Mergers & Acquisitions Part 1:

Assessment and Consideration

Featuring Stephen Emeli & Julia Akinyooye

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Homecare Updates

To say the home care industry in NY is a unique landscape would be an understatement. The issues that agencies face here are unlike anything experienced throughout the rest of the country. Many state-wide and locality-based mandates are placed on home care agencies from both the DOH and the DOL. The purpose of our blog is to give companies an additional resource for information.

In recent years, a plethora of compliance guidelines has emerged. The implementation of EVV, updates to the Wage Parity Law, increases in the minimum wage, COVID vaccine protocols, and the fallout from the CDPAP RFO awards are among the top concerns for agencies operating in the state.

In our inaugural post, we focus on a topic with many discussions – Mergers & Acquisitions, a subject so big we'll need multiple months to cover it.

Things to consider before an M&A

Before you begin, there needs to be a strategy - You need to have a clear idea of what you expect to gain from making the acquisition. What will be the business purpose for acquiring the target company (e.g., gain access to new markets, clients, or further M&A's)

Let's start with an assessment of that business - You most likely will have more than one company in mind when looking for an M&A. Does it meet the criteria determined in your strategy? Will it have a synergistic approach with your current companies, or will it be an outlier? It would be best if you also considered other aspects that affect its appeal (e.g., location, customer base, or profit margins)

M&A Assessment and Diagnosis

According to a recent analysis by the AMAA Merger and Acquisition Access provided by Deal Ware, the first quarter of 2021 M and A Market reports that healthcare businesses are listed as the top three types of companies to be Merged or Acquired. The healthcare industry represents roughly 30% of M&A activity, showing tremendous opportunities, specifically in-home care.

In New York, the Department of Health announced the Consumer Direct Lead FI awardees late last week, which will shorten the amount of Consumer Direct Agencies. Out of 400 agencies that have submitted proposals, only 68 were selected to operate. The low amount of awardees will cause great movement in the M and A sector in the next few months. Whether you are considering taking this time to sell or buy a home care agency, these are the things you should consider when thinking about M and A's.

Here are some things to analyze;
1. Assessment- Analyze your company and interview the prospective company

What are we lacking? – Robust training program, Home Health Aide Training School, a leadership team with home care specific knowledge, unionized environment, resources for staff and patients, service areas/ demographics, languages served, population, type of services provided (Pediatric, IV infusion, Medicaid Waiver, Traumatic Brain injury, Concierge Care, Case Management, Medicaid Application Services, Personal Shopper, Caregiver Support Group, Incentives, Accreditations, etc.) Patient, family, and staff wellness program, referral sources and marketing team, contracts, brand recognition, mission, vision, technological advancements, and operational efficiencies.

Is the company we are trying to acquire synergistic with our needs, goals, vision, and mission?
2. Diagnosis-Gather information & Identify the problems
  • Financial cost - what range will best fit our companys' sweet spot? What revenue are we looking for?
  • Financial Liabilities- Leases, Contracts, Tax, Payroll
  • Contract Rates/Billable hours, A&R
  • Audits Example DOH Audit, Consumer Affairs, Labor, Justice
  • Law Suits/Settlements
  • Wage Parity Compliance
  • Cash Flow
  • Bank Statements
  • Tax Returns
  • Profit and Loss
  • Patient Census
  • Employee/ Salaries
  • Obtain a Valuation/ Financial Analysis
  • Brand Portfolio (marketing experiences, employee experiences, culture, patient experiences, and reviews)
  • Market Distribution Accessibility feasibility

The planning phase to be discussed in the next series of M&A's comes after a well sought out assessment and diagnosis.