Similar to any major production, the M&A process requires that the right people are in the right places, and at the right time. Veteran deal makers understand that involving the right stakeholders at the proper time can have a significant impact on the M&A process, and possibly the ultimate value of the deal. For small and medium businesses who don’t regularly engage in merger and acquisitions activity and figuring out who should do what and when can become overwhelming. However, it’s essential to get this part of the process right from the beginning.

Five Merger & Acquisitions Stakeholders Groups

  • C-suite
  • Business unit leadership
  • Transaction lead
  • Corporate development
  • External advisors

Before engaging in any M&A activity, it’s essential to know who sits in the above groups.

The C-suite

The CEO and other c-suite executives will collectively make up the Investment Committee (IC). The IC is the ultimate decision-makers and retains responsibility for the success or lack thereof for every transaction.

The IC is responsible for ensuring that the right people are in the right seats in the other groups. They assist the various groups in maintaining focus and discipline throughout the process. The M&A deal process quickly gets messy if someone doesn’t help the aligned teams. The IC is the force which encourages teamwork and focuses on the objective.

The Business Unit Leadership

Once a transaction is complete, the newly acquired entity will be operating within the buyer’s organization. The majority of the time, this takes the form of working under an existing unit. The business unit team should be involved early in the process to provide strategic guidance. This includes when it will be time to pursue M&A activity and when to hold off.

The Corporate Development Team

The corporate development team is involved in the merger & acquisitions process from the beginning. For several acquires, a dedicated team may exist with the sole task of completing deals. For smaller entities, the corporate development team may be assembled when needed and disbanded once the deal is complete.

The Transaction Lead

If you’re are pursuing a transaction with the hopes of realizing such synergies, then be sure your transaction lead is involved in the process. The lead’s job is to help finalize the deal and facilitate integration. If you think your deal ends when documents are signed, and a wire is sent, then think again. The integration process can make or break the synergies that caused you to pursue the deal in the first place.

The External Advisors

You and your company are likely very talented, but most likely, you won’t have all the answers during the M&A process. Your outside advisors such as CPA’s, lawyers, and other deal makers may be able to provide valuable insight. It’s crucial that you seek out their assistance to make sure you’re going down the right path. Ask your advisors early on and throughout the process. They can help you to identify red flags, pitfalls, and good opportunities.

Conclusion

Running a proper M&A deal process requires discipline and having the right people in the appropriate seats. If you’re are new to the world of merger &acquisitions, learn as much as you can from successful deal makers. For smaller companies going down the path for the first time, it’s essential not to overlook specific parts of the process or make false assumptions. Build a quality team, seek outside advise, and be sure to learn from your experiences.

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Amedisys, LHC Group Stocks Trend Downward in August

Amedisys, LHC Group Stocks Trend Downward in August

Home health stocks took a hit in August according to the Stoneridge Partners Home Health Index (HHI). Amid volatility in the broader market, stock values tracked by the Stoneridge HHI were down nearly 4.4% compared to the previous month. The S&P 500 was down just over 1.8%.

The Stoneridge Partners HHI monitors the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. and Lafayette, Louisiana-based LHC Group, Inc., two of the country’s largest independent and publicly-traded home health companies. The mergers and acquisitions advisory firm also tracks but does not include stock values for Addus HomeCare Corporation in its final HHI calculations.

Amedisys (Nasdaq: AMED) stock values saw the biggest dip in August, down 4.7% compared to July. Still, the home health provider remains up nearly 3% year-over-year. LHC Group (Nasdaq: LHCG) stock was down nearly 4.1% compared to the previous month — but it still outpaced its performance in August of last year by nearly 19.8%.

The lone bright spot in August was Addus (Nasdaq: ADUS), stealing the show with an 8.6% increase in stock values month-over-month, and nearly 35.6% year-over-year.

“Companies released their second quarter results at the beginning of August, so that could have temporarily affected the continued growth we’ve seen from Amedisys and LHC Group,” Stoneridge Partners President Rich Tinsley said. “Plus, as Medicare-reimbursed providers, they are facing a host of regulatory changes in the months to come. That uncertainty might have been a factor. Addus, on the other hand, does mostly Medicaid-reimbursed home care — plus, it has Medicare Advantage changes working in its favor. So they may have been better positioned in August to continue leading the recent charge for home health stocks.”

Year over year, home health stocks were up about 10.4% while the S&P 500 was up less than 1.5%, according to the Stoneridge Partners HHI.

