‘There Are Fewer Quality Targets on the Market’: Hospice Transaction Activity Plummets

Hospice transaction activity has plummeted to its lowest level in years, new dealmaking data suggests.

That’s no surprise, as many anticipate health care investors to operate with a more conservative approach in 2023. The cooldown, experts note, is partly due to inflation reaching multi-decade highs, uncertainty in the banking world and credit markets drying up.

A dip in the number of quality available assets is likewise having an impact on hospice M&A activity.


“There are fewer quality targets on the market,” Mertz Taggart Managing Partner Cory Mertz said in the M&A advisory firm’s most recent quarterly report. “If you ask the buyer universe, they’ll tell you they are seeing a lot of opportunities, but most of them are not quality — whether financially, clinically or both.”

In total, there were at least 14 home health, hospice and home care deals reported in the first quarter of 2023, according to Mertz Taggart. Prior to then, no quarter had seen fewer than 24 transactions since the beginning of 2019.

There were specifically five hospice deals in the first three months of this year, down from the nine hospice-related transactions that took place in 2022’s fourth quarter. In comparison, the first quarter of 2022 had 12 hospice-related deals, while the first quarter of 2021 had 13 transactions.


In many cases, hospice sellers are still seeking a steep return for their business, Taggart noted in the firm’s M&A report. But buyers are no longer jumping at elevated valuations.

“To command the premium multiples, they really need to check the boxes from a clinical, compliance and cash flow perspective,” Mertz said. “Buyers are getting more disciplined.”

The bigger picture

It’s not just hospice, home health and home care dealmaking that’s down.

Private equity transaction activity in health care began with a boom in 2022, with first-quarter activity “almost on par with the first quarter of 2021,” according to a recently released report from Bain & Company. But volume declined sharply in the second quarter – and that dip continued on throughout the year.

Overall, buyout volume fell by more than 35% in 2022’s second half compared with the first half of the year, with Q4 having the lowest quarterly health care private equity deal activity since 2017. On the year, total disclosed deal value reached around $90 billion globally, down from $151 billion in 2021.

“Russia invaded Ukraine, energy prices skyrocketed and inflation reached multi-decade highs,” Bain & Company wrote in its report. “As central banks around the world hiked rates, public listings sank and credit markets dried up. This shift shook private equity activity globally, with health care no exception.”

With a less-favorable dealmaking climate, M&A experts believe 2023 will be defined by tuck-in acquisitions. Yet even those have been few and far between at the beginning of the year.

Looking ahead, it’s important to note that private equity buyers have plenty of firepower left to work with.

Last year, PE firms raised more than $15 billion in new buyout capital for funds where health care was the sole or main focus, according to Bain & Company, which cited data from capital markets company Preqin. That has happened in only two other years in the last two decades, with those years being 2019 and 2020.

Of course, the biggest hospice-related deal to kick off 2023 was Gentiva’s $710 million purchase of ProMedica’s hospice and home-based care assets. That move marked the first acquisition for Gentiva after private equity firm Clayton, Dubilier & Rice took on majority ownership from Humana Inc. (NYSE: HUM).

The acquisition added over 100 locations to Gentiva’s footprint.

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