BATON ROUGE, La., June 01, 2020 (GLOBE NEWSWIRE) — Amedisys, Inc. (NASDAQ:AMED), a leading provider of home health, hospice and personal care, announced today that, through one of its wholly owned subsidiaries, it has closed on its acquisition of Homecare Preferred Choice, Inc., doing business as AseraCare Hospice (“AseraCare Hospice” or “AseraCare”), a national hospice care provider with an executive office in Plano, Texas and administrative support center in Fort Smith, Arkansas. Under the terms of the agreement, Amedisys acquired 100 percent of the ownership interests in AseraCare Hospice for a cash purchase price of $235 million, which is inclusive of a $32 million tax asset bringing the net purchase price to $203 million. The Company did not use any of the funds received by the Company from the Public Health and Social Services Emergency Fund that was appropriated by Congress to the Department of Health and Human Services in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to fund the acquisition. “AseraCare has been on our radar for a long time. We have long admired their strong culture, focus on patients and employees and commitment to always providing high-quality care,” stated Paul Kusserow, Amedisys’ president and chief executive officer. “We are excited about the opportunity, as one company, to bring the gift of hospice to more communities.” Founded in 1994, AseraCare Hospice cares for more than 2,100 patients daily and employs more than 1,200 hospice professionals in 44 locations across 14 states, generating approximately $117 million in annual revenues. This acquisition adds greater scale to Amedisys’ high-quality, nationwide network. Combined, our new hospice operations will include 190 care centers in 35 states, with an average daily census of approximately 14,000 patients and approximately 7,000 hospice employees. “We feel privileged to welcome AseraCare Hospice into the Amedisys family. We share our commitment to delivering compassionate, patient-centered care to patients and their families, and a culture of engagement and support to our colleagues and caregivers,” said Anthony Mollica, Amedisys’ president of hospice. “We are all in the hospice business because we care. For us, this is not our job; caregiving is our calling.” This acquisition is the fourth hospice acquisition for Amedisys since 2019. The Company acquired and integrated Compassionate Care Hospice in February 2019, RoseRock Healthcare in April 2019 and Asana Hospice in January 2020.   “AseraCare and Amedisys have always shared an absolute and sacred commitment to help our patients live each day to its fullest, one person, one family and one community at a time,” stated AseraCare President Larry Deans. “I am fully confident that Amedisys will continue and build upon our mission-driven purpose and high-quality care for our patients and families for years to come.” Read more here… GlobeNewswire Click to read Amedisys to Acquire AseraCare Hospice for $235 Million

For years, many medicaid-reimbursed healthcare services companies operated with a certain degree of "stealth." While you were aware of your internal growth and revenue, that data was largely private. That changed recently. The release of the most recent Medicaid payment data has acted as a searchlight on the private healthcare market. For agencies in non-medical home care and private duty nursing (PDN), internal performance metrics are now effectively public search criteria. If you have noticed an uptick in "exploratory" emails or calls from private equity groups, strategic acquirers, and other advisors, this transparency is the reason why. The Buyer’s New Map Institutional buyers and large strategic aggregators operate on data. With the new Medicaid files, their Business Development teams are no longer guessing who the market leaders are in a specific region—they are filtering for them. If your company is doing $5M or more in revenue, you are likely now a "Tier-1 Target" on a proprietary spreadsheet. For smaller agencies, you have become an ideal "add-on" candidate for platforms looking to increase density. Why "Direct Interest" Isn't Always a Compliment It is flattering when a multi-billion-dollar fund reaches out to "learn more about your story." However, from a first-principles perspective, you must recognize the tactical intent. When a buyer approaches you directly, their primary goal is to preempt a competitive process.  By engaging you before you have representation, they can: Define the Valuation:  They use the data they found to anchor a price before you know what the broader market would pay. Control the Terms:  They utilize their "deal fatigue" and sophisticated legal teams to navigate a transaction where they hold the information advantage. Eliminate Competition:  They know that if you go to market with a firm like Mertz Taggart, the price will likely increase as multiple buyers compete for the asset. Seller Beware: The Cost of Going Alone The danger of the current data release is that it creates a false sense of security. A buyer might offer a "fair" multiple of the revenue they see in the public data. But "fair" is not "maximum." As we have discussed in our Seller Beware  posts, owners who negotiate directly with sophisticated buyers often leave millions on the table—not because the offer was "bad," but because they lacked the competitive leverage to find the best  offer. The Mertz Taggart Perspective Visibility is a double-edged sword. While it is good to be noticed, being "found" by a professional buyer puts you on their home turf. Our role is to provide the counter-balance. We bring institutional-quality execution  to private sellers, ensuring that when a buyer comes to the table with their data, you meet them with a disciplined process, market-validated credibility, and a relentless advocate in your corner. Before you respond to that "exploratory" inquiry, ensure you aren't setting a ceiling on your life's work.

Originally presented as a live webinar by the Mertz Taggart behavioral health team: Kevin Taggart, Peter Thiessen, and Dr. Anke Stugk If you're a behavioral health business owner thinking about selling, whether that's six months from now or three years down the road,  the decisions you make today will directly impact what your business is worth when the time comes. We recently hosted a webinar covering the full lifecycle of a behavioral health transaction: how to prepare, what buyers look for, what the process actually looks like, and where the market stands heading into 2026. This post distills the key takeaways for owners who are weighing their options. Watch the full webinar here: The Market Is More Active Than You Think Let's start with the question everyone wants answered: is now a good time to sell? The short answer is yes…with some nuance. If you've been hearing that the M&A market is down, you're not wrong that deal volume pulled back from the highs of 2021 and 2022. Those were anomaly years, driven in part by anticipated tax changes and a wave of private equity capital entering behavioral health. Transaction volume nearly doubled compared to pre-COVID norms, and when it corrected in 2023 and 2024, it felt like a sharper decline than it actually was. Here's the reality: 2023 and 2024 were still solid years when compared to pre-pandemic baselines of roughly 100 transactions per year. And 2025 has been our busiest year since 2021 on the behavioral health side — we've closed seven transactions with several more in the pipeline. More importantly, private equity interest remains strong. We're seeing a high number of new platform investments, which is a leading indicator for add-on acquisition activity in 2026 and 2027. Every time a PE group makes a platform investment in behavioral health, they're planning to do multiple add-on acquisitions in subsequent years. That creates more buyers competing for well-run businesses like yours. What's happening by subsector Substance use disorder (SUD):  The biggest shift here is that several large strategic buyers — groups that used to account for 15 to 25 transactions a year combined — have been on the sidelines. But new buyers have stepped in to fill much of that gap. Out-of-network businesses remain harder to sell, though there are exceptions for highly specialized programs. Autism and IDD:  After a rough stretch in 2022 and 2023 driven by wage inflation and the high-profile Carta bankruptcy, the ABA market has rebounded. We're seeing competitive processes again for well-run programs, and buyer interest is strong heading into 2026. Outpatient mental health:  This remains one of the most active areas. Psychiatry practices with integrated counseling services are in particularly high demand. We're still seeing double-digit multiples for businesses that check the right boxes — strong financials, good payer mix, and a scalable model. A note on venture capital:  Over the past few years, venture-backed telehealth companies entered behavioral health and were valued like software companies. That growth has slowed considerably. The distinction matters: venture capital tends to invest in pre-profitability growth stories, while private equity invests in EBITDA-positive businesses. If you're running a profitable, well-managed practice, private equity is your buyer universe, and that market is healthy. Getting Your Financial House in Order Buyers will scrutinize your financials going back at least two years, sometimes three. The single most impactful thing you can do to prepare is make sure your books are clean, consistent, and well-organized. Consistency matters more than perfection.  Categorize your revenue and expenses the same way every month, every year. When a buyer or their QoE firm can't easily compare one period to the next because line items keep moving around, it creates questions, and questions slow deals down. Personal expenses are normal; just be transparent.  We see it all the time: owners running personal travel, vehicles, or other expenses through the business. That's fine. We handle these through what's called EBITDA normalization — we add back personal or one-time expenses to show the true profitability of the business. The key is being upfront about them from the start. Develop budgets and forecasts.  Buyers want to see that you have a plan and that you can execute against it. If you forecasted 15% growth and delivered 12%, that's a conversation. If you forecasted 30% and delivered 2%, that's a red flag. During the transaction year especially, your performance against forecast is under a microscope. No last-minute surprises.  This cannot be overstated. If there are pending audits, legal issues, licensing concerns, or accreditation problems, disclose them early. We've seen deals fall apart 60 days before closing because a seller tried to hide an accreditation issue — and it took them another two years to find a buyer after that. These things almost always come out during due diligence. Bringing them forward early lets everyone work through solutions while the deal is still on track. What Drives Valuation, and What Hurts It Understanding what buyers value helps you make better decisions long before you ever go to market. What increases your valuation Diversified payer mix.  The more insurance contracts you have (Blue Cross, Cigna, Humana, Medicaid, Medicare, and others), the less risk a buyer takes on. Heavy reliance on a single payer is one of the most common valuation discounts we see. A strong management team.  Especially if you're not planning to stay long-term, buyers want to know who's going to run the business after you leave. Having a capable number two or three in place, people with experience who are committed to staying, makes a meaningful difference in what a buyer will pay. A scalable model.  Buyers are thinking about growth from the moment they evaluate your business. Can they replicate what you've built in a new market? Do you have the back-office infrastructure (HR, IT, billing) to support expansion? And critically, have you proven it works? If you've successfully opened a second or third location, that gives buyers far more confidence than a theoretical growth plan. Consistent growth.  Steady, demonstrable growth over two to three years is one of the strongest signals you can send. It doesn't have to be dramatic, even modest growth shows a business that's healthy and trending in the right direction. Clean clinical documentation and billing compliance.  Low denial rates and well-maintained clinical notes make due diligence smoother and signal operational maturity to buyers. What raises red flags Declining revenue.  