progress in caregiver hiring and retention, positively impacting service capacity and financial performance. Key Financial Figures M&A Activity Aveanna CEO Jeff Shaner stated, “We feel like we have not only stabilized the company but put the company back on the rightful path for growth and success. And we believe it’s time for us to reenter the M&A market.”  The company plans to close transactions in 2025, focusing on acquisitions within the Private Duty Nursing and Home Health & Hospice segments as part of its inorganic growth strategy. Guidance In 2024, Aveanna has secured 12 state rate increases for Private Duty Services, with additional states expected to implement increases in early 2025. The company has worked closely with the California Governor, Medi-Cal Department, and the Legislature to highlight how private duty nursing rate investments reduce healthcare costs and will continue partnering with California officials to pursue further rate increases in the 2025/2026 budget.  Aveanna has provided full-year 2025 guidance as follows: Revenue range - $2.1 - $2.12 billion and an adjusted EBITDA range of $190 - $194 million owing to the expected continued organic volume growth, improved clinical outcomes, and enhanced profitability into 2025 The company had a good Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. The Pennant Group, Inc. (Nasdaq: PNTG) Highlights The company achieved total revenue of $188.9 million in Q4 2024, marking a 29.4% increase compared to the same period in 2023. This growth reflects strategic investments in leadership, occupancy enhancements, improved revenue quality, and operational efficiencies.  The Home Health segment continued to show strong growth, with quarterly revenues reaching $78.6 million, a 50% increase year-over-year. Total home health admissions increased by 40.9%, while Medicare home health admissions increased by 30.1%. The Hospice segment achieved a 17% increase in revenue year-over-year, supported by improvements in hospice programs and the successful integration of recent acquisitions, which have helped differentiate its operations within the community. Hospice admissions increasing by 21.7%. The Senior Living segment generated $46.9 million in revenue, representing a 29% increase over the prior year quarter. Key Financial Figures M&A Activity In August, PNTG completed the first phase of its planned acquisition of Signature Group, LLC operations (Washington and Idaho assets). This acquisition added four home health agencies and one hospice agency to the Company’s portfolio. According to PNTG’s President & COO, John Gochnour, “The integration and transition of these operations is proceeding well, and we are starting to unlock additional value by implementing our unique operating model, sharing best practices, and providing world-class support from our service center.” The Oregon assets of Signature represent the second and larger portion of the transaction, with preparations for closing on January 1, 2025.  Guidance Considering the company’s geographic distribution and the finalized wage index updates, Pennant anticipates a net neutral effect on per-episode reimbursement under the 2025 Final Rule. PNTG has provided full-year 2025 guidance as follows: Revenue: Range of $800 million to $865 million Adjusted EBITDA: Range of $63.1 million to $68.2 million Management's projections account for reimbursement adjustments and exclude acquisition-related costs and other non-core expenses, emphasizing a focus on operational performance and cash flow. The company had a strong Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights The company reported net service revenue of $258.2 million for Q4 2024, a slight decrease of $2.4 million (0.9%) compared to the same period in 2023. Home Health revenue declined by 4% y-o-y. Non-Medicare admissions dropped 20.1%, driving total admissions growth of 4.8% year-over-year. Of these non-Medicare visits, 45% are now under payer innovation contracts at improved rates. However, while admissions grew, recertifications declined due to more admissions from acute care facilities with shorter stays and a changing payer mix in congregate living settings. This drop in recertifications was the main factor in the revenue decrease. Hospice revenue grew by $6.8 million or 13.3% year-over-year, driven by higher patient days and increased Medicare rates. Since January 2024, the average daily census has risen during the year 2024. Key Financial Figures M&A Activity The company remains limited by its credit agreement, which restricts acquisition opportunities due to current debt levels. As Enhabit Senior Vice President and Treasurer Jobie Williams stated, “We have focused this year on accelerating cash and paying down debt, and our success can be seen in our results. Our leverage decreased for the third quarter in a row. We ended the third quarter with a leverage ratio of 4.8 times.” Guidance Enhabit has provided guidance for full-year 2025 as follows: Revenue: Range of $1,050 million to $1,080 million Adjusted EBITDA: Range of $101million to $107 million This guidance reflects its long-term growth strategy in home health and hospice. Stabilized Medicare census, a renegotiated national contract, and a growing hospice segment highlight its strengthened market position. These developments reinforce its commitment to operational and financial improvement in 2025. The company had a strong Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. The company had a good Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights BTSG total revenue in Q4 2024 was $3.02 billion, representing 27% growth from the prior year period.  