Quote Of The Month

“We shouldn’t be treating mental and physical health as two completely separate things. The way we tend to respond to psychological health issues is quite different from our responses to physical health issues. As a society, we don’t train proactively about mental health issues. We don’t teach early prevention strategies. There seems a lot of discomfort and stigma around people who disclose they have psychological health issues.” – Shelley MacDermid Wadsworth, Professor of human development and family studies and director of the Military Family Research Institute of Purdue

Read the Full Article Here:  Supporting the mental health of military personnel, families and veterans in times of war

 

See It To Believe It!

The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these two publicly traded home health companies, all listed on the NASDAQ:

  • LHC Group (LHCG)
  • Amedisys (AMED)

This graph compares the percentage of the Home Health Index to the percentage change in the S&P 500 Index going back to 2002.
[visualizer id=”8359″]
This is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart.
[visualizer id=”8361″]

This graph displays HH Index performance since 2002.

[visualizer id=”8363″]
This graph compares the HH Index to the price of Addus stock (non-Medicare).
[visualizer id=”8362″]

(Home Health Index September 2019 | Stoneridge Partners)

 

Here are the results of the stock prices for the past two years:

Company 8/31/19 1 mos change YTD change 8/31/18 8/31/17
Amedisys 128.71 -4.70% +10.16% 125.01 52.24
LHC Group 118.5 -4.06% +26.82% 98.93 65.25
HH Index* 123.61 -4.39% +17.56% 111.97 55.40
S&P 2926.46 -1.81% +17.27% 2884 2471.65
Addus 87.98 +8.55% +29.27% 64.90 34.05

Although we track the performance of Addus, they are not included in our HH Index because very little of their revenue comes from Medicare.

 

Enterprise Value (EV)

EV (in M) 8/31/19 8/31/18 8/31/17
Amedisys 4490 3980 1719
LHC Group 4130 3430 1299
HH Index Total 8620 7410 3845
Addus 1150 804 424


Enterprise Value (EV), aka Selling Price, as Percent of Revenue

Company 8/31/19 8/31/18 8/31/17
Amedisys 248% 252% 116%
LHC Group 203% 253% 134%
HH Index Average* 226% 253% 122%
Addus 203% 176% 103%


Multiples of EV/EBITDA

Think of this as selling price as a multiple of EBITDA.

Company 8/31/19 8/31/18 8/31/17
Amedisys 24.92 26.41 20.3
LHC Group 20.33 33.19 14.06
HH Index Average* 22.63 29.80 18.28
Addus 27.74 22.30 12.99

The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology which may differ from that used by a company for its reporting. (Home Health Index September 2019 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Unilever acquired Bolivian’s Personal and Home Care Business Asterix
  • Addus HomeCare Corp. acquired Hospice Partners of America LLC, which has 21 locations in Texas, Idaho, Kansas, Missouri, Oregon and Virginia
  • St. Paul, Minnesota based St. Croix Hospice acquired Hometown Hospice & Homecare
  • Care Advantage Inc., a Chesterfield County-based home health provider acquired Allegiance Home Care

CLOSED by Stoneridge

  • Stoneridge Partners, Partner Joe Lynch, assisted with the partnership of CAP Funds and Bayou Home Care in August 2019
  • Stoneridge Partners represented a New Mexico based  agency that closed August 2019

Exclusively Listed For Sale By Stoneridge Partners

Do you know of any acquisitions that have taken place?  We are interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously and the return email address can be left blank.

Conference News

Brian Bruenderman, Partner and Executive Vice President of Stoneridge Partners is speaking at the National Association for Home Care & Hospice Conference in Seattle, Washington on Monday, October 14, 2019 at 4:30 pm in room 6E.

Another Cartoon Favorite 

   

 

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Home Health Index September 2019 | Stoneridge Partners

From Rich Tinsley, Publisher of “Home Health Index”. Rich can be reached at [email protected] or (239) 561-0826 and toll-free 800-218-3944

Previous editions of this monthly newsletter can be searched for at the bottom of the home page of the Home Health Index. Links to Google Finance: Amedisys | LHC Group

Please follow us on Facebook  and Linkedin

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AGENCIES FOR SALE

NEW NORTH CAROLINA: Stoneridge File #SBB-4927
  • $5 million Medicaid agency
  • CAP/PCS services
  • Long history, quality services
  • $2 million ID/DD
  • Profitable
  • Existing management team in place
  • Greater Detroit area
  • Opportunity to establish Medicare home health agency
  • Denver market
  • ACHC accreditation until 2022

Conference News:

Brian Bruenderman, Partner and Executive Vice President of Stoneridge Partners is speaking at the National Association for Home Care & Hospice Conference in Seattle, Washington on Monday, 10/14 at 4:30 pm in Room 6E.  

