On the buyer side, that due diligence includes checks around financials, compliance and a whole lot of other numbers.

But one factor that can fly under the radar is employee tenure.

“Tenure is a very important factor in our decision-making process as we evaluate potential partners to become part of our Help at Home family,” Rich Tinsley, chief development officer of Help at Home, told Home Health Care News. “We value long-tenured employees at every level of an organization. Tenure definitely makes the acquisition more attractive to us.”

Home-based care leaders told HHCN that a company’s workforce — and collective experience and dedication — is playing an even larger role these days in M&A.

Employee tenure – both at the caregiver and back-office level – can be an indicator of a company’s stability, resilience and positive culture.

Based in Chicago, Help at Home has more than 180 branch locations across 12 states. It provides personal care services to more than 66,000 clients via more than 53,000 caregivers.

“Our company has an average client and caregiver relationship of 4-plus years, which is reflective of the importance that we place on tenure,” Tinsley said. “We focus on like-minded organizations that place the same amount of importance we do on supporting the caregiver. It’s a win-win at the end of the day, when you have purpose-driven and supported caregivers doing their very best to care for their clients.”

Culture isn’t something that is necessarily quantifiable, however. That’s what makes M&A deals so risky in certain situations. Tenure, however, can be a data point for buyers to look into.

“Strong tenure is an indication that there is a strong culture,” Kris Novak, managing director of home health, hospice, home care and pediatrics at The Braff Group, told HHCN. “It tells me that your staff is dedicated and committed. If they’ve stayed for a long time, clearly they’re aligned on what the mission of the organization is. Given what we do in home care, home health, hospice, pediatrics — the greatest asset is the people.”

The Braff Group is an M&A advisory firm that specializes in senior care dealmaking.

Before joining the firm earlier this year, Novak was the vice president of mergers and acquisitions at the Baton Rouge, Louisiana-based Amedisys Inc. (Nasdaq: AMED).

With his background, Novak has intimate experience talking to providers about culture and quantifying the value of a well-run organization. If the people are staying on longer more often than not, that could lead to growth and is a very attractive attribute for a buyer.

“If you have employees saying that they feel like they have meaningful work, are being developed and feel appreciated — in this labor environment — that’s critical,” Novak said. “The demand for services right now is clearly very strong. All organizations are struggling from a labor perspective and so that’s your biggest lever for organic growth: having clinicians that can take care of more patients.”

Good culture fit

Tinsley said that in his experience, tenure and compliance track records are two good indicators that caregivers and care supervisors will remain with Help at Home beyond an acquisition.

“That’s key for us,” he said. “We want to manage the cultural integration strategy so that it ensures a smooth transition from the two cultures to one cohesive culture that enables our employees to thrive. We believe that the caregiver-first mindset is the key to success. If that is woven into the company’s culture, it’s a great match for us.”

There is so much unknown that goes into deals. So, if a buyer can feel more confident in the culture fit before a deal is finalized, it makes a world of difference.

“When I get a deal book and an [agency] is highlighting how long their employees have been there, I immediately think, ‘This sounds like I’m going to be stepping into something that has a recipe for success,’” Avid Health at Home CEO Jen Lentz told HHCN. “Any company who values their length of employment — whether it’s office or field staff — means that they are looking at culture and that people want to stay there.”

Avid Health at Home is a home care platform created in conjunction with the acquisition of For Papa’s Sake Home Care by private equity firm Havencrest Capital Management.

Improved outcomes

Tenure isn’t just about retention, it’s also about the care that’s being provided.

“There’s always been a correlation between tenured staff and the quality of patient care that’s delivered,” Novak said. “Obviously there’s efficiency there because they’ve done it for a long time and they’re able to be really productive from a financial perspective. But even more importantly, typically a tenured clinician is providing excellent care. That’s going to lead to higher STAR ratings and better patient satisfaction.”

With all of those elements coming together, providers are able to tell better stories to referral sources, Novak added.