Pharmacy Solutions segment revenue was $2.4 billion, achieving growth of 33% year-over-year. Within the segment, Infusion and Specialty revenue showed a 22% increase compared to last year. And home and community pharmacy revenue grew of 11% year-over-year.  The Provider Services segment had revenue of $655.8 million, representing growth of 11% compared to the prior year period. Home health revenue was $1041.3 million for 2024, growing 13%, over 2023, with average daily census rising close to 45,000. This growth was driven by strong clinical quality, including 30-day readmission rates that are 60% lower than the national average, particularly notable in the company’s emerging primary care services. Community and rehab care revenue was $1,470.9 million for 2024, representing growth of 6.4% year-over-year. Gross profit increased across all segments compared to Q4 of last year. EBITDA reached $263.9 million, reflecting a 9% year-over-year growth. Key Financial Figures M&A Activity During the nine months ending September 30, 2024, BTSG completed seven acquisitions across its Pharmacy Solutions and Provider Services segments, aimed at expanding its services and geographic reach.  On September 1, 2024, BTSG announced the acquisition of North Central Florida Hospice, Inc. ("Haven Hospice"), which provides hospice and palliative care services throughout Florida. As CEO Jon Rousseau stated, “Towards the end of the third quarter, we announced the closing of the Haven Hospice acquisition, and we look forward to expanding our quality care to high-need patients in Florida. Our hospice business continues to show strong growth, with excellent patient satisfaction, currently holding an 84% overall care rating according to the Consumer Assessment of Healthcare Providers and Systems.” Guidance BTSG has provided revenue and Adjusted EBITDA guidance for the full year 2025 as follows: Revenue: Range of $11.6 billion to $12.1 billion Adjusted EBITDA: Range of $545 million to $560 million, reflecting anticipated growth of 18.4% to 21.7% compared to 2024.  The company had a good Q4 2024, however, Federal Medicare and Medicaid funding changes may modestly impact future momentum. Option Care Health, Inc. (NASDAQ: OPCH) Highlights OPCH reported Q4 2024 revenue of $1,346.4 million, a 20% increase from $1,124.4 million in Q4 2023, driven by strong growth in its rare and orphan portfolios and continued expansion in established therapeutic categories.  Gross profit was $568.4 million, or 19.9% of net revenue, up 9% from $100.3 million in Q4 2023. Gross profit continues to improve, and spending leverage is strengthening, with SG&A down nearly 1% year-over-year. EBITDA reached $104.5 million in 2024, reflecting a 4% increase from $100.3 million in the last year.  While Hurricane Helene impacted operations in the Southeast at the end of Q3 continuing to Q4, it did not materially affect overall results.  The company generated $323.4 million in cash flow from operations during 2024, reflecting a 13% drop from $371.3 in 2023. The company ended the quarter with cash balances of $412.6 million. There was also a decline in cash flows from financing activities as the company refinanced its debt securing $50.0 million in proceeds, which was offset by a $250.0 million stock repurchase over the year. Key Financial Figures M&A Activity 2024 was another quiet year for acquisitions for Option Care. But that is changing. Though it is a Q1 announcement, it is worth noting Option Care acquired Intramed Plus in January 2025. Intramed Plus is a home-based and AIC provider with pharmacy infrastructure and four locations in South Carolina.  The company paid a multiple of EBITDA in the “mid-teens” according to CFO, Mike Shapiro. Shapiro added further that Option Care expects this to normalize down into the low-teens fairly quickly, as a result of cost synergies. Option Care raised its revenue and EBITDA targets by $100 million and $5 million respectively, primarily as a result of the Intramed deal. They were quick to point out the $5 million in incremental EBITDA was after cost-synergies. Intramed will allow Option Care to further expand its advanced practitioner model. Guidance OPCH has provided revenue and Adjusted EBITDA guidance for the full year 2025 as follows: Revenue: Range of $5.3 billion to $5.5 billion Adjusted EBITDA: Range of $450 million to $470 million Cash flow from operations: $320 million Overall positive guidance, despite the $60 million to $70 million anticipated gross profit reduction as a result of the STELARA price change, which goes into effect January 1, 2026. To download the .pdf version of this report, click below.