 

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AGENCIES FOR SALE

  • $9.5 million home health agency
  • Very strong operationally, clinically and financially
  • 99% revenue traditional Medicare
  • 100% private pay home agency
  • $10+ million revenue
  • Leader in metropolitan market
SOUTH CAROLINA: Stoneridge File #SJL-3009
  • CHAP accredited hospice
  • 125-patient census and still growing
  • Expertly run with full staff in place
  • No compliance,CAP or legal issues
  • $3 million Medicaid provider
  • Pediatric component
  • Recent rate increase
  • Great add-on opportunity
  • $2 million Medicare home health agency
  • Located in Austin, TX
  • Outstanding reputation, management & clinical team
  • CHAP accredited
  • Consistently top rated Home Care Elite for past 8 years
  • $1.7 million Medicare home health agency
  • Located in Southwest Houston
  • Well established with predictable referral sources
  • Very profitable
  • $1.4 million Medicaid pediatric therapy company
  • Major metropolitan service area
  • Approximately 200 ABC

 

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If you’re looking to sell your home health care business, you don’t want just any buyer. You want the most qualified buyer. It’s easy to get multiple offers from buyers who don’t offer the most money. Finding the right buyer for your home health care business is a challenging process, and the transfer of business ownership is time-consuming. However, Stoneridge Partners is here to prepare you for a successful outcome.

Before seeking a buyer, there are some essential questions that sellers need to ask themselves. First, can your health care business be sold? Several elements of a home health care business for sale can make it intriguing to buy. There must be a solid history of profitability. For example, there needs to be a competitive advantage, a large and loyal customer base or long-term contracts with clients, as well as growth opportunities. Other factors are brand loyalty, intellectual property rights, licenses, or issued patents.

For both the seller and buyer, the bottom line is what your health care business is worth. As a seller, you’re going to want the maximum value for your home care business but setting an asking price too high could raise suspicions to the buyer. However, if you set a price too low, you could lose out. Therefore, you must understand the factors that make up your company’s value. Your company’s value is determined by sales, earnings, performance, market outlook, personnel, net book value, and the fair market replacement value of equivalent operating assets. Value is also determined by intangible assets like your company’s brand image and industry reputation.

Finding the right buyer is the key to a successful transaction. The right buyer will also contribute to the continued success and growth of the home health care business for sale. Here are some tips to help you navigate through the murky waters of finding the right buyer.

1.Who Are Your Potential Buyers?

A buyer can come from your employees, customers, suppliers, or competitors. Everyone buys businesses for different reasons, and this will affect how you pitch your business to them. Typically, buyers are divided into two distinct groups: strategic and financial buyers. Strategic buyers will look at how well your business fits into their own company’s long-range plans. On the contrary, financial buyers think more about the company’s profitability and stability. These could be companies or individuals. Some buyers may want a reliable, well-managed company; while others will focus on turnaround situations.

2. Where Can You Reach Potential Buyers?

You can put feelers out to people you know or use outlets such as trade publications, or even newspaper advertising. You also have options such as BizBuySell.com or BizQuest.com. However, a broker, home health care M&A, or investment banker will have access to deal flow and can approach potential buyers confidentially. When looking for a buyer, you don’t have to risk losing valuable clients, vendors, or employees due to negative connotations.

3. Qualify Potential Buyers

Documents like confidential agreements and financial background information are standard documents for home health care businesses for sale. A broker or investment banker can pre-scan buyers to ensure they are financially qualified to purchase your business. Qualifying potential buyers include reviewing ownership, available funds to invest, source of financing, and any judgments or bankruptcies filed. You also want someone who has the business knowledge, management experience, and skills to take the business you’re selling to its full potential.

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AGENCIES FOR SALE

  • District 3 Medicare Certified Home Health Agency
  • Census less than 30
  • 4.5-star & Home Care Elite 2 years running
  • Motivated seller
  • $11 million revenue private pay
  • Mid-size metropolitan area
  • Largest in market
  • $1.9 million revenue
  • 81% Medicare certified
  • Licensed in 2 counties in South Central New Mexico
SOUTH ATLANTIC: Stoneridge File #SBA-9973
  • 12+ Million in annual revenue
  • Home Health Agency (HHA) and Adult Day Care Center (ADC)
  • HHA (represents 85% of revenue)
  • ADC (represents 15% of revenue)
  • HHA is primarily Medicaid business but is Medicare-certified
  • Accredited
  • Hospice
  • $3.5 Million in annual revenue
  • Accredited
  • Clean: No cap or regulatory issues
  • $1.1 million revenue in Houston Texas
  • Medicare certified
  • Motivated seller
  • $650,000 revenue
  • Medicare certified
  • Licensed in 6 counties North of Dallas, TX
  • $550,000 revenue
  • Medicare certified
  • Located in El Paso, Texas

 

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