Home care actors are operating in a completely different environment than in the past. No one understands this better than productive buyers like HouseWorks, PurposeCare and Care Advantage.
However, all three companies are taking unique steps to sustain growth in 2024.
First, there has been a huge gap between buyers and sellers in recent years. However, this gap may be starting to close.
“That gap between buyers’ expectations and willingness to pay has closed significantly,” said Cameron Cordts, corporate development manager at PurposeCare, during a panel discussion at Home Health Care News’ Capital + Strategy conference. “I think PurposeCare has had more success on the proprietary lead side as well.”
Cordts noted that the majority of PurposeCare’s growth came from acquiring these proprietary leads.
Backed by healthcare-focused private equity firm Lorient Capital, PurposeCare offers both clinical and non-clinical home care. The company is very optimistic about mergers and acquisitions. Since PurposeCare launched in 2021, the company has completed 14 acquisitions, primarily in the Midwest.
According to CEO Mike Trigilio, HouseWorks has ultimately self-funded eight of its last 10 deals.
InTandem Capital-backed HouseWorks has earned a reputation for being one of the most active buyers in the home care space — growing into a $400 million company. HouseWorks provides home care and operates food delivery and laundry operations. The company is also involved in daycare for adults.
“We’re trying to be a solution provider for the payer and not just provide home care,” Trigilio said during the discussion.
In the last six years, Care Advantage has completed 21 deals. In terms of acquisition targets, the company has focused on personal care and other complementary services.
“How can we do some of these things that we can’t just hop, skip and jump from? [personal care]“But one step away from that?” Jaron Clay, vice president of integrations at Care Advantage, said the same thing. “So we also dipped our toes into everyday adult life. We focus on companies that truly target non-English speaking populations that are otherwise excluded from the continuum of care. This has proven to be a very difficult and profitable business for us, but above all a truly rewarding one.”
Care Advantage, based in Richmond, Virginia, is a home health care company with more than 45 locations in Virginia, Maryland, Delaware, Washington, DC and North Carolina. The company offers both personal care and home care.
Clay knows that a potential acquisition target is a good fit if the company aligns with Care Advantage’s growth drive.
“Do you have the same attitude?” he said. “Are they happy with exactly where their business is today, or are they eager to grow and have the tools they need to grow their business and connect it to our grid? We absolutely rejected deals that looked great on paper because that mindset wasn’t there when we met the leadership team that wanted to stay.”
Although HouseWorks typically avoids acquisition targets that could be classified as distressed, the company sees opportunity in its ability to streamline an organization.
“We like to look at these companies and say, ‘What’s going on?'” Trigilio said. “‘What parts can we repair?’ A lot of this is about our technology and our solutions that we bring into play, basically on closing day. Some of these issues can be mitigated very quickly.”
Likewise, Care Advantage was able to help acquisition targets resolve key challenges.
“There are companies that were able to identify a problem and we felt like we had a quick solution for them, particularly in terms of talent acquisition,” Clay said. “That’s exactly what we hear over and over again: ‘It’s so hard to find caregivers.’ We have invested heavily in this regard at Care Advantage. We believe we have a better mousetrap, so we are open to companies that need a little help but don’t have a lot of problems.”
At PurposeCare, a strong organizational chart and a company with ambitious growth goals are the main indicator of whether an acquisition target is a cultural fit with the company, Cordts noted.
Looking forward, HouseWorks’ M&A focus is on the Medicaid space and looking for opportunities to add ancillary services to its overall offering.
PurposeCare is paying attention to regulatory updates that could impact its business, such as the Medicaid Access Rule and the upcoming proposed home health care payment rule.
At Care Advantage, the focus remains on culture.
“It goes back to that culture — always,” Clay said. “Are you doing a great job improving your communities? Are you doing great work for your customers? If not, this probably won’t be a good fit for us as we have worked very hard to achieve the reputation and results that we do. We’re not willing to lose this for a quick win.”