The importance of tenure is different based on the organization and based on the type of worker, too.

“Caregivers and the supervisors at the branch levels — those who touch the clients — are most important in smaller acquisitions,” Tinsley said. “As prospective acquisitions get larger, the branch administration and regional leadership tenure start to play a larger factor in a successful change management execution.”

That’s why, for providers looking to sell in the near- or long-term, it’s important to keep track of tenure and be as self-aware as possible about delegation and the hierarchy.

The post Why Employee Tenure Can Make Or Break A Home-Based Care Deal appeared first on Home Health Care News.

Generally, healthy relationships – ones where there’s “give and take” – lead to growth and success. Poor relationships between those two parties, on the other hand, tend to lead to undesirable outcomes.

“Private equity has a really powerful place within our space to offer some assets to an organization like mine,” Family Resource Home Care CEO Jeff Wiberg said on a panel at Home Health Care News’ FUTURE conference last month. “PE has allowed us to have plenty of dry powder to be able to continue to do what we want to be able to do.”

Backed by Great Point Partners, Family Resource Home Care is one of the largest independent personal care companies in the Pacific Northwest. The company’s services include personal care, medication management, meal preparation, housekeeping, companionship, dementia support and end-of-life, transitional and respite care.

Over the past few years, Family Resource Home Care has continued to expand its geographic footprint across the Pacific Northwest.

Most recently, the company acquired Companion Care Inc., a home care agency that bolstered Family Resource Home Care’s footprint to seven locations in the Puget Sound region and to 29 total across Idaho, Oregon and Washington.

Wiberg has a unique perspective on the relationship between agency and PE firm. He’s worked in PE and is now at the helm of a growing provider.

“My honest experience has been that you’re constantly having to re-educate the private equity team to make sure that they understand that — in spite of the fact that they think they know how to run a business — really the expertise is still with the executive team,” Wiberg said. “So you have to manage through that dynamic a bit.”

Someone else who has toed that line delicately as of late is Jen Lentz, an operating partner of Havencrest Capital Management and the CEO of its new home care platform, Avid Health at Home.

“I’m an operator by trade,” Lentz said during the panel. “When you start thinking about looking at private equity, … it is so important to take a step back, know your own limits and know what you can really offer before finding a true partner.”

Havencrest Capital Management is a health care-focused private equity fund with about $600 million of assets under management. The company’s strategic approach is to partner with founder-owned health care companies with EBITDA between $3 million and $15 million.

Because of her background in home care – she was previously at Premier Home Health Care – Lentz said she has developed a knack for knowing who she wants to be in business with from the jump.

“I had met a lot of folks in that space in my former life and I would know from the start that this was somebody that I could work with,” Lentz said. “It’s not for the faint of heart. It’s very entertaining. And it’s a lot of fun because you do have the ability to have a thesis, have a strategy and then go execute it. Whether that’s through interior investment or an aggressive M&A rollup, it’s a lot of fun.”

Getting PE backing

There’s a push and pull that exists in PE firm-agency relationships. It’s up to both sides to agree on a long-term strategy and to have an open dialogue throughout the process, before and after an investment.

It’s also important for both sides to have realistic expectations.

“Eighteen months ago, we would come into these conversations where maybe someone sold too late or had an inflated view of what we thought they might be,” Will Davis, regional director of origination at The Riverside Company, said during the panel. “If we had proposed things like earnouts, or some sort of a structured scenario which reduced their upfront proceeds, we got thrown out of the room. But the market has moderated a bit and the buyers and sellers are coming a bit closer together.”

Riverside’s portfolio includes Best Life Brands, a holding company for home-based care franchise companies like ComForCare and Boost Home Healthcare.

Davis said Riverside is actively looking for more partners and that it has capital to deploy. Provider leadership being willing to wait on their earnings tends to help the dealmaking process, he said.