This gets noticed immediately and makes it significantly harder to get a deal across the finish line, especially if the decline happens during the transaction year. Low EBITDA margins.  If your margins are meaningfully below your peers in the same geography and service line, buyers will ask why — and whether fixing it means cutting costs or adding headcount, both of which affect their return. High staff turnover.  This can signal that you're running too lean, which leads to burnout. Buyers know that means they'll need to hire more people post-close, adding expenses they didn't budget for. Customer or referral concentration.  If one referral source or one payer represents a disproportionate share of your revenue, that's a risk factor. Diversifying before you go to market strengthens your position. Unresolved audits.  Whether it's Medicaid, Medicare, or an individual payer audit, open issues create uncertainty. Get them resolved before you're in a transaction if at all possible. Heavy reliance on grant revenue.  Grant-funded revenue is viewed differently than contract or insurance revenue, especially if the grants are new or if the relationship with the granting entity depends entirely on you as the owner. What the M&A Process Actually Looks Like If you've never sold a business before, the process can feel opaque. Here's how it typically works, and why a competitive process matters. Phase 1: Preparation (Month 1) Before anything goes to market, we spend the first month building your Confidential Information Memorandum (SIM), essentially a detailed profile of your business that tells your story to potential buyers. This involves multiple rounds of review and editing to make sure the numbers and narrative are right. Phase 2: Market outreach (Months 2-3) We send a one-page teaser with no identifying information to our buyer network, which is typically around 10,000 contacts. Interested buyers sign an NDA and receive the full SIM. They review it, ask questions, and submit what's called an Indication of Interest (IOI) — their initial view of what the business is worth and how they'd structure a deal. Phase 3: Management meetings and LOIs (Months 3-5) From the IOI pool, which might be 20 or more,  we work with you to narrow it down to five to eight groups that are the best fit. These buyers visit in person, spend a half-day to a full day with you, and then submit a formal Letter of Intent (LOI) with their final offer terms. This is where the competitive process pays off. On a recent deal, we received 23 offers. The lowest offer was 40% of the highest. Most sellers who try to negotiate on their own or work with a single buyer would never know whether they're leaving money on the table. Competition creates pressure that benefits sellers, buyers who really want a well-run business will pay above market to win the process. Phase 4: Due diligence and close (Months 5-9) Once you select a buyer and sign the LOI, they begin due diligence on an exclusive basis. This is the most intensive phase, and it's where organization and responsiveness make the difference between a smooth close and a drawn-out one. Quality of earnings (QoE):  The buyer hires a third-party firm to verify your financials. They'll examine every transaction, every billing record, every adjustment. We prepare our clients for QoE questions before we ever go to market, so by the time the buyer's team digs in, there are rarely surprises. Clinical chart review:  Typically 50 to 200 charts depending on business size. This isn't about finding fault, it's about understanding what the buyer is actually purchasing and where there's room for improvement. We've seen cases where this review actually helped our clients identify and fix documentation gaps before they became compliance issues. Legal due diligence:  The legal request list is often the most intimidating part — 200-plus questions covering everything from contracts to regulatory compliance. But here's what we tell our clients: "N/A" is a perfectly valid answer. A large portion of those questions simply won't apply to your business. Asset verification and reps & warranties insurance:  Toward the end, there's typically a supplemental process to catalog assets and secure insurance that protects both parties post-close. The key to getting through due diligence efficiently is being organized from the start. Consistent file naming, timely responses, and a team that's aligned on the process. Delays in providing information can slow the deal and, in some cases, erode buyer confidence. The professional team around you You're not doing this alone. In addition to your M&A advisor, you'll work with an attorney who handles the purchase agreement, reps and warranties, and legal risk protection, and an accountant who works through quality of earnings responses, working capital adjustments, and financial due diligence. Your advisor coordinates across all parties to keep things moving. Is Now the Right Time? There's no universal answer, but here are a few things worth considering. If your business is growing, your financials are clean, and you have a strong team in place, you're in a position of strength. Market conditions in 2026 look favorable — buyer interest is high, new platform investments are creating more acquirers, and deal volume is trending upward. If you're not quite ready, that's okay too. Many of the owners we work with spend a year or more getting prepared. Some we've known for years before the timing was right. The important thing is to start the conversation early enough that you're making strategic decisions about payer contracts, staffing, documentation, and growth, with an eventual exit in mind. Whether you're ready to go to market or just starting to think about what your business might be worth, we're always happy to have a conversation. Download this article as a guide: Mertz Taggart is a healthcare-focused M&A advisory firm representing sellers of behavioral health and home-based care businesses. To learn more or request a confidential valuation, reach out to our behavioral health experts via email at info@mertztaggart.com

Behavioral Health M&A Executive Summary: A Year of Resilience and Reality Checks Despite economic headwinds and a "bumpy ride" for many operators, 2025 concluded with a slight uptick in overall deal volume. The year ended with 180 total transactions , a modest increase from the 176 recorded in 2024. Q4 2025 saw approximately 39 announced transactions  (30 M&A and 9 Growth deals). While deal volume has cooled from the frenetic pace of Q1 2025, the market remains active, driven largely by the continued dominance of the mental health sub-sector. The Macro View: Regulation & Distress Several major currents shaped 2025: Lender Caution & The "Reimbursement Audit":  Deals in 2025 took longer to close as lenders tapped the brakes to conduct forensic-level diligence on insurance receivables. Following the cash flow disruptions caused by the Change Healthcare cyberattack earlier in 2024 and ongoing Medicaid uncertainty, credit committees are  scrutinizing revenue numbers more closely. Lenders are now slowing down processes to ensure —and effectively insure  against risk—that target companies have robust "denials management" processes and verifiable collectability. They are demanding proof that revenue cycles are resilient before releasing funds, forcing sellers to open their books for longer, more intrusive audits.  “We’re seeing many of the larger providers having reimbursement challenges, which isn’t helping ease the lender’s concerns.   Fortunately, it seems like some of these groups are putting these challenges behind them heading into 2026,” Taggart remarked.  Regulatory Scrutiny on "Roll-Ups":  Federal regulators (FTC/DOJ) have intensified their focus on private equity "roll-up" strategies, particularly in healthcare. This has extended deal timelines and forced buyers to be more cautious about local market concentration. Per Taggart, “We’ve had several deals in 2025 that the private equity backed acquirer didn’t want the deal announced, in order to not draw additional attention to the acquisition”.  The "Flight to Quality":  We are witnessing a bifurcation in the market. Premium assets with strong clinical outcomes and strong management teams are still commanding high multiples. Conversely, "distressed deals" are becoming common for operators who over-leveraged during the cheap-money era or failed to integrate rapid acquisitions. Mental Health M&A The Clear Leader Mental health continues to be the engine of the behavioral health M&A market. The sector outperformed all others in Q4 with 27 transactions , cementing its status as the most active sub-sector of 2025. For the full year, mental health racked up 111 transactions , significantly outpacing Addiction Treatment (33) and I/DD/Autism (36). Notable Q4 Transactions Consolidation in the pediatric and tech-enabled space was a major theme in the final quarter: Hazel Health's "Double Play":  In a major consolidation of the youth mental health market, Hazel Health acquired both Little Otter  (pediatric therapy/psychiatry) and BeMe Health  (teen mobile mental health) in October. The move, coupled with the appointment of Iyah Romm  (Cityblock founder) as CEO, signals Hazel's aggressive push to dominate the school-based and pediatric telehealth space. Talkspace  acquired Wisdo Health , an AI-powered social health platform, to integrate peer support and combat loneliness among its users. Handspring Health  acquired Joon Care , further consolidating the pediatric mental health market. Oak Integrated Care  completed two strategic mergers in December, acquiring both the Association for the Advancement of Mental Health  and the Association of Schools and Agencies of Public Health . Venture Capital & Growth Equity Mental health also continues to lead in venture capital interest with 34 growth deals  in 2025. Investors remain willing to deploy capital here, but they are becoming highly selective. Radial  raised a massive $50 million Series A  round led by General Catalyst . The funding is earmarked to expand its "brain medicine" network, focusing on interventional psychiatry (TMS, Spravato) and technology infrastructure. Nest Health  secured $22.5 million  in growth funding from Amboy Street Ventures  to scale its in-home, whole-family care model. Market Watch: The "Growth at All Costs" Reckoning Despite the activity, cracks are forming in some rapid-growth models. As Taggart predicted, several high-profile platforms faced significant operational and financial challenges in late 2025. Ellie Mental Health: The Franchise Fallacy? Once a darling of the franchise model, Ellie Mental Health  faced substantial headwinds in late 2025. Following rapid expansion, the company's auditors expressed "substantial doubt" regarding its ability to continue as a going concern in its most recent franchise disclosure documents. Franchisees have filed lawsuits alleging the company failed to provide promised backend billing support, leading to revenue cycle failures at the clinic level. In a move to stabilize cash flow, the company sold its corporate "test kitchen" clinics in Minnesota to Nystrom & Associates .  