At a time when the Biden administration stated its intent to limit private equity ownership and its “particularly dangerous model” in the skilled nursing space, it appears private equity is driving mergers and acquisition activity in long-term care.
That’s according to a report from professional services firm CliftonLarsonAllen (CLA), which showed that dealmaking rebounded toward the end of 2020 and stayed hot through 2021, led by private buyers and private equity.
“Private buyers reflecting private equity and strategic buyers are driving the M&A environment due in part to record levels of capital raised, representing nearly 80% of the buying market,” Jed Cheney, CLA principal, wrote in the report.
Long-term care accounted for 403 deals out of 1,094 total in 2021 compared to 325 deals out of 826 total in 2020.
The long-term care segment includes independent living communities and active adult, assisted living and memory care communities, life plan communities and skilled nursing facilities.
Geographically, the deals had the highest concentration throughout the Sun Belt region and California.
Volumes in the long-term care segment were back to “historically high levels,” according to the report, with the highest per unit/bed levels seen in years.
A nursing home deal in Louisiana that occurred in October was reportedly the highest ever seen in the history of the state at $159,000 per bed, or $30 million for the 189-bed facility.
These valuations are occurring while occupancy remains at historically low levels, particularly in the SNF market.
Cheney felt this may signal confidence in the market, though it is mostly driven by private buyers. Private buyers led the way in deal activity for long-term care in 2021 with 62 deals compared to nine for public buyers and seven for nonprofits.
The report described it as somewhat of an “inverse relationship”, which others in the skilled space have alluded to in the past, as shrinking margins and declining income capitalization rates have done little to lower SNF valuations.
The report also showed home health and hospice have seen some of the highest recorded valuation multiples in health care services.
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