The slowdown continued. But the pick-up is happening. After a booming M&A landscape in 2021 gave way to a moderate 2022 and 2023, home-based care dealmaking slowed considerably in 2024, dropping from 183 deals in 2021 to 110 in 2023 down to just 72 in 2024. That decline in 2024 ended with just 14 transactions in Q4, tied for the lowest quarter for home-based care M&A activity since the pandemic. But don’t expect things to stay that way. “Things are starting to move,” says Cory Mertz, Managing Partner at Mertz Taggart. “More transactions are moving forward. They just haven’t gotten across the finish line. But expect they will in 2025.  At the risk of getting ahead of ourselves, we’re seeing a fast start to Q1 2025, in terms of deals closed.” 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. Home care led the way with eight transactions, followed by six in hospice and just two in home health. Nine of the deals featured PE-backed companies. Election Impact on Home-Based Care M&A The most significant event in Q4 was undoubtedly the election.  While impacts from DOGE and the current administration’s view on Medicaid funding (and its potential impact on home-based care) are not yet known, positively or negatively, the Trump administration is expected to bring a positive shift to the healthcare M&A landscape by encouraging private sector growth and reducing regulatory hurdles. Recent scrutiny of private equity investment in healthcare in the form of legislation at both the federal and state levels has created uncertainty in the market, but the new administration’s anti-regulatory stance could reverse this trend and foster a more transaction-friendly environment. Added Mertz, “By focusing on deregulation, the administration is creating a climate where private equity investors have more confidence they can get deals more efficiently, unlocking opportunities in the healthcare sector.” Home Health M&A   Of the past 16 quarters, the two lowest quarters in home health M&A came in 2024: Q1, with four deals completed, and Q4, with just two. The first of those two was announced on October 13, when Brooklyn-based home health care agency Prime Home Health Services acquired the assets of Visiting Nurse Association of Staten Island (VNASI), which had ended its operations September 27. “That operation closed down, and Prime will do our best to continue to service the community by using and recognizing the name and how it resonates,” Prime Home Health Services CEO Christopher Doulos said in a statement. The second deal came less than a month later, when Choice Health at Home acquired the Oklahoma City-based Accentra Home Health and Hospice . As Choice noted, the acquisition means it will be able to cover 90% of Oklahoma’s urban and rural geographies. “This will improve the lives of our nurses, there will be less travel time and more density of patients in the metro areas,” Choice CEO David Jackson told Home Health Care News . “But also, it gives us the license numbers in the state to really be able to reach out and touch people in the rural areas as well. So, from a strategic planning perspective, we want to cover the Southwest, with Oklahoma included. Within that, we’re really intent on providing care in rural and urban settings, and this gives us the opportunity to do so.” Hospice M&A Choice’s acquisition of Accentra is also a hospice transaction, one of five that closed in Q4. The other four were all solely hospice. Hospice transaction activity has taken the biggest hit post-COVID of any of the three sectors; 2024 saw 25 hospice deals, down from 30 in 2023, 41 in 2022 and 81 in 2021. The four other hospice deals in Q4: Private equity firm Martis Capital acquired Dallas-based Three Oaks Hospice for $150 million. Chapters Health System acquired four non-profit hospices, including Hospice of Santa Cruz County . Long-term care company Mission Health Services acquired Utah-based Angel’s Crossing Home Hospice . Nevada-based Eden Health acquired A Plus Hospice Care . “This acquisition represented an expansion opportunity into an adjacent market within a state where the buyer, Eden Health, had developed a growing footprint,” Spencer Walters, senior director of Eden Health,  told Hospice News  in an email. “Eden Health has successfully grown their regional presence by supplementing organic growth efforts with an aggressive acquisition strategy.” Home Care M&A The busiest sector in Q4 was home care, with eight deals completed.  The biggest mover: Vistria-backed Help at Home, who completed four transactions in the quarter, including Helpmates Home Nurses in Pennsylvania, and Florida-based Caregiver Services (CSI). “CSI knows what it takes to be an employer that can cultivate a compassionate care workforce, and they’re also focused on providing high-quality care and being a trusted partner with the state of Florida and their payers in the communities they serve,” Ray Smithberger, chief operating officer of Help at Home, told Home Health Care News  following the deal. Other notable transactions in Q4 include: Canada-based Nova Leap Health acquired a Florida-based private duty home care agency in Florida.  