Mergers and acquisitions in the home care space were trending upward as of last year. Transaction volume increased by 4.1% year over year, representing a growing interest despite challenging market conditions. Among those transactions, private strategic buyers accounted for 43.5%, and private equity add-ons accounted for 38%.
Faced with an aging population, a largely fragmented market, and a consistent interest in exploring new technologies, here are a few predictions for what the home health care acquisitions and mergers landscape will look like in 2025.
The Role of Mergers and Acquisitions in Home Healthcare
When agencies join forces through a merger or acquisition, they are able to use their resources more efficiently than ever before.
- M&A allows larger companies to buy smaller ones, slowly consolidating the market to create larger, more efficient home care agencies while reducing market competition.
- The acquiring company absorbs the agency’s capabilities, allowing it to quickly scale its services and expand its reach.
- Consolidation through M&A can make companies more attractive to investors by demonstrating growth and the potential for higher returns.
- By merging, companies can pool their resources to collectively address staffing issues in the home care industry.
Market Dynamics and Investor Interest
Investors love a burgeoning market, and home care is ripe for the picking.
Robust Unmet Demand
The number of Americans ages 65 and older is projected to increase from 58 million in 2022 to 82 million by 2050, representing a 47% jump. More than ever, at-home and non-medical care will be in high demand, especially given this population’s overwhelming preference for aging in place. As a result, home healthcare agencies will need to meet the rising demand by delivering the highest quality care to their clients.
Technology Adoption
Technology plays a major role in attracting investors. The integration of technology in home care, like Artificial Intelligence (AI), is appealing to investors as it helps agencies analyze client data to identify patterns, predict potential health risks, and provide caregivers with real-time insights to deliver personalized and proactive care. Furthermore, it helps to reduce hospitalizations while increasing the quality of care provided. This technology helps improve outcomes and ensures clients receive more tailored, efficient care that addresses their individual needs.
This technology helps improve outcomes and ensures clients receive more tailored, efficient care that addresses their individual needs, leading to better home health care recommendations.
The Current Buyer Landscape
In the home care market, two primary types of buyers are active in agency acquisitions: private strategic buyers and private equity firms. The former is typically an established home care organization that wants to expand its reach, client base, or service offering; they absorb the acquired agency or agencies directly into their existing operational flows.
Private equity firms, on the other hand, are not service providers. They purchase home care companies – often multiple at a time – as investments. They may choose to sell one or more of their acquired agencies at a later date if they believe it will be a profitable transaction.
Challenges Impacting M&A
M&A activity in the home healthcare sector faces several key challenges. Investors are looking to acquire businesses in excellent standing, but workforce shortages are leaving many agencies in a bind. If they are unable to effectively recruit and retain staff, their appeal will be diminished in buyers’ eyes, signaling to the market that they may not be viable long-term.
Buyers will also be looking for a “sure bet,” but regulatory uncertainty can make home care an unpredictable sector. Potential changes to healthcare regulations, including reimbursement rates and labor laws, may leave investors feeling wary about profitability or operational issues down the line.
Emerging Trends and Opportunities
Despite these challenges, there are plenty of advancements that make home care M&A an attractive prospect. New advancements in technology – including telemedicine, Remote Patient Monitoring (RPM), Electronic Health Records (EHRs), AI-driven solutions, and more – present new opportunities for integration.
What’s more, the aging population across the United States is poised to substantially increase demand for home care services, combined with a growing focus on palliative care. With the proportion of Americans 65 or older expected to increase by 47% by 2050, and 77% of older adults favoring at-home care, investors are sure to take notice.
Cross-Market Acquisitions
Health systems are increasingly engaging in cross-market M&A to diversify their home health care recommendations and strengthen their portfolios. Acquiring cross-market businesses is the most straightforward way to expand their service offerings, helping them seamlessly achieve greater scale.
Technology-Driven Acquisitions
Buyers are targeting companies with advanced technology, such as telehealth, AI, and remote patient monitoring. These innovative features help improve care outcomes while reducing costs and optimizing business operations, allowing for more personalized home health care recommendations.
Future Outlook
According to a recent study commissioned by AxisCare and conducted by Leading Home Care … a Tweed Jeffries company, many of the country’s top agencies view acquiring other companies as a significant opportunity for growth: 42% say it will be a top priority over the next five years.
As the industry’s focus continues to pivot towards tech-enabled solutions, investor interest will rise along with the tide. Integrating touch points like telemedicine, remote monitoring, and point-of-care platforms into complete service offerings will enable more comprehensive care while simplifying operations, creating the ideal environment for growth and scaling efforts.
So, as agencies prepare to shuffle consolidation towards the top of their priority pile, the conditions have been set for larger agencies and investors to meet them where they are.
Prepare Your Agency for 2025 With AxisCare
With every merger and acquisition comes a need to onboard and upskill staff members from the acquired agency. It is therefore imperative for investors and top-level organizations to have a strong employee management system in place – one that is efficient, comprehensive, and most importantly, repeatable.
AxisCare is a home care management platform designed to help agencies streamline every aspect of their operations, including onboarding. Want to learn more? Request a free demo.
