Andre Ulloa, partner at M&A Healthcare Advisors, was featured in McKnights Home Care article on the current state of the economy and its effect on healthcare M&A.

“The fundamentals of home care and hospice, including an aging U.S. population and strength in the Medicare program, make the industry attractive for investors hoping to enter the space or expand their footprint in it, they say. Andre Ulloa, partner at M&A Healthcare Advisors, told McKnight’s Home Care Daily Pulse that PE buyers and many strategic corporate buyers are also flush with cash they need to deploy in the form of deals. He predicts those firms are likely to be acquirers of smaller companies, and deals could be structured a bit differently.”

Andre Ulloa, partner at M&A Healthcare Advisors

McKnights Home Care
By Diana Eastabrook

Anxiety over another interest rate hike and fears over the stability of the U.S. banking system could derail large home care and hospice deals in the short term, according to mergers and acquisitions experts.

Private equity groups, which have become big buyers in the space, typically finance deals partly with debt. However, M&A experts say it could get harder for PE buyers to finance those deals if the Federal Reserve Board continues to hike interest rates and banks tighten credit.

“At the high end of the market — let’s say transactions in the $100 million to $1 billion plus range — values have come down as capital has gotten more expensive,” Cory Mertz, managing partner at M&A advisory firm Mertz Taggart, told McKnight’s Home Care Daily Pulse. “At this end, all transactions are highly leveraged. So we’re seeing fewer large platform transactions.”

After back-to-back blockbuster years for home care and hospice deals, acquisitions fell more than 40% last year to pre-pandemic levels, according to Mertz Taggart. Now rising interest rates, which have recently caused the collapse of two U.S. banks, potentially threaten future deals. But, not all of them, according to experts.

The fundamentals of home care and hospice, including an aging U.S. population and strength in the Medicare program, make the industry attractive for investors hoping to enter the space or expand their footprint in it, they say. Andre Ulloa, partner at M&A Healthcare Advisors, told McKnight’s Home Care Daily Pulse that PE buyers and many strategic corporate buyers are also flush with cash they need to deploy in the form of deals. He predicts those firms are likely to be acquirers of smaller companies, and deals could be structured a bit differently.

“The underwriting might be a little tighter and there might be a little more scrutiny than there has been,” Ulloa added. “But I don’t think anything’s going to stop a bank from underwriting if there is a good buyer that is a good business.”

Large home care firms, including Amedisys, reaffirmed their intentions to hunt for deals in 2023. Tom Lillis, a partner with healthcare advisory firm Stoneridge Partners Strategic Consulting, told McKnight’s Home Care Daily Pulse he also expects to see M&A activity remain relatively strong for home care and hospice over the next couple of quarters. However, he admitted the prospect for deals later in the year is less certain, especially among private equity investors.

“When that money that exists now gets deployed, where is the next tranche of funds coming from,” Lillis asked. “There is so much unknown. Will they be able to raise funds?”