“In some cases, the sellers and their advisors are suggesting those structured scenarios before we are, which is good,” Davis said. “I think because of that, we’ll see an uptick in activity, and a steady rate environment is going to help that. I think we have a better sense of rates being in a narrower range, and that will help those using leverage coming in.”

Backended earnings requires a successful relationship while the PE firm is involved, though.

Productive relationships are what gets both parties from the start line to the finish.

“I think the juice is worth the squeeze,” Wiberg said. “There’s a lot of expertise in financial analytics, KPI analytics and so forth. You’re equipping yourself to make more informed choices. I mentioned the dry powder and having the ability to continue to grow — that’s nice to have, but partnering is not for the faint of heart. There’s a lot of rigor involved. If you’re ready for that rigor, then it can be very beneficial. If you’re not, it can drive you insane.”

The post What Makes A PE Firm-Home Care Provider Relationship Successful appeared first on Home Health Care News.

The company was first unveiled in early August. It was created in conjunction with Havencrest’s acquisition of For Papa’s Sake Home Care, which is a personal home care provider in the Chicagoland area.

Avid Health at Home is an example of a platform creation, an increasingly popular way for private equity companies to get into home-based care without significant risk.

Tabbed to lead Avid Health at Home is Havencrest Operating Partner Jennifer Lentz, who will serve as Avid Health at Home’s CEO. Lentz was a longtime veteran of Premier Home Health Care Services, where she worked her way up to COO.

“I just believe home care has got such a tremendous future in U.S. health care delivery,” Lentz told Home Health Care News. “It feels fantastic to be able to lead a team of qualified, amazing individuals that I am starting to get to know really well. I’m excited about the opportunity and really thrilled to continue to take care of our seniors.”

While Havencrest did look at larger companies to acquire as the foundation of the new venture, For Papa’s Home Care ultimately made the most sense given its size and quality, Lentz told Home Health Care News.

“What we found was that it would be harder to go in and really change [things], when it comes to being tech-enabled, when it comes to best practices and policies,” she said. “We weren’t really too excited about some of the things we had looked at. So we opted to pivot and go for the platform, looking for smaller, quality agencies – that really have a unique perspective on the communities that they serve – to bring them up into the larger entity.”

Part of the reasoning behind acquiring a smaller agency at first, and then expanding, is that Lentz and her team did want to build a new type of home care provider.

They want Avid Health at Home to be tech- and data-driven, first and foremost.

“Data transmission from the home being first and foremost,” Lentz said. “We want to be really looking at what’s happening with our clients in their homes, and then be able to leverage that.”

In the future, the company wants to work with home health and hospice providers to help curb readmissions and ED utilization.

Proving its capabilities – for provider and payer partnerships – is front of mind from Day One, Lentz said.

Next, however, is M&A. The company is looking to “aggressively roll up acquisitions.” Those transactions could take place anywhere – but sights are set on the Midwest, Mid-Atlantic and Mountain West regions.

Another consideration is the self-directed or family caregiver model that’s gaining more popularity in the U.S. Lentz sees that as an area that home care providers will have to be proficient in moving forward.

“I think it’s critical for a home care company to consider it as a revenue stream, and as a part of your service delivery model,” she said. “You have to be both, you have to be able to balance out, because people are going to need you whether you have an agency staff member or whether you’re helping to support a family member under the Medicaid program.”

The post The PE-Backed Avid Health at Home Has Lofty Goals From The Get-Go appeared first on Home Health Care News.

Private equity investment remains down in health care services. But the firms active in home-based care will likely have a major impact on the industry in the near future.

The decisions those firms make – while entering or exiting – will have a lasting impact.

In the second quarter, there were 164 PE deals across health care services in the U.S., which is the lowest mark since the second quarter of 2020, according to PitchBook’s health care services report, released this week.

“It was a bigger drop than expected in terms of deal activity,” Rebecca Springer, lead health care analyst at PitchBook, told me. “I thought that we had probably hit close to the bottom in Q1, but then we dropped over 20%.”