Omni Health Services: The Mid-Market Squeeze In one of the largest provider failures of the quarter, Omni Health Services , a major mental health provider with 18 clinics across Pennsylvania and New Jersey, filed for Chapter 11 bankruptcy  on November 25, 2025. The filing highlights the intense pressure on mid-sized groups that may be over-leveraged or struggling with rising labor costs and reimbursement friction. Talkspace: The Profitability Paradox   Even the public markets are signaling caution. Despite Talkspace  reporting profitability, the company's stock struggled to gain traction in Q4. A one-off $1.2 million loss  in Q3 2025 challenged the company's "bullish narrative," showing that investors are now scrutinizing margins far more closely than top-line revenue growth. Addiction Treatment M&A A Historic Low The addiction treatment sector struggled to find momentum, recording just seven transactions  in Q4. The full-year picture is equally stark. Addiction treatment saw the lowest total deal volume in the last six years . Venture capital has also dried up: there were only four VC deals in the sector for the entire year, with zero  occurring in the last two quarters. Notable Q4 Transactions Despite the slowdown, a few significant strategic moves and consolidations occurred: OneFifteen Closes:  In a sign of the times, OneFifteen , the high-tech substance use treatment center backed by Verily (Google)  and local health systems, closed its doors in Summer 2025. This underscores that even well-funded, tech-forward models are not immune to the sector's economic realities. BriteLife Recovery  acquired Summit Behavioral Health , a New Jersey-based provider, in a strategic expansion. River Cities Capital  made a platform investment in The Blanchard Institute , a North Carolina-based outpatient treatment provider. Autism and I/DD M&A Quiet Stability The Intellectual and Developmental Disabilities (I/DD) and Autism sector saw steady activity with 8 deals  reported in Q4. Growth capital has been notably scarce in this space. There were only two growth deals for the entire year , with one occurring in Q1 and the other in Q4. Notable Q4 Transactions Coyne & Associates  acquired Behavioral Health Works (BHW) , a major deal that reshapes the landscape for ABA providers in California. Brightli & Centerstone Merger:   Brightli  completed a mega-merger with Centerstone , creating one of the largest nonprofit behavioral health providers in the U.S. with over $1 billion  in combined revenue and 10,000 employees. Beacon Behavioral  remained acquisitive, completing two acquisitions in Q4 2025 to cap off an active year. VersiCare Group  expanded its footprint in Michigan with the acquisition of CHS Group, LLC . Outlook: 2026 As we move into 2026, the market is shifting from "growth at any price" to a focus on clinical quality, sustainable margins, and operational integration. "We are seeing a flight to quality," Taggart says. " We expect 2026 to be a year where solid, profitable companies command a premium , while distressed assets continue to come to market and should be an opportunity for buyers to purchase certain assets at a more attractive entrance point."   If you are interested in downloading the PDF version of the Q4 2025 Behavioral Health M&A Report, click the download link below:

Executive Summary: The Hospice M&A Pivot Record Volume: Q4 2025 recorded 16 hospice transactions, the highest quarterly volume since 2021. Platform Catalysts: Recent premium private equity platform transactions have reset valuation benchmarks and established new precedent multiples. Arbitrage Opportunity: Clear market data allows private equity and other financial sponsors to bid aggressively and still capture a healthy multiple expansion through a combination of strategic M&A and De novos. Strategic Resurgence: A more positive interest rate environment, and a narrowing valuation gap have shifted the market pendulum back toward sellers. In the world of healthcare M&A, the last three years have felt like navigating through a heavy fog. Between rising interest rates and a persistent valuation gap, many owners chose to drop anchor and wait for clearer conditions. But as we move into 2026, that fog has officially lifted. The fourth quarter of 2025 recorded 16 hospice transactions—the strongest quarter we’ve seen in four years. As we noted in our Q3 2025 Home-Based Care M&A Report, the industry was already showing signs of a return to sanity, but this Q4 surge has officially signaled a broader market resurgence. The Power of the "Known Multiple" and Precedent Transactions The market doesn't operate in a vacuum; it needs a catalyst. A series of recent high-profile platform transactions over the past 6 months have fundamentally reset the industry’s compass. While exact deal terms are often confidential, the multiples on these transactions are well-known within the private equity (PE) and buyer community. For each of these transactions, there were dozens of financial buyers that didn’t win the deal—and they are now using those precedent multiples to help inform their current bidding strategies. Multiple Expansion Playbook This new visibility has given private equity firms two specific incentives to jump back into the hospice space: Arbitrage Visibility: PE firms now have a clear arbitrage map. They know that if they acquire regional agencies at current market rates and fold them into a sophisticated platform, they have a clear path to the frothy exit multiples proven by the previously mentioned recent platform trades. The Add-On Engine: Once a PE group acquires a platform, they are often eager to sink their teeth into bolt-on acquisitions at lower “non-platform” multiples to help them both scale and lower their overall acquisition multiple. This is fueling a strong appetite for agencies in the $5M–$20M revenue range that provide geographic density. The Tide is Turning: Interest Rates and Valuations As Managing Partner Cory Mertz recently shared with Jim Parker at Hospice News: "The past few years’ slump has been driven by a valuation gap where sellers hung on to 2021 expectations while buyers got more conservative. Since then, the gap has closed... and buyers have gotten more aggressive." Fed Chair Jerome Powell announced three small rate cuts in 2025. With a consensus that we will see another 2-3 rate cuts later this year, capital is becoming less expensive. For a buyer, even a small drop in rates changes the math, allowing them to stretch further on price for a high-quality, compliant asset. Navigating the 2026 Horizon The momentum from Q4 2025 is expected to carry directly into 2026, signaling a definitive shift in the market's direction. While sellers have moved past the 2021 "valuation hangover" to more realistic expectations, the real catalyst has been the buyers, who are once again eager to put capital to work. "We are bullish on hospice M&A after a four-year slump," says Mertz. “However, the bar for program integrity has never been higher. Buyers are prioritizing agencies with clean clinical records and robust documentation, especially in 'hotspot' states under enhanced CMS oversight.” For owners who have maintained a steady course and built clean, compliant, and scalable agencies, the market conditions have finally aligned. The slack tide has passed, and the pendulum has officially swung in your favor.

As 2025 came to a close, home-based care M&A volume rebounded from the relative lows of 2024, with a total of 105 transactions closed during the year, 21 more than the year prior. This brings the industry transaction volume closer to the levels seen in 2022 and 2023 , which saw 110 and 111 deals, respectively.  Recapping the year, Cory Mertz, managing partner at Mertz Taggart, noted, “2025 has been a bounce-back year for deal volume. When the Fed made its first rate cut at the beginning of Q3 2024 , we started to see an uptick in activity, which led to a strong first quarter to start the year. There were some new curveballs throughout 2025 with macroeconomic uncertainty, a new administration eager to shake things up, regulatory concerns regarding the CMS home health rule and increased scrutiny of hospice compliance, but M&A activity remained relatively strong as the Fed continued to cut rates and buyers saw an opportunity to deploy the dry powder they’ve been holding on to.” The Federal Reserve cut rates three times in 2024 by 100 basis points (1%) and made an additional three cuts in 2025 by 75 basis points (0.75%). As interest rates come down, private equity firms and their portfolio companies, which make up the bulk of home-based care deal volume, have an easier time securing palatable financing for transactions. 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. Q4 capped off the year with 26 completed transactions, matching the number of deals closed in Q2 of this year and exceeding Q4 2024 by eight. The quarter saw 14 sponsor-backed strategic deals, five private equity platform deals and one public company deal, among other transactions. Unlike the previous eight quarters, non-medical home care did not lead the pack in transactions closed but was instead dethroned by hospice, which saw a record 16 closed transactions, the highest number of deals seen in a single quarter since the COVID-fueled M&A frenzy in 2021. While looking forward to 2026, Cory Mertz summarized his outlook by saying, “We expect to see activity continue to increase into the next year. Private equity funds have ample dry powder to invest, and there are many aging portfolio companies that we’ll likely see go to market in the coming months. There’s also a tendency for portfolio companies to close a few quick acquisitions to boost EBITDA right before kicking off a sale process, so we’re also expecting some additional add-on activity as some of these four, five and six-year-old serial acquirers look to exit soon.” Home Health M&A   Home health M&A activity slowed with only three deals closed during the quarter, matching the number of transactions in Q4 of the year prior. All three transactions were add-ons by sponsor-backed portfolio companies.  VitalCaring Group , a portfolio company of The Vistria Group and Nautic Partners, acquired the home health operations and some of the hospice and palliative care operations of Traditions Health , a Franklin, Tennessee-based provider with patients in 18 states. The deal adds 35 home health, 37 hospice and three palliative care locations to the company’s operations in Oklahoma, Texas, Kansas and Missouri. The fourth quarter also saw CMS release its much-anticipated finalized 2026 home health payment rule in November, which includes a 1.3% aggregate reduction from the prior year, estimated to be about $220 million in payments. Cory Mertz noted, “While the final rule still represents a cut from 2025’s rates, it’s much lower than the 6.4% originally proposed by CMS. We’re seeing some buyers who were previously hesitant to take a risk with all the uncertainty start to get more comfortable looking at home health assets again.” Hospice M&A Hospice M&A activity hit a record high, with 16 total transactions closed during the quarter, the highest seen since Q4 2021. These deals include 10 add-ons from sponsor-backed strategics, two closed private equity platforms and two acquisitions from strategics. The two closed platforms were Legacy Hospice , a hospice provider with locations in Alabama, Arkansas, Mississippi, Missouri and Tennessee, which was acquired by Bain Capital Double Impact , and Agape Care Group , a hospice and palliative care provider for over 5,700 patients in 10 states, which was bought by Linden Capital Partners . Among the add-on deals, the most notable was Traditions Health’s  sale of its hospice and palliative care business to The Care Team , which acquired Traditions’ assets in Illinois, Indiana, Ohio and Virginia, LifeCare Home Health Family , which bought the Georgia operations, and Mission Healthcare , which acquired the assets in California and Oregon. LifeCare Home Health Family  made another acquisition during the quarter when it purchased Infinity   Hospice Care , a family-owned hospice provider serving Nevada and Arizona. And Uplift Hospice closed its third transaction of the year when it acquired Grace Hospice & Palliative Care and Grace Medical Group,  a Tucson-based provider, increasing the company’s average daily census and density in Arizona.  