The SeniorCare Investor: Near Record M&A Market--

Two Large SNF Acquisitions Close Out 2011 With A Bang

 

Despite the economy, the housing market, federal and state deficits, sovereign debt problems, reimbursement cuts and anything else you want to throw in there, the seniors housing and care merger and acquisition market had its best showing since the peak in the market back in the 2006-2007 period, both in terms of the number of publicly announced transactions as well as the dollar volume of those transactions (deals announced in 2010 but closed in 2011 are counted as 2010 deals for these purposes). 

The final results are not in yet, but in terms of number of publicly announced transactions the total should be close to 150, which will edge out 2006 (146) and be the most active year since the late 1990s. The first three quarters of 2011 (118 deals) had already bested each of the full years 2008 through 2010, but that was to be expected given the Great Recession and the capital constraints in the market during those three years.  The total dollar volume in 2011 will be over $16 billion and very close to the dollar volume in 2007 ($16.6 billion), but still far below the $22.6 billion record in 2006.  In all four years when there have been $10 billion or more in announced transactions (2006, 2007, 2010 and 2011), the results have been skewed by at least a few large, multi-billion dollar transactions. 

In both 2010 and 2011 the activity by the REITs has propelled the dollar volume, and while still active, they have quieted down somewhat since the first half of 2011.  The REITs have obviously benefited from their low cost of capital, but with borrowing costs for almost everyone else at historic lows, it has been much easier to justify transactions, and much easier to justify some higher prices, which has resulted in the increase in higher quality properties in the market─a welcome development for many buyers throughout the year.

There have, of course, been some hiccups in the market, most notably the Medicare reimbursement cuts for skilled nursing facilities and the financial troubles of many CCRCs.  While it may cause a dip in transaction volume for the former, not to mention lower prices, we should see an increasing number of CCRCs sold in 2012, but it won’t be pretty...Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today