Once again, NYS has created another potential financial obstacle for Home Care agencies. A recent proposal would raise the pay for home care workers to 106% of the minimum wage by 4/1/2021 and 112% by 10/1/2021. The wage parity rates could also increase from $4.09 to $4.27 per hour in NYC/5 Boros and from $3.22 to $3.38 in Long Island/Westchester. Another floating proposal suggests increasing home care workers' pay to 150% of the minimum wage.
While these attempts are noble in their intentions, the matter's reality is much different for agencies. The plethora of new laws to comply with can bear a tremendous burden on an agency's bottom line. Math is always dependable, and the math doesn't add up. There was a time when fighting with MTLC's for higher reimbursements was the worst-case scenario for home care agencies. The new fight is much bigger, more expensive, and time-consuming.
However, similar to other legislation that withered away after overwhelming legal opposition, some proposals may never become enacted. The day-to-day inconclusive matters revolving around the home care industry continue to mount. We will continue to follow them and provides updates, both here and on our social media platforms.
M&A's Part 2: Smart Planning
Planning an acquisition - Once you have contacted the business or businesses that have met your criteria (identified in part one of this M & A series), you can plan your approach accordingly. You will begin to analyze the data and assess how this business has performed on its own. Then you will explore by projecting how it will function as an M&A within your company.
These factors have a significant impact on what the next steps will be:
Will you move forward on making an offer?
Will you adjust a predetermined offer due to what your analysis identifies?
How flexible will you be during the negotiations?
Making an Offer
In planning, there are many things to consider when making an offer. Ensuring you have carefully reviewed the business's financial transactions thoroughly and have all the information necessary to make an informed decision is ideal. Some of the financial transactions can include:
- Financial health history and 3-year projections (trends)
- Specific assets being sold (with each respective financial analysis)
- Other businesses listing with similar business models (comparisons)
- Business debt/contracts rates, obligations
- Financial Analysis and valuation – done by an outside consultant or accounting firm
Considerations for you to take in today's market
PPP loan - During the age of the Covid-19 pandemic with regards to Payment Protection Loans, it is important to understand how the purchase/acquisition will impact the PPP loan forgiveness process. Legal provisions may be made and should be considered accordingly. Contacting an Attorney who specializes in the sale of your specific type of business is essential to understanding the full implications of your business transaction.
Importance of seeking Legal Counsel - If you are a first-time buyer, it is pertinent to retain a legal advice lawyer. Skipping out on this step-in planning can cause later issues and even possibly hurt your deal altogether. Lawyers specialize in different areas, so be sure to retain a lawyer that has specific experience with Licensed Home Care Agencies. LHCSA's have specific rules and regulations on how mergers and acquisitions can be handled on the Department of Health's state level. To avoid issues and denials, an experienced lawyer will help make this transition as smooth as possible.
Will you make an offer?
Will it be competitive with today's market?
Will this business valuation decrease during your negotiations?
Are there changes in the industry approaching?
What is the likeness of this offer going through?
Serious buyers must move swift on such dealings. If you come across a good deal that works for your mission, and goals give serious thought to a solid offer. Leave room for the unexpected and negotiations. Plan on what you will need to pull this offer off (cash flow/operating expenses when you take over management) resources, legal advisory, internal team.
The deal can take one month to several months depending on how fast or slow the parties involved move, assets being purchased, challenges, etc. As you may know, industry changes occur in the home care sector, causing fluctuations in the market, which may make this a great time to buy or sell. Stay abreast on these changes included the enacted budget set for April 1, 2021, which will impact M and A's, especially in New York state, as the MRT solidifies and directs its initiatives and recommendations.