Despite strong demand, hospice transactions still suffer from fears stemming from Medicare clawback risk, especially in enhanced oversight states. Ohio and Georgia recently joined California, Arizona, Nevada and Texas on the enhanced oversight state list, bringing the tally to six so far. Mertz Taggart continues to recommend that providers considering a transaction in the next 24-to-36 months invest in a billing and compliance audit. Cory Mertz noted, “We strongly recommend that all hospice operators undergo a pre-market audit. It’s especially important to quantify clawback risk if you operate within any of those six enhanced oversight states.” Home Care M&A Non-medical home care, which typically contributes the largest share to overall home-based care M&A volume, saw another down quarter. At 11 transactions – including three platform deals, four sponsor-backed add-ons and one public company deal – Q4 represents the slowest quarter of the year, but is still in-line with the activity seen last year. Among the transactions closed this quarter was Addus Homecare’s  acquisition of Del Cielo Home Care Services , an Alice, Texas-based home care provider with 700 clients and annualized revenues of $12.5 million, for a purchase price of $7.4 million. Amivie , a portfolio company of Martis Capital, closed the acquisitions of Atrio Home Health , a Minnesota-based provider of in-home care services, and Rent a Daughter , a Beachwood, Ohio-based provider of senior care services. The platform deals closed this quarter include JL Capital Group’s  acquisition of Thema Home Care , a Downingtown, Pennsylvania-based provider of non-skilled home care, and NexPhase Capital’s  acquisition of Always Best Care , a leading franchisor of in-home senior care services. Although non-medical home care saw a relative low in M&A activity this quarter, Cory Mertz remains optimistic about its outlook, noting, “There are a number of highly acquisitive sponsor-backed portfolio companies in the space that are gearing up to exit in 2026, which means that they’ll be looking to scoop up a few more companies onto their platform to add additional cash flow before going to market. We’re also seeing elevated interest in private duty home care from strategic acquirers who are looking to diversify their payer mix.” If you are interested, you can also download the .PDF version of the Q4 2025 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 posted revenue of $362.3 million for the quarter, up 25% from Q3 2024. Growth was led by the Personal Care segment, which represents 76% of the business and saw a 6.6% same-store revenue increase and a 28% overall revenue increase year-over-year, driven by strong hiring and patient volumes. The segment has also seen favorable reimbursement support in many states, including rate increases in Illinois and Texas, the company’s two largest markets. The company’s Hospice segment, representing 19% of Q3 2025 revenue, increased same-store revenue by 19% over the prior year quarter, supported by a 9.5% and 6.5% increase in same-store average daily census and admissions, respectively. The Home Health segment, representing 5% of the business, saw a 2.8% decline in year-over-year same-store revenue, but remains a key clinical partner to the company’s other operating segments. Adjusted EBITDA for the quarter came in at $45.1 million, a 31.6% increase over the prior year quarter, reflecting continued operational excellence and cost management. Heather Dixon was elevated to President and COO, replacing Brad Bickham who has taken an advisory role in anticipation of his retirement in March 2026. Key Financial Figures M&A Activity On October 1, Addus announced the acquisition of the personal care operations of Del Cielo Home Care Services, increasing the company’s presence in the South Texas personal care market. CEO Dirk Allison commented, “Our team is excited about this acquisition, and I want to officially welcome the Del Cielo Home Care team to the Addus family. Going forward, our development team will continue to focus on both clinical and nonclinical acquisition opportunities to increase both the density and geographic coverage to our current states. While the proposed home health rule will most likely continue to delay any meaningful home health opportunities, we will be evaluating smaller clinical transactions along with personal care service transactions that fit our strategy.” The company also completed the acquisition of Helping Hands Home Care Services, a personal care, home health and hospice provider serving the Western Pennsylvania market, on August 1. Guidance Management expects a gross margin benefit of 40 basis points year-over-year and 20 basis points sequentially from increased hospice reimbursement and lower unemployment taxes in Q4 2025. Aveanna Healthcare (Nasdaq: AVAH) Highlights Aveanna reported Q3 2025 revenue of $621.9 million, an increase of 22.2% over the prior year quarter. Growth was largely driven by the Private Duty Services segment, which represents 83% of the business and grew 25.6% year-over-year, and the Home Health & Hospice segment, which is responsible for 10% of the company’s quarterly revenue and grew 15.3%. The Private Duty Services unit’s growth was driven primarily by a 12.9% volume increase over the prior year quarter to approximately 11.8 million hours of care and a 12.7% increase in revenue per hour to $43.51 as a result of preferred payor volume growth and rate enhancements. Adjusted EBITDA surged 67.5% year-over-year to $80.1 million due to growing volumes, an improved rate environment and the company’s cost savings initiatives. Aveanna continues to pursue its preferred payor strategy in order to secure more value-based agreements and enhanced reimbursement rates, which has resulted in five additional preferred payor agreements this quarter and improved caregiver hiring and retention. Preferred payor agreements now account for approximately 56% of total Private Duty Services MCO volumes, inclusive of the company’s recent acquisition of Thrive Skilled Pediatric Care. Key Financial Figures M&A Activity CEO Jeff Shaner highlighted the successes of the recent Thrive acquisition and said, “I’d expect us to do more Thrive-like acquisitions in 2026 to continue to build out more Medicaid states.” The company is still on track to complete the integration by the end of the year. Management also shared continued improvements to the company’s liquidity position as a result of increased free cash flow generation and debt refinancing, which allows Aveanna to continue to pay down debt and execute on its M&A strategy. Guidance Management has once again raised its full-year 2025 outlook based on the strength of Q3 2025 and year-to-date results. Full-year 2025 revenue and adjusted EBITDA is expected to be above $2.375 billion and $300 million, respectively. CEO Jeff Shaner reiterated the company’s commitment to their five primary strategic initiatives: enhancing partnerships with preferred and government payors, identifying cost efficiencies, modernizing the Medical Solutions unit, managing capital structure and cash collection and engaging leaders and employees in delivering the Aveanna mission. The Pennant Group, Inc. (Nasdaq: PNTG) Highlights Pennant Group reported total revenues of $229 million for Q3 2025, a 26.8% or $48.4 million increase year-over-year, driven by growth across all three of its operating segments, including a 21.7% increase in Hospice revenue, a 33.3% increase in Home Health revenue, including other Home Care revenue, and a 23.2% increase in Senior Living revenue over the prior year quarter. The Home Health segment, representing 42% of the business, saw increases of 36.2% in total admissions, 7% in same-store admissions and 2.9% in revenue per episode year-over-year. The Hospice segment, representing 33% of Q3 revenue, also saw growth with average daily census, admissions, same-store average daily census and average revenue per day increasing 17.4%, 16.6%, 6.1% and 3.3% year-over-year, respectively. The company amended its existing credit facility, adding a $100 million term loan to free up additional revolver capacity and provide dry powder to deploy strategically. Key Financial Figures M&A Activity In September, Pennant Group closed the acquisition of Healing Hearts Home Health and Healing Hearts Outpatient Therapy, a single-site agency based in Gilette, Wyoming. On October 1, the company closed its $146.5 million acquisition of 54 divested assets from UnitedHealth Group and Amedisys, adding $189.3 million of combined trailing 12-month revenue of which 70% is related to Home Health while the remaining 30% is attributed to Hospice. The acquired assets are located in Tennessee, Georgia and Alabama, all of which are certificate of need states. In November, Pennant Group acquired Twin Rivers Senior Living, a 55-bed assisted living community in Lewiston, Idaho, and the real estate of Honey Creek Heights Senior Living, a West Allis, Wisconsin-based assisted living community with 135 beds, after previously acquiring their operations at the start of the year. CEO Brent Guerisoli commented, “These acquisitions reflect our disciplined growth strategy and our dedication to delivering exceptional care.” Management confirmed that the company will continue to evaluate M&A opportunities in spite of their heavy integration load, with CEO Brent Guerisoli noting, “Market forces and our own reputation as a quality buyer continue to drive a very robust pipeline of acquisition opportunities in all of our segments.” Guidance Management anticipates to close out 2025 with full-year revenue between $911.4 million and $948.6 million, while adjusted EBITDA is expected to land between $70.9 million to $73.8 million. Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights Enhabit reported quarterly revenues of $263.6 million, a 3.9% increase from the prior year quarter. Growth was primarily driven by its Hospice segment, which grew 20% year-over-year. Home Health revenue fell 0.2% from the prior year quarter but saw 4.3% admissions growth when normalizing for closed branches and a census increase of 3.7%. Fee-for-service Medicare census has continued to stabilize, with the company reporting a 1.4% year-over-year decrease, which is a marked improvement from the 14.1% decline seen in Q3 2024. Non-Medicare admissions, in contrast, rose 10.4% year-over-year and non-Medicare revenue per visit grew 2.8% as a result of continued payor mix management. The Hospice segment, representing 24% of Q3 revenue, has seen its seventh straight quarter of sequential census growth. Normalized for closed branches, admissions grew 3% over the prior year quarter while census grew 12.6%. The company has also added two de novo locations for a total of six newly opened locations year-to-date and are on pace for a total of 10 locations by year-end. The company continues to focus on improving its financial health. Enhabit has been actively paying down debt with its free cash flow, reducing its leverage ratio to 3.9x from 5.4x in Q4 2023. This has lowered annual cash interest expense by approximately $19 million since Q4 2023. Enhabit has grown its direct sales team by 21 or 11% year-over-year in order to unlock additional referral sources. The company reduced its home office expenses by $2.3 million sequentially, landing at 9.1% of revenue compared to 9.9% of revenue in the prior quarter as part of its cost savings initiatives. Key Financial Figures M&A Activity Management’s current focus is on deleveraging the balance sheet and have indicated that they will not be prioritizing M&A until they’ve succeeded in lowering their leverage ratio. As of quarter-end, the company has reduced its leverage ratio to 4.3x from 5.1x in Q2 2024. Guidance Management updated its 2025 full-year guidance, expecting revenue to land between $1.058 billion and $1.063 billion, and adjusted EBITDA is expected to be in the range of $106 million to $109 million. Full-year 2025 adjusted free cash flow is expected to be between $53 million and $61 million. Management reaffirmed its commitment to strategies designed to mitigate pricing headwinds next year as a result of the 2026 CMS Home Health proposed rule. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights BrightSpring posted quarterly revenues of $3.3 billion, a 28% jump from the prior year quarter, and adjusted EBITDA of $160 million, representing a 31% year-over-year increase. Growth was largely driven by the Pharmacy Solutions unit, which grew revenue 31% year-over-year and represents 89% of the business. The segment’s adjusted EBITDA surged 42% over the prior year quarter and saw a total pharmacy script volume of $10.8 million. The Provider Services segment grew revenue and adjusted EBITDA by 9% and 16% year-over-year, respectively, driven by strong growth in the segment’s Home Health, Hospice and Primary Care businesses which collectively represent 50% of the segment’s revenue. The company’s overall adjusted EBITDA margin grew 30 basis points both year-over-year and sequentially to 4.8%, driven by disciplined management of the company’s operating expenses and a greater contribution from generics in the Pharmacy Solutions unit. Key Financial Figures M&A Activity The company pushed back the anticipated closing of its Community Living divesture to Q1 2026 from Q4 2025. BrightSpring expects to receive $715 million in net cash proceeds from the $835 million purchase price. The transaction remains subject to review by the Federal Trade Commission. Management reaffirmed its expectation to close both the Amedisys and LHC branch acquisitions later this quarter and indicated that their financial impacts will be immaterial to their full-year 2025 results. The company continues to focus its M&A efforts on tuck-in acquisitions, with CEO Jon Rousseau commenting, “Our M&A strategy will remain primarily focused on accretive tuck-ins in target geographies.” He indicated that BrightSpring will be targeting acquisitions in the $3 million to $10 million EBITDA range. Guidance Management revised their full-year 2025 guidance upwards as a result of their third quarter performance and higher expectations for Q4 2025. Adjusted EBITDA is expected to land between $605 million and $615 million, excluding any financial impact from the company’s soon-to-be divested Community Living segment. Management continues to expect an additional 16 to 18 limited distribution drug launches over the next 12 to 18 months. Option Care Health, Inc. (NASDAQ: OPCH) Highlights Option Care posted quarterly revenues of $1.5 billion, representing a 12.2% increase over the prior year quarter. Growth was underpinned by mid-teens and low double-digit growth year-over-year in their acute and chronic portfolios, respectively. The adoption of Stelara biosimilars, which carry a lower reference price and reimbursement rate, negatively impacted the company’s chronic portfolio growth by 380 basis points. Gross profit grew 6.3% year-over-year to $272.9 million, but saw a margin decline due to the aforementioned adoption of Stelara biosimilars and  the impact from lower margin orphan therapies. Despite the margin pressure, Option Care reported adjusted EBITDA of $119.5 million, which represents a 3.4% increase over the prior year period as a result of strong revenue growth and disciplined cost management. After refinancing and extending the maturity of their term loan to reduce borrowing costs and add an additional $50 million in liquidity, the company’s leverage ratio stands at 1.9x. The company launched three new enhanced applications to drive efficiencies in the patient onboarding process and staffing utilization. Meenal Sethna joined Option Care as the company’s CFO, filling in for Mike Shapiro who recently stepped down into a strategic advisory role. Key Financial Figures M&A Activity Option Care continues its integration efforts from its acquisition of Intramed Plus, an infusion services provider serving South Carolina, earlier in the year. Newly-appointed CFO Meenal Sethna reaffirmed management’s intentions to continue evaluating potential tuck-in acquisitions, saying, “We remain active in assessing M&A opportunities, focusing on strategic tuck-ins and near adjacency opportunities.” Guidance Management updated its guidance for full-year 2025 and expects to generate revenue of $5.6 billion to $5.65 billion and adjusted EBITDA of $468 million to $473 million. Option Care reaffirmed its expectation to generate over $320 million in cash flow from operations. The company, consistent with comments from prior earnings releases, does not expect potential tariffs, most favored nation pricing and other similar policy changes to have a material impact on full-year 2025 earnings. To download the .pdf version of this report, click below. Disclaimer The information contained in this document is provided for informational and marketing purposes only by Mertz Taggart and is not intended as investment, financial, legal, tax, or other professional advice. The content has been compiled using publicly available sources, including but not limited to SEC filings accessed via EDGAR, Seeking Alpha, and Yahoo Finance.  While we strive to ensure the accuracy and reliability of the information presented, Mertz Taggart does not warrant or guarantee the completeness, timeliness, or accuracy of the information, nor shall it be held liable for any errors or omissions.  This document does not constitute a solicitation, recommendation, or offer to buy or sell any securities or other financial instruments. Any views or opinions expressed are those of the author(s) and do not necessarily reflect the views of Mertz Taggart or its affiliates. Recipients should not rely solely on the information herein for making investment or strategic decisions. All readers are encouraged to conduct their own independent research and to consult with their professional advisors before making any financial or business decisions. All trademarks, logos, and brand names mentioned are the property of their respective owners and are used in this document for identification purposes only.

Behavioral Health M&A Reading recent headlines, one might be inclined to think M&A activity across behavioral healthcare is in the midst of a slowdown. But while deal volume has receded from the highs of 2021 and 2022, behavioral healthcare is on track for a total number of mergers and acquisitions that still outpaces historic norms. In the third quarter, 40 deals were reported—a figure that puts 2025 on track for about 167 transactions by year’s end. For comparison, behavioral healthcare was seeing roughly 100 deals per year completed before the COVID-19 pandemic. “And a lot of deals lag, too,” added Mertz Taggart managing partner Kevin Taggart. “It could be three or four months before some transactions are announced publicly. When all is said and done, I would anticipate a final total for 2025 that ends up higher than the current projected total.” While tighter lending environments and negative headlines—including Acadia Healthcare announcing the closure of multiple facilities and layoffs of about 400 employees   and several bankruptcies announced by other provider organizations within the industry—buyers’ interest has not waned. Mertz Taggart closed three deals in Q3, and has closed seven behavioral transactions to date for 2025, with more expected by year’s end. “Deals are still getting done with attractive multiples for highly desirable companies,” Taggart said. “They are getting a little harder to complete. We’ve had a few this year where the first buyer fell through, so we’ve had to move on to the second one.  “Private equity is still reaching out to us weekly looking for behavioral health opportunities,” he added. Of the 40 behavioral healthcare transactions announced in Q3, 10 were growth deals, continuing a trend that has emerged post-COVID. A threshold for such investments could be looming on the horizon, though, Taggart cautioned. “We’re going to see some of these groups struggle to get additional investment because of their sky-high valuation,” he said. “They’re valued more like tech companies, and you still need people to operate them. But some are starting to do acquisitions as well, so we’ll see. “I do think the growth capital market will slow because the brick-and-mortar groups can use technology as well.” Overall, Taggart said, the firm expects a strong finish to 2025 and is bullish on 2026. Addiction Treatment M&A A total of eight transactions involving addiction treatment providers were announced in Q3, bringing the year-to-date total to 27.  Prior to 2021, addiction treatment was a stalwart of deal volume. Activity has decreased in recent years, though, as organizations that could be counted on for making deals, such as Baymark, Behavioral Health Group, and to a lesser degree, Summit Behavioral Health, Pinnacle Behavioral Health, and others have slowed or stopped their growth through acquisition.  “There are new buyers coming into the space. That’s taken a little while to ramp up,” Taggart said. “Overall, I’m still bullish, although out-of-network is still tough.” To that point, Taggart noted a recent report   that Pyramid Healthcare and Advanced Recovery Systems are preparing for sales. “These larger transactions, if and when they do happen and especially if they happen at strong multiples, will prompt more providers to do more deals,” he said. Taggart said he expects to see the addiction treatment market begin to open up again in 2026. Notable deals involving addiction treatment provider organizations in Q3 included the following: Mertz Taggart advised St. Joseph’s Recovery Center  in West Virginia on a platform transaction to an East Coast-based private equity group. The Ridge Ohio , a rehabilitation services provider with two facilities in Ohio, received $18 million in investments from Prospect Capital Corporation and Thesis Capital Partners. Bradford Health Services  acquired three Texas-based programs: The Last Resort Recovery Center , Crestone Wellness and  The Chapter House , making them one of more active buyers in the SUD market. Luxury SUD treatment provider The Hope House , a portfolio company of Chicago-based private equity firm Traverse Pointe Partners, acquired Winward Way Recovery  in Newport Beach, California. Crossroads Treatment Centers  expanded its footprint in Pennsylvania with a deal to acquire Family Health Services , an outpatient addiction treatment provider with two facilities in the greater Pittsburgh region. Louisiana-based Nova Vital Recovery  announced a statewide expansion in September with its acquisition of Magnolia Recovery Services . The deal complements Nova Vital’s recent addition of intensive outpatient programs in Shreveport and Monroe. Mental Health M&A The mental health subsector has continued its post-COVID acceleration in transactions, with 25 deals announced in Q3. Private equity firms have shown interest in mental healthcare providers, although buyers have gotten more discerning, Taggart said. “They’re looking for more medical practices versus strictly counseling-based providers,” he said. “Psychiatry practices are well-positioned going into 2026. Offering ancillary services, such as transcranial magnetic stimulation and Spravato (esketamine), is also helpful for margin expansion as well.” Among the most notable deals reported in the third quarter, The Carlyle Group  is acquiring Psychiatric Medical Care  in a $400 million, private equity-backed deal, according to a media report . Mertz Taggart represented Modern Recovery/Avery’s House , a teen mental health program based in Arizona & Idaho. All 10 growth funding deals reported in Q3 involved mental healthcare providers. This included value-based care provider AbsoluteCare  raising $135 million in equity funding to expand into new markets. Other growth deals announced: Diana Health  announced it raised $55.4 million in a Series C funding round led by HealthQuest Capital and several previous investors. Digital eating disorder treatment provider Equip Health  raised $46.6 million, according to public documents filed with the SEC. Another telehealth provider, the youth-focused startup Cartwheel Care , disclosed that it has raised $35 million of a $44 million funding round, led by an undisclosed investor. Other transactions involving mental healthcare providers in Q3 included: Rosecrance Behavioral Health , a not-for-profit therapy and SUD treatment provider, acquired Ascend CHC  in a move that will allow Rosecrance to add eating disorder care and specialty sports and performance counseling services. Cerebral , a telehealth-based provider, acquired Resilience Lab  in a private equity-backed strategic deal. Uwill , an international provider of mental health and wellness solutions, acquired tbh, which provides support for students and young adults facing basic needs insecurity and mental health challenges. Nystrom & Associates acquired the Minnesota-based operations of Ellie Mental Health , creating a combined organization that operates 84 locations across five states. Autism and Intellectual/Developmental Disabilities M&A Within the autism and intellectual/developmental disabilities (I/DD) subsector, eight deals were reported in Q3, bringing the year-to-date total to 27. Since the blockbuster year of 2021, in which 44 deals were announced, autism and I/DD provider organizations have faced significant headwinds from wage inflation, especially among behavioral technicians, Taggart said. However, as wages began to settle in 2024, momentum for deal activity has renewed. The transactions involving autism and I/DD therapy providers included the following: Mertz Taggart advised a Northeast ABA provider as a platform for a Canadian private equity firm. Achieve Partners  acquired Westside Children’s Therapy , a provider with 30 centers in the Chicagoland area.  First Children Services  secured a strategic growth investment from Station Partners  to support its continued expansion. Redwood Family Care , a multi-state provider of I/DD services, acquired Minnesota-based Eagles Wing , which offers residential and day support services to individuals with developmental disabilities. A Change in Trajectory , a Van Nuys, California-based, family-oriented agency that serves individuals with special needs, was acquired by Pine Street Group, an investment holding company that targets middle and lower-middle market businesses. DOMA , a Minneapolis-based provider of I/DD services, announced its acquisition of Payee Support Services  in Ohio, strengthening its presence in the Midwest. Following the retirement of longtime CEO Jack Priggen, Cardinal of Minnesota , a provider of residential and in-home services for persons with disabilities, has been acquired by The Cottages Group of Burnesville .

If you’re an owner of a home-based care agency, chances are you are getting approached regularly, even daily, by private equity groups, strategic buyers, independent sponsors, and search funds, all eager to talk. Some may have suggested attractive “multiples” that they will pay for companies like yours. It sounds flattering, even tempting. You think, “I’ve got a willing buyer, let’s keep it simple and cut out the middleman.” Think again. We know how this might sound. Yes, we’re advisors — and yes, we benefit when sellers hire us. But stay with us. This isn’t a sales pitch. Whether you work with us or another experienced advisor or banker, this is about making sure you don’t leave millions on the table. Here’s why: 1. It’s Not Just About Finding Buyers – It’s About Finding Your Ideal Buyer In today’s market, especially in the home-based care sector, there is no shortage of buyers. If you own a solid business, you’re most likely getting approached regularly. You may even be thinking, “I don’t need a banker; the buyers are coming to me.” But here’s the reality: finding a buyer is the easy part . Finding the right  buyer, getting top-of-market  terms, and protecting yourself through diligence, closing, and post-closing reconciliation — that’s the hard part. That’s where a competitive, advisor-led process delivers real, measurable value. 2. Good People – Even Better Negotiators Buyers may seem friendly. Most are genuinely high-integrity people. But don’t forget who they work for: investors. And their job is to get the best deal possible — for them , not for you. Private equity firms, in particular, are professional dealmakers. They do this every day. They know what levers to pull. They know how to frame their offer just right to make you feel like you’re winning, even when the deal is structured entirely in their favor. Meanwhile, most business owners are selling for the first (and only) time. That’s not an even playing field. 3. Even PE Firms Hire Bankers When They Sell — Why Don’t You? Here’s a telling fact: when private equity groups go to sell a portfolio company, they almost always  go through a banker-led competitive process. Why? Because they know it’s the only way to: Maximize valuation and terms Maximize closing certainty Generate competitive tension among buyers Create backup options if the chosen buyer drags their feet or tries to renegotiate post-LOI If the pros won’t go to market without an advisor, why would you? 4. Where Many Sellers Slip: Naming Your Price First It often starts with a simple question from a buyer: “How much do you want for your agency?” You give them a number. They come back with something just below that, maybe with some “stretch” language to make it feel generous. But look closer at the deal: There’s a seller note (you’re effectively financing the buyer) Payments are deferred (vs cash at close) There’s an earnout (you’re taking on all the post-close performance risk) You’re rolling equity, but you’re last to get paid from a liquidity event, and often at a diluted value It’s not just about the headline number — it’s about structure, terms, timing, and control. And most self-negotiated deals get structured in ways even the well-informed seller doesn’t fully understand until it’s too late. 5. “Fair” ≠ “Market” Buyers love to position their deals as “fair.” It sounds reasonable. It sounds cooperative. But in practice, it’s a subjective term – one that can make a deal seem better than it is. “Fair” is subjective. “Market” is real. And unless you’ve run a proper process and seen multiple offers, you don’t know what “market” is.  That’s how buyers keep you in the dark — and get you to accept less than you could have achieved. 6. Premium Companies Get Premium Outcomes Strong, high-performing agencies don’t just deserve “a good deal” — they often receive something better: a premium . We always give valuation guidance to our clients before going to market — informed by comps, investor sentiment, experience, and current deal trends. But we’re often pleasantly surprised by where the market actually takes the deal, especially with premium businesses. Why? Because when the right buyer  meets the right opportunity  at the right time , strategic motivation can drive valuations far above guidance. It’s not uncommon to see bidding wars erupt over highly differentiated companies — and those wars don’t happen without process, positioning, and pressure. If you’re running a great company, don’t settle for “reasonable.” There’s a good chance your business is worth more than you think — but only if you let the market tell you. 7. We’ve Seen This Movie Before — And Changed the Ending We’ve had multiple clients approach us after they’d already negotiated a letter of intent directly with a reputable, strategic buyer. They were ready to sign. Each time, we reviewed the deal. We saw opportunities to push back. To create leverage. To run a fast but focused market process, all while keeping the buyer interested and at bay. Each time, we got them a significantly better deal.  In some cases, it was with the same buyer . In others, it was a new buyer altogether. Either way, just introducing competition changed everything — often adding millions  to the final purchase price and dramatically improving the terms. Even the threat  of competition made buyers step up. That’s how leverage works. 8. Think You’re Saving Money? Think Again. Some sellers avoid hiring an advisor because they think they’re saving money by going direct. Hiring a banker is not a cost. It’s an investment.  And like any smart investment, it comes with a return — one that pays off at closing, in the form of a better price, better terms, and higher certainty of close. It’s a performance-based investment with virtually guaranteed, immediate ROI. 9. Better Odds of Closing. Better Terms at Close. Deals fall apart for all kinds of reasons — diligence issues, financing delays, buyer fatigue, retrades. But when sellers work with an experienced advisor who runs a real process, the odds of closing go up dramatically. And just as important, the odds of closing on the originally agreed terms  go up too. Buyers are far less likely to drag their feet or re-cut a deal if they know there are other interested parties waiting in the wings. And they will not want to have a reputation in the home-based care M&A world as less-than-honest dealmakers. You’ve Heard Our Perspective We’re not asking you to take it on faith — we’re asking you to look at the facts, the market, and what happens when real competition is introduced. Whether you work with us or not, make sure you’re not negotiating alone. The Bottom Line When a buyer approaches you directly, they’re doing what buyers do — trying to get the best possible deal for themselves. There’s nothing wrong with that. But it means the process will be tilted in their favor unless you change the dynamics. That’s what an advisor does. We reset the playing field. We bring the right buyers to the table, create competition, and ensure you’re in a position of strength throughout the process — not just at the LOI stage, but all the way through diligence and closing, and often even beyond. You’ve spent years building your business. When it’s time to sell, you deserve more than just a “reasonable” offer. You deserve a market-tested outcome that reflects the true strategic value of what you’ve built.

