PE-Owned Hospice Giant Compassus Reportedly Considering a Sale

Private equity-backed Compassus could soon be up for sale, according to a Jan. 8 report from PE Hub.

PE Hub cited “three people familiar with the matter” for its article, which claims Compassus has tapped an advisor from Jefferies Financial Group to help the company prepare for an upcoming sales process.

Jefferies had no comment for Home Health Care News, while Compassus had not provided any comments at the time of publication.

Owned by Audax Group and Formation Capital, Brentwood, Tennessee-based Compassus is one of the nation’s largest providers of hospice care services, with more than 140 locations across 30 states.

The hospice landscape has become increasingly attractive in recent years, with hospice demand and valuations — which routinely are running to double-digit EBITDA multiples — at an all time high.

Additionally, the industry has seen a modest increase in PE deals, up from 28 in 2017 to 38 in 2018, according to proprietary data from M&A advisory firm Mertz Taggart. In fact, lack of quality hospices on the market is primarily to blame for that uptick not being higher, according to Cory Mertz, managing partner of Mertz Taggart.

While he doesn’t have any information on Compassus, Mertz says now is as good a time as any for a sale.

“In the case of Compassus, Audax Group and Formation Capital bought the company in December 2014, so they’ve held this asset for four years, which is right in the holding period ‘sweet spot’ for private equity,” he told Home Health Care News. “It will likely sell to either another private equity group, who will have the mandate to grow it via acquisition, or a strategic buyer with a strong home health presence, likely sharing some of the same geographic footprint.”

Last year, Home Health Care News reported that two PE-owned companies — BrightSpring Health, formerly known as ResCare, and Civitas Solutions Inc. (NYSE: CIVI) — were rumored to be for sale. In both cases, speculation ultimately proved to be true.

BrightSpring announced plans to merge with pharmacy company PharMerica in December 2018. Also that month, Civitas entered into an agreement to be acquired by funds advised by Centerbridge Partners L.P.