While the selling company’s name has been withheld at Nova Leap’s request, the financial terms were made public.   Nashville-based Avenues Home Care acquired Texas-based Clear Path Home Care . Havencrest-backed Avid Health at Home, LLC acquired Sandhills Home Care in North Carolina. 2025 Outlook “We expect activity to pick up in 2025 relative to 2024.  There is too much pent-up demand from private equity, driven by aging dry powder.  These are committed funds from their LP investors that they have not yet been able to invest.   Leaving committed funds uninvested can make raising their next fund more of a challenge, so there is an impetus to invest now,” Mertz said. “We also expect to see more activity by sponsor-backed portfolio companies seeking an exit.  Some of them have shared with us that they’ve held off on their previously planned exits and see 2025 as the year to transact so they can ultimately give their investors a return on their capital.  If it’s a successful exit, and many will be, they will then be armed with good results that they can boast as they raise their next fund.” If you are interested, you can also download the Q4 2024 Home-Based Care M&A Report via the following link:

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 delivered strong operating results in Q3 2024, with total revenue increasing by 7% to $289.8 million from $270.7 million in Q3 2023. This growth was driven by a combination of solid organic expansion and contributions from recent acquisitions. The personal care segment, representing 74% of total revenue, experienced 6.7% organic growth in Q3 2024 compared to Q3 2023, driven by strong demand and favorable reimbursement across its markets. In the Q3 2024, the company hired 79 personal care caregivers per business day, while turnover rates remained historically low. The hospice and home health segment's revenue growth was primarily driven by the 2023 acquisition of Tennessee Quality Care. The hospice segment’s average daily census grew modestly to 3,534 in Q3 2024, a 2.3% increase from 3,453 in Q3 2023. The Company maintained a stable gross profit margin of 32%, consistent with the levels reported in both Q3 2023 and Q2 2024. Key Financial Figures M&A Activity Addus is moving forward with the acquisition of Gentiva’s personal care business to strengthen the scale of its personal care segment. As Addus CEO Dirk Allison noted, “upon the close of this transaction, Addus will be the largest provider of personal care services in the state Texas, which is primarily a managed Medicaid market. In addition, this transaction will give us a larger presence in Arkansas, strength our California and Arizona private pay and Veterans Affair businesses and will add a location in Eastern Tennessee to our existing operations in the state and provide entry into both Missouri and North Carolina.”  ADUS expects the Gentiva acquisition to close in fourth quarter and will add $280 million in annualized revenues in personal care services. 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.  Guidance Addus expects a positive impact on the personal care segment from favorable reimbursement rates across its operating states. Starting January 1, 2025, Illinois, the largest state for personal care services, will implement a 5.5% rate increase. Aveanna Healthcare (Nasdaq: AVAH) Highlights Revenue for Q3 2024 totaled $509 million, reflecting a 6.5% increase compared to Q3 2023. Aveanna achieved year-over-year growth across all three operating divisions, with Private Duty Services increasing 6.4%, Medical Solutions rising 12.6%, and Home Health & Hospice growing 2.2% compared to the same period in 2023. EBITDA for the quarter was $36.8 million, representing a 14.3% increase year-over-year. This growth was primarily driven by strong performance in its private duty division, an improved payor rate environment, the successful implementation of cost reduction initiatives, and focus on episodic payers within its home health division. Aveanna recognizes that the primary challenge is the labor environment, particularly the shortage of available caregivers. In the past quarter, the company has seen notable improvements in caregiver hiring and retention trends, positively impacting its financial performance. Organic growth across all segments compared to the prior year: Private Duty hours grew 3.8%, Home Health & Hospice episodes grew 1%, and Medical Solutions had a 4.5% increase in unique patients served. Key Financial Figures M&A Activity Aveanna CEO Jeff Shaner stated, “We feel like we have not only stabilized the company but put the company back on the rightful path for growth and success. And we believe it’s time for us to reenter the M&A market.”  