Private equity firm Webster Equity Partners is considering the sale of Bristol Hospice, which operates 35 locations across 10 states, PE Hub has reported. Bristol’s EBITDA is in excess of $70 million, indicating that the company is about seven times larger than when Webster first acquired it in 2017, according to PE Hub.
That degree of growth is not surprising given Bristol’s emphasis on growth. The company completed nine acquisitions during 2020 and 14 in total since Webster purchased the agency. Webster did not comment to Hospice News on the potential sale.
“Bristol, based in Salt Lake City, Utah, is among the last remaining independent hospice platforms available of scale available for investment — after Care Hospice and St. Croix Hospice agreed to trade hands around mid-teens EBITDA multiples last October,” the PE Hub report stated.
Private equity activity in the hospice space has spiked in recent years, with buyers largely driven by demographic tailwinds, rising utilization and the need to build scale for participation in value-based payment models such as Medicare Advantage or the Center for Medicare & Medicaid Innovation’s direct contracting programs. On the seller side, record high multiples for hospice companies have made investor-owners’ mouths water.
Bristol has often been at the forefront of this activity, given the number of transactions it completed last year. Among its 2020 transactions were the purchases of Remita Health in September, Sojourn Hospice & Palliative Care in March and the hospice operations of Visiting Nurse Association of the Inland Counties (VNA). Financial terms for these transactions were undisclosed.
Early this month, Bristol purchased the California operations of Companion Hospice for a confidential sum, filling a gap in its geographic service area. Companion retained its Texas and Arizona locations.
“By our account, they’ve done at least 15 acquisitions in the past three years, so the timing probably about right for them to give their investors a really nice return on their capital,” Cory Mertz, managing partner at the M&A advisory firm Mertz Taggart, told Hospice News. “Contributing to the alleged decision is the fact that hospice valuations are still very strong.”
If it comes to fruition as expected, the Bristol Deal could rival the purchase of St. Croix Hospice in October by the private equity firm H.I.G. Capital.
Minnesota-headquartered St. Croix, previously owned by the investment firm the Vistria Group, has a large Midwestern footprint that extends across six states and has completed a number of acquisitions of its own during 2019 and 2020, as well as adding five de novos last year and one so far in 2021.
“Recent transactions certainly continue to bolster the go-forward valuations of larger hospices as well.You’ve got recent comparatives that support it,” said Mark Kulik, managing director for home health and hospice at the M&A firm The Braff Group. “Also, supply and demand, with every new large hospice transaction there’s one less large hospice available in the marketplace. There’s a lot of small providers, but there’s very few large providers.”
Another factor that goes into a sale like this is timing. Private equity groups purchase companies and hold them for a time, building up value for an eventual return. While historically the length of time a PE firm would hold a company was in the area of nine or 10 years, that duration is declining.
The median holding time of private equity assets in 2019 dropped to 4.9 years, according to Pitchbook’s 2019 Annual US PE Breakdown. In 2014 the median holding time was 6.2 years.
“There just happens to be several private equity backed platforms reaching inflection points within their investment cycles that are traditionally three- to seven-year holding periods,” Senior Analyst Jake Vesely from Provident Healthcare Partners told Hospice News. “This is naturally leading groups to explore exits at the same time and as a result, we are seeing increased competition and frothy valuations from both larger private equity firms and strategic buyers.”