Global private equity firm Advent International has entered a definitive agreement to acquire AccentCare from its current PE-backer, Oak Hill Partners.
Financial terms were not disclosed.
The acquisition is one of six home health PE deals announced so far this year, with fewer industry deals happening at a slower pace than in years past. In 2017, there were 28 PE deals in the space, followed by another 58 in 2018, according to the latest proprietary data from M&A advisory firm Mertz Taggart.
AccentCare is a post-acute provider with a presence in more than 175 markets across 16 states. The Dallas-based company offers a number of service lines, including but not limited to non-medical personal care, rehabilitative therapy and hospice services. It’s also the sixth largest home health provider and the third largest personal care provider in the country.
“What I see going forward is we’re going to continue to execute on our strategy, which is really about building size, density and presence in core market places across the country,” Stephan Rodgers, AccentCare CEO, told Home Health Care News.
Rodgers — who will remain the company’s CEO under its new ownership — says the company will also continue to prioritize managed care relationships.
“We believe strongly that managed care is the future and we need to continue to make investments in our capabilities to be able to successfully service our managed care partners,” he said. “We’re also going to add to the capabilities of the company.”
AccentCare also has more than 30 partnerships with insurance companies, physician groups and major health systems, which Rodgers previously discussed with HHCN on its Disrupt podcast.
The Dallas-based post-acute care provider first started looking for a buyer in 2017. While there was plenty of interest at the time, Rodgers said, “we just weren’t happy with the pricing.”
Now, about 18 months later, AccentCare has had better luck.
“It worked out incredibly well for us,” Rodgers said. “We’re very happy that in waiting during that time period, it made a significant difference in the value of the company.”
Meanwhile, Boston-based Advent International is global PE giant with investments in Western and Central Europe, North America, Latin America and Asia. As of December 2018, Advent was managing $36 billion in assets. Annually, the firm’s current portfolio companies generate about $50 billion in revenue.
Apart from the price tag, Advent’s culture and portfolio made the deal appealing to AccentCare, Rodgers said.
“Advent has a record of taking businesses our size and getting them up to that next level,” he said. “We’re basically going to be approaching $950 million this year in revenue. Advent wants to make us a $2.5 to $3 billion company, and they’ve been very successful in doing that in the past.”
On top of that, Advent is anything but new to the health care industry — a perk Rodgers is eager to take advantage of.
Over the past 29 years, Advent has invested more than $7.0 billion in 42 health care companies, according to the press release.
“We see numerous avenues to use [AccentCare’s] industry-leading infrastructure to expand into new service areas and offer additional clinical capabilities, which will enable the company to care for more patients in partnership with physicians, health systems and insurance plans,” Carmine Petrone, managing director at Advent, said in a press release announcing the news.
AccentCare will go to Advent after more than eight years of being backed by Oak Hill Partners. The New York City-based middle-market PE firm boasts about $15 billion of initial capital commitments and co-investments since its founding in 1986.
Financial advisors from Barclays, Deutsche Bank and RBC helped Advent negotiate the deal, while Harris Williams & Co. and J.P. Morgan served as financial advisors to AccentCare.
PE home health outlook
Prior to the acquisition agreement, AccentCare was busy with M&A activity of its own, making a bevy of acquisitions in recent years and at least seven since Jan. 1 2018, according to records from Mertz Taggart.
In fact, just last week, the post-acute care provider announced its purchase of three eastern Florida home-based care businesses.
AccentCare’s recent increase in transactions is “right out of the private equity playbook,” Cory Mertz, managing partner at Mertz Taggart, told HHCN.
“Once a platform company is acquired, that company will acquire several smaller entities for an average multiple of EBITDA of, say, six times,” Mertz hypothesized. “AccentCare is approaching a billion dollars in revenue, with a broad footprint. These are the companies that command double-digit multiples. So they are buying for an average of six times and selling the combined entity for a double digit multiple.”
Generally, Mertz estimates the home health care industry will see a slow down in PE activity compared to years past, largely due to the onset of PDGM.
“When buyers buy, they are acquiring future cash flow,” Mertz said. “As many operators are becoming aware, modeling how any given agency will perform under PDGM is not at all straightforward. So most buyers are forced to be much more selective about what they will actually consider, focusing much more on those acquisition opportunities that really fit into their strategic plans.”
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