Private equity dealmaking has been affected by higher inflation and the subsequent higher interest rates. While inflation is easing, interest rates have not yet followed.

Because of that, the home care, home health and hospice M&A environment has been affected in multiple ways. Some of the dominoes have already fallen, while others could fall any time now.

Firstly, different types of transactions are getting done. Private equity firms are opting to go ahead with “platform deals” to get into home-based care.

At the same time, there are multiple, massive PE investments that have nearly run their course. When they officially do – and PE firms exit their current positions – the home health market could look a lot different.

In this week’s members-only, exclusive HHCN+ Update, I break down the macro PE trends – and explain how they could shake up the broader home-based care market for years to come.

PE dominoes waiting to fall

There are multiple large PE investments that have nearly run their course.

– Elara Caring is backed by Blue Wolf Capital Partners and Kelso & Company, the latter of which joined in 2018.

– Advent International acquired AccentCare in May of 2019.

– Looking further down the road, The Vistria Group and Centerbridge Partners backed the large home- and community-based services provider Help at Home in October of 2020.

– Wellspring Capital Management acquired Interim HealthCare’s parent company – Caring Brands International – in October of 2021.

All of these companies are top home-based care providers in the country.

It’s likely Blue Wolf Capital Partners and Kelso & Company are looking to exit their investment in Elara Caring sooner rather than later.

“The bank loan market is slowly improving, but it’s still a shadow of what it previously was,” Springer said. “There needs to be better access to finance some of those bigger deals. Also, the health of those older platforms is going to be pretty varied. Some are in a good position to exit; some are really not, given the current interest rate environment.”

While they have to eventually exit their investments, those PE firms also have to do so at an advantageous time, Springer said.

“I would expect that those that are not in such a good position are going to be holding on for longer,” she said. “Then, once platforms start trading, sponsors are going to be looking at what else is in the market and trying to time exits. They’re already working with multiples that are a couple turns lower than what they would have gotten in previous years.”

If they hold on too long, though, they run the risk of hurting both their internal rate of return and their fundraising on future deals.

An extension is usually available at the end of an investment, but lenders generally don’t like to see that extension realized.

“In the past couple of years, continuation funds have primarily been used for really good assets, strong assets that they want to hold onto and continue growing,” Springer said. “But in times past, … they were used to hold onto assets that have really underperformed. Generally, lenders don’t like that, and aren’t going to be supportive. But technically, it’s something you can do.”

In the end, this puts PE firms in a precarious position. AccentCare and Elara Caring are two large, solid home-based care companies.

The largest independent home health companies have been dropping like flies over the last couple of years. Humana Inc. (NYSE: HUM) acquired Kindred at Home. UnitedHealth Group’s (NYSE: UNH) Optum acquired LHC Group and is now in the process of acquiring Amedisys Inc. (Nasdaq: AMED).

Enhabit Inc. (NYSE: EHAB) announced last week that it was exploring the launch of a strategic alternatives process, which could ultimately end up in a sale.

If Enhabit is on the market, there could be one fewer buyer around to bid on the likes of Elara Caring or AccentCare. If it’s not another private equity group coming into the mix to buy those assets, it could be a managed care company.

Managed care companies – like Humana and UnitedHealth Group – have become a new group of buyers for home health assets in the last half decade.

“I think, for most private equity firms, they’re an exit opportunity,” Springer said. “Vertical payer-provider integration is not just Optum, it’s everyone. It’s just the direction that the industry is going. So, private equity has to focus on building assets that are attractive to those buyers.”

More managed care involvement in home health care specifically could cause trouble. If payers have significant in-house capabilities, they may be less likely to bend the knee and increase rates for small- to mid-sized providers.

At the same time, some home health insiders have suggested that managed care companies becoming aligned with industry advocacy efforts could be of benefit in the future.

Smaller ‘platform deals’

Despite a dip in activity, PE firms are continuing to invest in home-based care, albeit in a slightly different way.

A couple have already launched their own “platform companies,” which tend to be cheaper and less risky investments.

Havencrest Capital Management officially launched Avid Health at Home last week, and Waud Capital recently put $100 million behind the post-acute veteran Steve Jakubcanin to do the same.

“For as long as platform trades are quiet, this is one of the primary ways that firms are going to be deploying capital in this market,” Springer said.

PE firms continuing to take advantage of this opportunity would prove that it’s the macro headwinds – and not necessarily the micro ones within home health or home care – that are affecting deal flow.

The first and second quarters have also been relatively quiet in the home care, home health and hospice markets from an M&A perspective.

“There are advantages of small platform creation,” Springer said. “It can be a proprietary deal sourcing process, so you can get a better entry multiple. The group is not already leveraged, so you’re not dealing with that issue in the high rate environment. You can start out with low leverage and position it to be able to grow pretty significantly. And, it’s just less capital to deploy in a slightly riskier environment.”

As for Avid Health at Home, it’s starting local in Chicago. It launched in tandem with Havencrest’s acquisition of For Papa’s Sake Home Care, but plans to scale quickly – in the Midwest, in the Mid-Atlantic and in the Mountain West geographies.

Avid Health at Home CEO Jen Lentz told me that Havencrest did look at more “sizable” deals at first, but ultimately felt like going that route would be more complicated.

“What we found was that it would be harder to go in and really change [things], when it comes to being tech-enabled, when it comes to best practices and policies,” she said. “We weren’t really too excited about some of the things we had looked at. So we opted to pivot and go for the platform, looking for smaller, quality agencies – that really have a unique perspective on the communities that they serve – to bring them up into the larger entity.”

The post Next Wave Of Home-Based Care Private Equity Activity Could Shape Market For Years appeared first on Home Health Care News.

The new company will be dubbed “Avid Health at Home,” and Havencrest Operating Partner Jen Lentz will be the CEO.

“We are very excited about the creation of Avid as well as our partnership with FPS,” Christopher W. Kersey, founding managing partner of Havencrest, said in a statement. “With Jen’s leadership and her successful operating track record in the post-acute care marketspace, our investment in FPS represents a strategic entry point into home care and will allow Avid to establish market leadership and expand access to quality care for patients across the Chicago market.”

Based in Dallas, Havencrest is a health care-focused private equity fund with about $600 million of assets under management. The company’s strategic approach is to partner with founder-owned health care companies with EBITDA between $3 million and $15 million.

For Papa’s Sake Home Care fits the bill. Founded in 2011, the company provides home care services to the broader Chicagoland area.

“At Avid, our goal is to establish a platform that provides quality person-to-person care that leverages industry best practices as well as innovative technology,” Lentz said in a statement. “Havencrest is the catalyst to achieve that goal through our shared vision of expanding the critical role that home care plays in the larger health care delivery system.”

The plan is to begin expanding immediately. Avid is “actively exploring new acquisition opportunities” across the Midwest, Mid-Atlantic and Mountain West geographies.

Ultimately, Avid hopes to be a successful home care platform, but also a disrupter.

“We believe there is significant opportunity to innovate in home care through a focus on technology, training and quality measures,” Jett Aubrey, principal of Havencrest, said in a statement. “Home care is increasingly demanding a bigger seat at the post-acute table, and we believe that Avid is positioned to be that provider of choice for patients, providers and payers.”

Private equity involvement in home-based care has slowed of late due to macro economic factors.

But the platform formula – where PE firms hand the keys to an in-house leader – is an emerging trend.

Waud Capital recently put $100 million behind two home-based care veterans to build a home-based care company, for instance. 

“Models like that, which are going to allow firms to take advantage of a little bit better pricing on smaller agencies, while still putting capital to work without having to do big platform deals – we’re going to see a lot of that,” Rebecca Springer, senior health care analyst at Pitchbook, told HHCN in February.

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