Private equity firm Towerbrook Capital Partners and health system Ascension Health have agreed to purchase the Nashville-based hospice provider Compassus at a valuation of $1 billion, with multiples of EBITDA in the low teens, PEHub.com reported.
The two companies will split ownership of Compassus down the middle, each holding an equal stake, according to PEHub.com.
Compassus operates more than 125 community-based hospice, palliative and home health care services locations in 30 states. The company’s previous investors, Formation Capital and Audax Private Equity will no longer hold stakes in Compassus following the transaction’s closure. These two private equity owners began exploring M&A transaction opportunities in January.
Compassus had no comment for Hospice News on the transaction.
A number of firms are providing financing for the purchase, including Barclays, Merrill Lynch, Capital One, Jefferies and Houlihan Lokey.
This is the second time that Towerbook and Ascension partnered on an investment, the first being the 2016 purchase of health care management technology firm Trimedix.
The hospice M&A market is continuing to heat up despite record-high multiples in the space, largely driven by demographic tailwinds and availability of capital.
“Hospice made a big jump in the second quarter, which isn’t shocking at all, given the growing demand among home health agencies and some of the newer hospice private-equity backed portfolio companies in the marketplace,” according to Cory Mertz, managing partner at M&A advisory firm Mertz Taggart.
The second quarter of 2019 saw 14 hospice transactions. Eight major hospice acquisitions took place during the first quarter of 2019, up from seven transactions during Q1 2018 as well as Q4 2018, which also saw seven transactions, according to a report from Mertz Taggart.
Among the most significant transactions in the second quarter occurred in May with the purchase of Texas-based Resolutions Hospice by Cornerstone Healthcare Inc., a subsidiary of The Ensign Group (NASDAQ: ENSG), for an undisclosed amount.
Also this week, Addus HomeCare Corporation (NASDAQ: ADUS), which provides hospice in addition to other a home care services, completed the purchase of Hospice Partners of America, LLC, a multi-state provider of hospice services headquartered in Birmingham, Ala., for a cash purchase price of $130.0 million.
A number of other high-profile companies, including Amedisys (NASDAQ: AMED) and LHC Group (NASDAQ: LHCG] have said they are actively seeking new acquisitions, focusing more of their efforts on building their hospice segments.
Companies featured in this article:
Addus Homecare, Amedisys, Ascension Health, Audax Private Equity, Barclays, Capital One, Compassus, Cornerstone Healthcare, Ensign Group, Formation Capital, Hospice Partners of America, Houlihan Lokey, Jeffries, LHC Group, Merrill Lynch, Mertz-Taggart, Resolutions Hospice, Towerbrook Capital Partners, Trimedix