Despite experts pointing to a “laggard” in health care deals this year, a recent analysis from advisory, tax and surety firm Baker Tilly shows that long-term care mergers and acquisitions will surpass other businesses in the first half of 2024. It is said that it surpassed the field. .
“While the report shows that senior care itself is experiencing a decline in deal volume, the first six months of this year were on the decline compared to last year,” said Michael Demers, managing director at Baker Tilly Capital LLC. The number of cases has increased in comparison.” Baker Tilly's private investment banking subsidiary told McKnight's Business Daily on Wednesday. The group said it helped write the report.
Mergers and acquisitions involving senior living communities and skilled nursing facilities set a new quarterly record with 183 deals announced in the second quarter of 2024, according to data released by LevinPro LTC in July. The number of mergers and transactions in the second quarter was 21% higher than the 151 deals recorded in the first quarter of 2024 and 49% higher than the 123 deals recorded in the second quarter of 2023.
Assisted living communities accounted for 45% of M&A deals in the second quarter, followed by skilled nursing facilities at 35%, according to the data.
Devers said there are a lot of heartbreaking sales happening in long-term care settings.
“Reimbursement rates are not very high in certain states, and (long-term care) has been struggling since COVID-19. The financial situation hasn't really improved and they've done their best to try and get by. But I couldn't,” Devers said. “So you're seeing sales happening in the first half of the year where they just gave up, threw in the towel and made a deal.”
As an example, independent operators may not be making as much money, even if they have favorable reimbursement conditions, because expenses weigh on profitability, he said. As it becomes more difficult for operators to survive as independent, standalone facilities, it may make sense to partner with a larger provider, he said.
Jennifer Schwalm, head of Baker Tilly's healthcare senior services business, works primarily on the nonprofit side of long-term care, and she said she's seeing similar trends.
“That's the pressure in long-term care, and it's not just nursing homes or memory support,” Schwalm said, noting that much of her work involves continuing care retirement/life plan communities.
He said the nonprofit sector is more about partnerships than acquisitions, and businesses are looking for the right partner to combine their missions and resources.
“I think at the end of the day, it's all about sustainability and how we can continue to be sustainable as an organization. That really drives some of the decisions we make.” Schwalm said.
Demers said he expects transactions to follow roughly the same trend throughout the second half of the year.
“It's even more difficult to be a small, independent operator or facility. I think you need scale to be more effective,” he said.