As uncertainty continues to loom in both the industry’s regulatory environment and the broader economy, home-based care M&A volume dipped slightly, predominantly from a decline in non-medical home care transactions. While activity slowed relative to the two prior quarters in 2025, Q3 remains in line with the transaction volume seen in 2024. 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. A total of 20 home-based care transactions were completed during the quarter. Public company transactions accounted for four deals, while sponsor-backed strategic and private equity platform acquisitions accounted for eight and three, respectively. Despite the number of non-medical home care deals falling compared to the previous quarter, the sub-vertical still leads in M&A activity with 11 closed transactions during Q3. While speaking about the outlook for home-based care M&A through the rest of 2025 and beyond, Cory Mertz, managing partner at Mertz Taggart, highlighted the impact of future rate cuts by the Federal Reserve. He noted, “We’re seeing more optimism in the market after the latest quarter-point cut last month, especially from buyers looking for add-on acquisitions.” Mertz also touched on demand resulting from sustained levels of undeployed capital in private equity, “Although the overall number has come down recently, there’s still near-record dry powder that funds are actively looking to invest. If they can’t sufficiently invest out of their current fund, raising their next fund will become more of a challenge.” Home Health M&A   Seven home health transactions closed during the quarter, matching Q2 and maintaining the pace set at the start of the year. Three of the seven were public company transactions, with the The Pennant Group being responsible for two. It announced the acquisition of GrandCare Health Services , a home health agency serving California’s Los Angeles, Orange, Riverside and San Diego counties, and Healing Hearts Home Health , a Wyoming-based agency offering home health, non-medical home care and outpatient therapy services in seven communities throughout the state. Rounding out this quarter’s public company transactions was Optum’s  long-awaited $3.3 billion acquisition of Amedisys , a formerly publicly traded home health and hospice provider with 500+ locations across 37 states and Washington, DC. The deal closed after a two-year delay and a settlement with the Department of Justice where both parties agreed to divest over 150 assets, consisting primarily of home health locations, to BrightSpring Health Services and The Pennant Group. The remaining four transactions were private equity-related, split equally between sponsor-backed strategic and platform acquisitions. Sacred Heart Health Care , a portfolio company of Creach Family Holdings operating under the Faith Home Health and Hospice brand, announced the acquisition of Freudenthal Home-Based Healthcare , a Missouri-based home health provider, as it maintains its focus on becoming the leading in-home service provider in the Midwest. Marathon Nursing , a Massachusetts-based provider, was bought by Team Select Home Care , a portfolio company of Court Square Capital Partners. Regulatory uncertainty, particularly concerning CMS’s proposed rate cut of 6.4%, has remained at the forefront in the minds of acquirers when evaluating deals in the home health space. The proposed rule is set to be finalized in November and would take effect in January 2026. However, there is still considerable demand for quality assets in a space that’s historically had strong and consistent deal volume. Cory Mertz noted that “Although buyers are well-aware of the risks involved with a potentially large reimbursement cut, high-quality assets are still in strong demand. Of the major home-based care providers who are building a continuum of care in their efforts to negotiate value-based payment arrangements with the payors, skilled home health is the most prominent of the service lines.” Hospice M&A Hospice deal activity remained steady with six hospice transactions announced in Q3, one more than in Q2 and in line with both the 2024 and year-to-date 2025 averages. Among the six announced transactions was the acquisition of St. Gabriel’s Hospice & Palliative Care , a Texas-based provider of end-of-life care, by LifeCare Home Health , a Medicare-certified hospice, home health and private duty care provider in Texas, Nevada and Florida and portfolio company of healthcare services-focused private equity firm Zenyth Partners. BaneCare Management , a Massachusetts-based senior care services provider, also announced its acquisition of Longwood Hospice , enhancing its care continuum throughout the state. Concerns surrounding Medicare clawback risk continue to be present amongst buyers as billing and compliance diligence remains the key hurdle to consummating transactions in the hospice space, particularly in the so-called enhanced oversight states of California, Nevada, Arizona and Texas. Mertz Taggart maintains its firm guidance to would-be hospice sellers to seek out a comprehensive billing and compliance audit as a key first step prior to engaging a sell-side advisor when preparing for a sale. Cory Mertz noted, “It’s important to use a group that will quantify the clawback risk, financially.” Cressey & Company announced a partnership with Paradigm Health . Paradigm management, along with the company’s existing investor, Havencrest Capital Management, also made investments as the company pursues its next phase of growth. Despite strong demand, deals have proven difficult to get to the closing table. Diligence around billing and compliance have caused many proposed deals to fall apart. Buyers are fearful of Medicare clawback risk, a concern that is amplified in four “enhanced oversight” states—California, Arizona, Nevada, and Texas. As such, Mertz Taggart continues to strongly recommend that providers considering a transaction in the next 24 to 36 months first invest in a billing and compliance audit.  “We are strongly recommending a pre-market audit for operators, especially in those four states,” Mertz noted. “It’s important to use a group that will quantify the clawback risk specific to those four states, considering the current enhanced oversight environment.” Home Care M&A Non-medical home care M&A activity declined this quarter compared to the relative highs of Q1 and Q2 this year but generally stayed in line with last year's deal activity.  The largest announced deal this quarter where the purchase price was publicly disclosed was Addus Homecare’s $21.2 million acquisition of Helping Hands Home Care Service, a home care provider with three locations throughout western Pennsylvania serving approximately 600 patients daily. Addus CEO Dirk Allison said during the company’s most recent earnings call, “As we have with this most recent acquisition, our development team will continue to focus on both clinical and non-clinical acquisition opportunities that increase both the density and geographic coverage of our current states. We will be evaluating smaller clinical transactions along with personal care service transactions that fit our strategy.” In line with historical trends, sponsor-backed strategic buyers made up the bulk of the deals closed this quarter. Among them was Amivie ,   a multi-regional provider of non-medical home care and portfolio company of Martis Capital, which acquired FosterBridge , an in-home care provider serving patients in 23 counties across southeastern Ohio. Q3 also saw a platform investment in Elder Care Homecare , an in-home provider serving New York, New Jersey, Connecticut and Massachusetts, by private equity firm Rallyday Partners , opening the door for add-on acquisition opportunities throughout the Northeast. Non-medical home care held on to its spot as the darling of home-based care services investors, and Cory Mertz expects that trend to continue into both Q4 and 2026 as deal activity inches up, saying, “We’re still seeing high levels of interest in the home care space, driven primarily by sponsor-backed portfolio companies that are seeking additional cash flow before their scheduled exits in the next 12-18 months. We are also seeing an uptick in demand for private duty home care, as some of the strategic acquirers are looking to diversify their payor mix.” If you are interested, you can also download the .PDF version of the Q3 2025 Home-Based Care M&A Report via the following link:

After an especially active first quarter and with signs currently indicating a healthy and active pipeline, analysts at Mertz Taggart are bullish in their outlook on the behavioral healthcare market for 2025. Behavioral Health M&A A total of 47 transactions involving behavioral healthcare organizations were reported in the first quarter of the year. This included 34 M&A transactions, the most since Q4 2022. Activity within the intellectual/developmental disabilities (I/DD) and autism sectors has seen a resurgence, with a reported 12 transactions in Q1—the highest volume recorded since 2021. Sales of organizations that provide applied behavior analysis (ABA) therapy have been especially competitive, said Mertz Taggart managing partner Kevin Taggart. “During COVID and right after COVID, a lot of ABA companies experienced wage inflation without getting rate increases, so there was some high-profile bankruptcy with some large providers that left California, Colorado and other states,” said Taggart. “The dust has seemed to settle on that over the last six months or so, and so now we’re seeing a lot of groups asking for ABA businesses. That’s a positive.” Within the subsector of mental health, demand has remained consistent for going on two-and-a-half years. 29 transactions (19 M&A and 10 growth deals) involving mental healthcare providers were reported in Q1, a figure roughly in line with the 30 deals announced in the final quarter of 2024. Although it’s not readily apparent based strictly on the number of transactions announced, buyers’ interest in psychiatric hospitals is high, Taggart said. There simply aren’t enough smaller, independent providers available to meet the demand. “We’ve had more groups ask us for psych hospitals since Q1 this year than probably any quarter in the last three or four years,” he said. “But there are fewer smaller operators out there. There just haven’t been as many deals completed because there’s not enough supply. But there are definitely groups looking.” Finally, Taggart noted one additional trend to watch: the continued flow of growth deals at high valuations.  “Money has continued to pour in to these growth deals, which surprised us a bit,” he said. Addiction Treatment M&A Once a subsector that analysts could reliably expect to have the highest number of transactions in a quarter, addiction treatment deal volume has remained flat for two years now. Deals are still getting done, Taggart clarified, but not to the level of historical norms. Nine deals involving addiction treatment providers were reported in Q1, matching the total from each of the prior two quarters. This included seven M&A transactions and one growth deal. The following addiction treatment transactions were reported in Q1: Wellpath Recovery Solutions , a provider of services at inpatient psychiatric hospitals, residential treatment centers and mental health rehabilitation centers, as well as community-based services, was acquired by an undisclosed buyer in a deal that will cancel out about $375 million in debt of parent company Wellpath Holdings . Optimal Investment Group,  a Sherman Oaks, California-based private equity firm, made a strategic investment in Recovery Dynamics in Los Angeles . Substance use disorder (SUD) treatment provider Meridian Behavioral Health expanded its continuum of care with its acquisition of Gateway Recovery  in January. Denver-based addiction treatment providers AspenRidge Recovery  and Colorado Medication-Assisted Recovery  announced a merger in March. Both companies were founded by Cortland Mathers-Suter, who was named CEO of the combined company. Oceans Healthcare  acquired Haven Behavioral Healthcare , adding seven new locations across five new states, bringing the total number of states in which it operates to nine. The deal was backed by private equity firm Webster Equity Partners. The respective boards of directors of Family Service & Guidance Center  and Valeo   Behavioral Healthcare  announced their approval of plans to merge the two organizations into a single Certified Community Behavioral Health Clinic  within the next year.  