The company plans to close transactions in 2025, focusing on acquisitions within the Private Duty Nursing and Home Health & Hospice segments as part of its inorganic growth strategy. Guidance Aveanna expects to continue the momentum into 2025. Year-to-date, Aveanna has secured 12 state rate increases for Private Duty Services, with additional states expected to implement increases in early 2025.  In addition, the Company is in the early stages of implementing the preferred payer strategy in Medical Solutions to be fully realized by the end of 2025 The Pennant Group, Inc. (Nasdaq: PNTG) Highlights For Q3 2024, the company reported total revenue of $180.7 million, an increase of $40.5 million or 28.9% compared to Q3 2023. The company has invested in leadership, increased occupancy, improved revenue quality, and enhanced operational performance to drive this growth. The Home Health segment continued to show strong growth, with quarterly revenues reaching $72.9 million, a 43% increase year-over-year. Total home health admissions increased by 38.5%, while Medicare home health admissions increased by 30.8%. The Hospice segment achieved a 25% increase in revenue year-over-year, supported by improvements in hospice programs and the successful integration of recent acquisitions, which have helped differentiate its operations within the community. Hospice admissions increasing by 22.8%. The Senior Living segment generated $45 million in revenue, representing a 16.3% increase over the prior year quarter. Key Financial Figures M&A Activity In August, PNTG completed the first phase of its $80 million planned acquisition of Signature Group, LLC operations (Washington and Idaho assets). This acquisition added four home health agencies and one hospice agency to the Company’s portfolio. According to PNTG’s President & COO, John Gochnour, “The integration and transition of these operations is proceeding well, and we are starting to unlock additional value by implementing our unique operating model, sharing best practices, and providing world-class support from our service center.” The Oregon assets of Signature represent the second and larger portion of the transaction, with preparations for closing on January 1, 2025.  Guidance Considering the company’s geographic distribution and the finalized wage index updates, Pennant anticipates a net neutral effect on per-episode reimbursement under the 2025 Final Rule. PNTG has raised its full-year 2024 guidance as follows: total revenue between $665.3 million and $706.5 million, adjusted earnings per diluted share between $0.90 and $0.96, and adjusted EBITDA between $51.9 million and $55.2 million. This guidance update reflects strong expected performance through year-end, hospice reimbursement adjustments, lower interest expenses, and contributions from joint ventures and management agreements. Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights Enhabit total revenue was $253.6 million for the third quarter down $4.7 million or 1.8% year-over-year. EBTIDA was $18.1 million up $2.6 million or 16.8% year-over-year. EBITDA still lower than Q1 2024, and Q2 2024.  Home Health revenue declined by $9.9 million. Non-Medicare admissions grew 20.1%, driving total admissions growth of 5.6% year-over-year. Of these non-Medicare visits, 45% are now under payor innovation contracts at improved rates. However, while admissions grew, recertifications declined due to more admissions from acute care facilities with shorter stays and a changing payor mix in congregate living settings. This drop in recertifications was the main factor in the revenue decrease. Hospice revenue grew by $5.2 million or 11% year-over-year, driven by higher patient days and improved reimbursement rates. Since January 2024, the average daily census has risen monthly, with a 6.9% increase in Q3, including 5% same-store growth. Key Financial Figures M&A Activity The company remains limited by its credit agreement, which restricts acquisition opportunities due to current debt levels. As Enhabit Senior Vice President and Treasurer Jobie Williams stated, “We have focused this year on accelerating cash and paying down debt, and our success can be seen in our results. Our leverage decreased for the third quarter in a row. We ended the third quarter with a leverage ratio of 4.8 times.” Guidance Enhabit has revised its 2024 guidance due to lower recertifications in Q3 and the impact of hurricanes. In Q3, 29 home health branches were affected by Hurricane Helene, and 21 by Hurricane Milton, with 12 impacted by both, resulting in an estimated loss of 425 to 450 admissions.  The revised full-year revenue forecast for 2024 is $1.031 billion to $1.046 billion, with adjusted EBITDA expected between $98 million and $102 million. Starting October 1, 2024, the hospice segment received a 4% reimbursement rate increase, expected to generate an additional $8 million annually. For home health, 2025 revenue is projected to grow by low- to mid-single digits, driven by admissions, census growth, and a shift to higher-paying Medicare Advantage plans. This growth is also supported by a continued focus on operational efficiency. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights BTSG total revenue in Q3 2024 was $2.9 billion, representing 29% growth from the prior year period.  Pharmacy Solutions segment revenue was $2.3 billion, achieving growth of 35% year-over-year. Within the segment, Infusion and Specialty revenue was $1.7 billion, reflecting a 42% increase compared to last year. And home and community pharmacy revenue was $588 million, marking growth of 19% year-over-year.  The Provider Services segment had revenue of $641 million, representing growth of 10% compared to the prior year period. Home health contributed $265 million, growing 13%, with average daily census rising 16% to over 46,000. This growth was driven by strong clinical quality, including 30-day readmission rates that are 60% lower than the national average, particularly notable in the company’s emerging primary care services. Community and rehab care revenue was $376 million, representing growth of 8% year-over-year.  Gross profit increased across all segments compared to Q3 of last year. Adjusted EBITDA reached $151 million, reflecting a 16% year-over-year growth. Key Financial Figures M&A Activity During the nine months ending September 30, 2024, BTSG completed seven acquisitions across its Pharmacy Solutions and Provider Services segments, aimed at expanding its services and geographic reach.  On September 1, 2024, BTSG announced the acquisition of North Central Florida Hospice, Inc. ("Haven Hospice"), which provides hospice and palliative care services throughout Florida. As CEO Jon Rousseau stated, “Towards the end of the third quarter, we announced the closing of the Haven Hospice acquisition, and we look forward to expanding our quality care to high-need patients in Florida. Our hospice business continues to show strong growth, with excellent patient satisfaction, currently holding an 84% overall care rating according to the Consumer Assessment of Healthcare Providers and Systems.” Guidance BTSG has revised its revenue and Adjusted EBITDA guidance for the full year 2024 as follows: Revenue: Increased to a range of $11.0 billion to $11.3 billion Adjusted EBITDA: Revised to a range of $580 million to $585 million, reflecting anticipated growth of 14.2% to 15.2% compared to 2023.  Option Care Health, Inc. (NASDAQ: OPCH) Highlights OPCH reported Q3 2024 revenue of $1,278.5 million, a 17% increase from $1,093.0 million in Q3 2023, driven by strong growth in its rare and orphan portfolios and continued expansion in established therapeutic categories.  Gross profit was $256.7 million, or 20.1% of net revenue, up 1.0% from $254.3 million in Q3 2023. Gross profit continues to improve, and spending leverage is strengthening, with SG&A down nearly 1% year-over-year. Adjusted EBITDA reached $115.6 million, reflecting a 5.3% increase from $109.8 million in the same period last year.  While Hurricane Helene impacted operations in the Southeast at the end of Q3, it did not materially affect overall results.  Cash flow generation remains strong, with $160.4 million in cash flow from operations for the quarter. The company ended the quarter with cash balances of $483 million, after deploying approximately $42 million on share repurchases. As CFO Mike Shapiro stated, “We believe the balance sheet has never been stronger, and we remain engaged in a number of acquisition opportunities while continuing to execute our multifaceted capital deployment strategy.” Key Financial Figures M&A Activity In Q2 2024, OPCH repurchased approximately $78 million of its stock. Given the strong momentum in cash flow generation, the company remains focused on deploying capital through M&A and share repurchase strategies. In Q3 2024, the company repurchased an additional $41.9 million of stock. Guidance Option Care Health has updated its financial guidance for the full year 2024, projecting: Revenue: $4.9 billion to $4.95 billion Adjusted EBITDA: $438 million to $443 million. Supply chain disruptions from Hurricane Helene, especially in intravenous solution production, have significantly impacted operations. As a result, the company is currently limited in its ability to onboard new patients, particularly those requiring intravenous antibiotics and nutrition support therapy.  The company expects the supply situation to improve over the coming weeks and months as imports resume and production ramps up at plants and other producers. The updated guidance incorporates the IV bag supply chain disruption. The Company expects that the disruption will negatively impact the fourth quarter financial results and is considered in its updated 2024 guidance. To download the .pdf version of this report, click below.

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: