Non-Traditional Buyers Flocking to Hospice M&A Market

Private-equity firms have been investing heavily in hospice during the past few years, a trend that is not expected to slow. However, a new crop of investors are also moving into the space such as search funds and family offices seeking to capitalize on rising demand and the promise of demographic tailwinds as the population ages.

A search fund is an investment vehicle, through which investors financially support an entrepreneur’s efforts to locate, acquire, manage, and grow a privately held company, according to the Stanford Graduate School of Business.

“Private equity-backed hospices are becoming more dynamic and are more on the forefront,” Mike Moran, principal with Team M&A at American Healthcare Capital, told Hospice News ““We’re also seeing a surge of other types of financial buyers, such as search funds and family offices. This is not the traditional private equity group we’re accustomed to working with but a different type of financial firm that is looking to acquire a platform within hospice and other health care segments.” 


An estimated 198 search funds are operating currently in the United States, according to Stanford University. The search fund model emerged from faculty at Stanford in the mid-1980s.

Non-traditional buyers are beginning to realize the potential in hospice investments. The hospice M&A market has been particularly resilient to headwinds brought on by the pandemic. While the larger health care market saw more disruption, hospice activity proceeded apace according to a report from Provident Healthcare Partners.

Acquisitions in the health care services sector slowed significantly in early 2020 as the pandemic ramped up. In the home health space in particular, investors also have been cautious as they gauge the impact of the patient-driven groupings model (PDGM), a new payment structure that became effective this year.


Among the various segments of the health care industry, hospice continues to be the one to watch, even as valuations soar and multiples continue to hit record highs.

“Private equity has always been acquisitive, especially in hospice, and now we’re starting to see a little more activity from non-traditional financial firms like family offices and other companies known as search funds,” Moran said.

Alongside search funds, family offices are also looking closely at hospice acquisitions. These are typically family units who incorporate, pool financial resources and purchase business assets, typically with representation by a banker or broker.

While a search fund would likely assume management of a company, installing its own executive leadership, a family office is more likely to retain current management and offer them much more autonomy, according to Moran.

Family offices are become more prevalent in the hospice market.

“We are seeing increased activity from family offices in general. People are looking for ways to generate returns, and you often can’t get returns in conventional ways anymore. It’s got to be through investment and acquisition,” said Dexter Braff, president of the Braff Group. “Family offices are kind of closed private-equity groups that are not raising outside capital. They are using capital that’s been accumulated by a family, and they are always looking for investments.”

While a private equity firm would likely sell a hospice asset within 10 to 12 years, family offices could hold on to a business indefinitely, according to Braff.

“Hospice is an attractive acquisition opportunity for someone who has a long-term hold as well as somebody who has a short-term hold,” Braff told Hospice News.

This emerging trend does not mean that traditional private equity buyers are diminishing. Numerous transactions have taken place in 2020 among private equity-backed hospices.

In March, Minnesota-based St. Croix Hospice bought Serenity Care Hospice in Harrison, Mo., for an undisclosed amount. St. Croix is a portfolio company of the Chicago-based private equity firm Vistria Group. More recently, Vistria began shopping St. Croix itself for a potential sale.

Traditions Health, a portfolio company of family-owned investment firm Dorilton Capital Advisors, has also been active in the market. The company completed three acquisitions in the past nine months in Texas, Oklahoma and Georgia.

Bristol Hospice, backed by Webster Equity Partners, purchased the Utah and California locations of Sojourn Hospice & Palliative Care from parent company Healthy Living Network. Financial terms were undisclosed.

These are just a few examples out of a larger number of transactions involving private equity.

“A lot of the consolidation activity in much of the health care services sector, not just hospice alone, is driven by private equity,” Braff said. “These companies are mostly private equity backed, and their entire reason for being is to build up the value of their initial acquisition and be able to then sell that with added appreciated value.”

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