Silver Hill Hospital  announced in February that it has completed its acquisition of Freedom Institute  to expand its psychiatric care services in New York City. As part of the deal, Freedom Institute has been rebranded as Silver Hill New York . 1888 Equity  acquired Jaywalker Lodge , a drug and alcohol rehabilitation facility in Colorado. Mertz Taggart  provided exclusive sell-side advisory services. Acadia Healthcare  completed its acquisition of North Carolina-based Sellati & Co .  Mertz   Taggart  provided exclusive sell-side advisory services. Two growth funding deals were also announced: You Are Accountable , a New York-based peer SUD support company, raised $1.9 million in funding, the company announced in February. Investors were not disclosed. Bicycle Health , a virtual opioid use disorder (OUD) treatment provider, completed a $16.5 million funding round led by Questa Capital Management . Mental Health M&A As mentioned above, demand has remained healthy for mental healthcare providers, particularly those that offer psychiatry and ancillary services, Taggart said. “There is still strong demand for mental health, especially psychiatry practices or groups that offer psychiatry services, even just medication management or ancillary services such as transcranial magnetic stimulation or ketamine-assisted therapy,” said Taggart. “There is still good demand for outpatient mental health—not to the level it was in 2022, but it’s been pretty steady in recent years, even with some notable strategic buyers taking a pause.” Those strategic buyers, he added, are now showing signs they are ready to get off the sidelines, a development that could spur more activity later this year. Deals involving mental healthcare organizations in Q1 included the following: Riverside Impact Capital , a firm that specializes in working with mental health practices, announced a strategic investment in Evergreen Counseling . Mertz Taggart provided exclusive sell-side advisory services. Traverse Pointe Partners  completed its acquisition of Soma Therapy  in a private equity platform deal.  Mertz Taggart provided exclusive sell-side advisory services. ARCpoint Inc. announced in January that it has completed the sale of 68% of its ownership interest in Achieve Behavioral Health Greenville . The buyer in the deal was not disclosed. Empower Community Care , a global behavioral health organization, acquired Brief Strategic Family Therapy Institute from the University of Miami  in a private equity-backed strategic deal. Avel eCare,  a telemedicine provider of clinician-to-clinician services, acquired Amwell Psychiatric Care,  a division of Amwell , in a private equity-backed strategic deal. The acquisition expands Avel’s footprint to over 45 states. Orchard Mental Health Group  (formerly known as Quince Orchard Psychotherapy ) made a private equity-backed strategic acquisition of GBCC Behavioral Health  and Oasis Behavioral Health Urgent Center . Eating Disorder Recovery Specialists ,  Mental Health Recovery Specialists ,  Sanctuary Psychology P.C. and  Well Williamsburg —entities founded by clinician-entrepreneurs Sarah Chipps, a psychologist, and Greta Gleissner, a licensed clinical social worker—have been merged to form Well Behavioral Health . Iris Telehealth  has acquired innovaTel  from Quartet Health  in a private equity-backed strategic deal. Days later, Quartet  itself was acquired by NeuroFlow , another behavioral health-focused tech company. Axess Family Services  and Children’s Advantage , a pair of not-for-profit providers that serve Portage County, Ohio, announced a merger in February. FullBloom , an academic, behavioral and mental health provider for schools, acquired school-based mental health provider CharacterStrong  in a move to support its increasing focus on mental healthcare. TPN.health , a behavioral health network platform, acquired All Counseling  and its provider-patient matching technology, TheraMatch . Boston-based The Stepping Stones Group  announced in March it has acquired Gallagher Pediatric Therapy in Fullerton, California, for an undisclosed sum. AI-powered mental health chatbot company Wysa  acquired April Health , a behavioral health company that works with primary care providers. Beacon Behavioral Partners  made two acquisitions in Q1, reaching agreements to acquire Shore Clinical TMS & Wellness Center and Cognizant Behavioral Health Services . Several mental healthcare organizations also announced growth funding transactions  in Q1, including the following: Mindful Health  completed a $12 million funding round led by WP Global Partners . Digital family mental health startup Little Otter  raised $9.5 million in a strategic funding round led by Next Legacy Management . Sonar Mental Health  raised $2.4 million in a pre-seed funding round for its AI-backed youth mental health startup. The funding round was led by Nina Capital . Digital mental health startup Nema Health  raised $14.5 million in a funding round that brought in two new investors: Deerfield Management  and CVS Health Ventures , the venture capital arm of CVS Health. Digital health company DarioHealth  raised $25.6 million from an undisclosed investor. Neurodivergent affirming therapy provider Prosper Health  raised $16.2 million in a funding round led by Kindred Ventures . Trail Mix Ventures   Fund II and Foreground Capital  led a $12 million investment round for Millie , a maternal mental healthcare company. TownHome Health  raised $500,000 according to SEC filings. An investor has not been disclosed. Digital alcohol use disorder treatment provider Ria Health  raised $12.5 million as part of a Series B funding round led by Peloton Equity . Bluebird Kids Health  raised $31.5 million in a funding round led by F-Prime Capital   Partners . Autism and Intellectual/Developmental Disabilities M&A The 12 transactions reported in the I/DD and autism subsector for Q1 were the most for a quarter since 2021.  One of the ABA therapy companies Mertz Taggart was working with in Q1, received the highest number of offers for any deal the firm has worked on since 2021, Taggart said. The following is a list of transactions involving providers of I/DD and autism therapy services: Ascend Capital Partners , a healthcare-focused private equity firm, acquired a majority stake in Unison Therapy Services . Healthcare-focused private equity fund Leavitt Equity Partners  partnered with Pediatrics Plus  in Conway, Arkansas. BrightSpring Health Services  divested its I/DD division to Sevita  (formerly known as The Mentor Network ) in a deal valued at $835 million. Already Autism Health  announced two acquisitions. First, it acquired Commonwealth ABA  in a deal backed by private equity firms Triton Pacific Healthcare Partners , Star Mountain Capital  and Ace & Co. The company also acquired C.A.B.S., Autism  and Behavior Specialists . Private equity firm Nautic Partners  acquired Proud Moments ABA  from PE firm Audax   Private   Equity . Three Maine-based not-for-profits— GMS , Uplift  and Independence Advocates of Maine —announced a merger. Meridian Executive Services  acquired Danville Services Corp.  In a private equity-backed strategic deal. Behavior Genius , a provider of ABA services, acquired Bay ABA  in the San Francisco Bay Area. Regency ABA  in Georgia acquired Magnolia Behavior Therapy  in Seattle, Washington. Strawberry Fields , a not-for-profit provider, became an affiliate of Devereux Advanced Behavioral Health . Delta Behavioral Health Group  was acquired by SpringHealth Behavioral Health   & Integrated Care . Frontera Health , an autism services startup that is backed by AI, raised $32 million in a seed funding round led by Lux Capital  and Lightspeed Venture Partners . If you would like to download this report in a PDF file, click the link below. Mertz Taggart is a leading healthcare M&A advisory firm specializing in transactions across behavioral health, home health, home care, and hospice sectors, as well as ABA services mergers and acquisitions. We help business owners maximize value, prepare for sale, and navigate every stage of the M&A process with expertise and confidentiality.

I get asked all the time…’what kind of multiple would my home care agency command?’ ‘Not So Fast’…There’s No Straight Answer. I would go as irresponsible to give guidance simply in the form of a multiple without knowing the other half of the valuation equation – Adjusted EBITDA .s far as saying it’ The Adjusted EBITDA can be dramatically different depending on whether it is based on a trailing twelve-month (TTM) period, calendar year, annualized pro- forma, or some other formulation. It can also vary significantly based on the buyer and which adjustments will be considered. The question should be, ‘what kind of VALUE would my home care agency command?’ which is more complicated. Let’s take a step back and explain the value equation that is commonly used in the home care industry. Value = (Adjusted EBITDA) x (the Multiple), whereby: Adjusted EBITDA (or Earnings Before Interest, Taxes, Depreciation and Amortization) is a proxy for “normalized” cash flow (normalizing for typical variations in a company’s revenue cycle). The Multiple is the inverse of the go-forward risk of that cash flow continuing after the transaction is complete. The lower the risk of cash flow deterioration, the higher the multiple. For example, a 7x multiple implies a 14.3% return and a 5x implies a 20% return, so the 5x multiple is viewed as a riskier investment for the buyer, therefore he/she requires a higher rate of return. Pretty straightforward, right? Well, not always. And here’s why …Adjusted EBITDA is in the eye of the beholder. Consider three case studies to illustrate: The Growing Agency I represented the seller of a home care agency with the following value drivers: Trailing 12 months (TTM) revenue of $12,o00,000 Trailing 12 months adjusted EBITDA of $2,200,000 (~18% of revenue) Strong growth Multiple locations Strong clinical and compliance program Non-CON state Virtually no seasonality After receiving multiple bids, and after negotiations, the successful buyer (a large private equity fund) came in with a valuation of $17,600,000. Clearly a healthy multiple of 8x ($17,600,000/$2,200,000), right? I can assure you the buyer was looking at this differently. Remember, this was a fast growing company that had no seasonality. Trailing 12 months (TTM) Last 6 months, annualized Revenue $12,000,000 $14,400,000 Adjusted EBITDA $2,200,000 $2,880,000 Multiple 7.3 5.6 So, what was the multiple? Depends on who you ask. The buyer was telling their board that they got this company for a steal – a multiple of 5.6 My client, the seller, was telling his golf buddies he sold for a multiple of 7.3x… EBITDA & multiples are in the eye of the beholder. Corporate Overhead and Synergies Here’s an example of a hospice we represented: Trailing 12 months revenue: $5,600,000 Trailing 12 months adjusted EBITDA: $800,000 Modest growth Strong clinical and compliance program Non-CON state After running a competitive bid process, the buyer agreed to pay $5,600,000 (or about 1x revenue). This company commanded a multiple of 7, ($5,600,000/$800,000) right? Maybe/Maybe not… In this case, the seller was paying an annual salary of $200,000 to a high-priced CFO who was not an owner of the company. Although he was instrumental in the success of the company, he was not needed by the buyer. This is typical, as nearly all strategic buyers have their own CFO who can take on these responsibilities. So the buyer would enjoy an immediate $200,000 bump in EBITDA on day one – to $1,000,000. To the buyer, this company was purchased for a multiple of 5.6x ($5,600,000/$1,000,000). The Low Margin Business Another example: Trailing 12 months revenue: $4,800,000 Absentee owner, not involved in the business Trailing 12 months EBITDA: $150,000 The sale price was $2,400,000, or a multiple of 16 ($4,800,000/$150,000). Clearly not a standard industry multiple for a privately held home care agency, but it was a competitive process and the company had a high strategic geographical interest to the industry buyer. In this case, the buyer saw some “low hanging fruit” in the seller’s cost structure and knew it could bring its EBITDA up to 12% (or about $600,000) very quickly. This included $220,000 in salary and “home office” expense enjoyed by the absentee owner who was not involved in the day to day operation of the business. In the eyes of the buyer, the multiple was a conservative 4x (or $2,400,000/$600,000). So that begs the question…what is the multiple of a break-even (or money-losing) agency that sells for any price? It’s all about the value. Reach out to us at info@mertztaggart.com for more information on home care, home health, and hospice valuations.