The SeniorCare Investor: The Death of the Big Deal

 
2008 M&A Dollar Volume Will Be The Lowest Since 2002
 

The seniors housing and care merger and acquisition market, which had been steadily growing in volume since 2001, hit a peak in 2006 with more than $22.6 billion of announced transactions before tapering off to "just" $16.6 billion in 2007. The 2006 figure was almost four times the dollar value of the deals announced in the four years combined from 1999 to 2002. To put it into some historical perspective, the combined dollar value for 2006 and 2007 ($39.2 billion) is almost equal to the dollar value for the 10 previous years combined. Obviously, the majority of this dollar volume in 2006 and 2007 came from several of the large corporate transactions, such as the sale of Manor Care, Holiday Retirement and Genesis Healthcare, among others. In the absence of those large transactions, the dollar volume in 2008 is expected to be close to $1.5 billion (still doing the tallying), which is right around the annual average for that 1999 to 2002 period. This is not a coincidence. In the last downturn, financing dried up and investors turned elsewhere amid a financial collapse in both the assisted living and skilled nursing sectors. No one knew how long it would take to recover from the many bankruptcy filings, empty or near-empty buildings and business plans that would have to be re-written. The one certain thing was that the business was not going to go away, and savvy investors took advantage of the market disconnect in place at the time and started buying properties at nice discounts at a time when new development came to a virtual halt. Sound familiar? The difference this time is that the industry is in much better financial and operational shape, and the number of distressed sales is still relatively low, although that could change in the next 12 months.