Stephen M. Monroe, Partner
Kathy Hammell, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
Volume Of Home Health Care Mergers And Acquisitions Suffers First Decline In Four Years According to Irving Levin Associates, Inc.
(August 26, 1998-New Canaan, Connecticut) Up until this past year, the home health care industry had been one of the fastest growing segments of the health care market, resulting in an unprecedented level of consolidation among home health care providers. With cutbacks in Medicare reimbursement, combined with numerous investigations into alleged fraudulent billing practices, investors and consolidators slowed their pace of acquisitions, according to The Home Health Care Acquisition Report, Third Edition. For the 12-month period ended June 30, 1998, there were 111 publicly announced mergers and acquisitions of home health care companies, representing a decline of 20.7% from the previous 12-month period record of 140 transactions.

“Although the number of transactions remained relatively high, the regulatory uncertainty in the home health care industry certainly had an impact on the volume of activity,” according to Stephen M. Monroe, a partner at Irving Levin Associates, Inc., publisher of the report. “When historical financial statements begin to lose their meaning because of reimbursement changes, it makes acquirers much more hesitant in today’s acquisition market,” according to Mr. Monroe.
The acquisition market was again dominated by a few large buyers. American HomePatient led the group with 21 announced transactions, followed by Integrated Health Services with 19 deals. The top four acquirers, which also included Pediatric Services of America and AMEDISYS, were involved in just over 50% of the transactions in the 12-month period ended June 30, 1998.
Despite the uncertainty in the market, many of the large consolidators are continuing their efforts to expand. Even though the company has indicated that it may spin-off much of its home health operations, Integrated Health Services more than doubled the number of its acquisitions in the most recent 12-month period. “The companies with liquidity and adequate bank lines are the ones that are able to take advantage of some of the pricing weakness that is becoming more apparent in the market,” according to Mr. Monroe. “The flip side of that argument is that many potential sellers are sitting on the sidelines until some of the uncertainty clears up. It is inevitable, however, that with nearly 70% of the publicly traded home health care companies trading at less than $5 per share, and with five of them below $1 per share, there is going to be significant consolidation among these companies over the next 12 months.”
The Home Health Care Acquisition Report, Third Edition, is updated annually and is approximately 80 pages. The Report combines a four-year trend analysis of the acquisition market with hard to find information on all of the publicly announced transactions that occurred in the 12-month period ended June 30, 1998. Irving Levin Associates, Inc. is the premier research and publishing firm tracking merger and acquisition activity in the health care and seniors housing markets. To purchase the report please call (800) 248-1668.
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