Analysts reflect on OMI deal, market conditions

• Owens & Minor’s acquisition: Owens & Minor (OMI) acquired Rotech Healthcare for $1.36 billion, aiming to secure large payer contracts for value-based care and a capitated risk model. 

• Market impact: The acquisition, along with favorable conditions like improving interest rates and demand, could stimulate further M&A activity in the HME industry. 

• Quipt Home Medical’s strategy: Following the OMI-Rotech deal, Quipt Home Medical is focusing on acquiring companies in the $20 million and under range to capitalize on growth opportunities. 

YARMOUTH, Maine – After a few sleepy quarters, Owens & Minor’s mid-year acquisition of Rotech Healthcare provided a jolt to the HME industry, but it’s hard to say what kind of downstream impact, if any, it could have on the overall appetite for M&A, say analysts. 

OMI in July announced it had entered into a definitive agreement to buy Rotech, which, along with AdaptHealth, was awarded contracts last year to provide HME to certain Medicare Advantage HMO members, for $1.36 billion in cash. 

“I think where this positions OMI is to take a run at these large payer contracts for value-based care and a capitated risk model,” said Pat Clifford, managing director, home medical equipment, for The Braff Group. “I have to believe that's part of what's driving that acquisition; otherwise, it just didn’t make a lot of sense.” 

OMI officials have said Rotech will provide the company with an “on ramp” to DME. The company has previously acquired Apria Healthcare in 2022 and Byram Healthcare in 2017. 

The deal, along with other favorable conditions, including improving interest rates, ongoing demand and even favorable reimbursement changes, like the 2023 passage of the Lymphedema Treatment Act, could trigger further activity among potential buyers not wanting to miss out on growth opportunities, say analysts. 

“We have been seeing more buyer interest and improving valuation from some of the national, regional and, to a lesser extent, local firms on the buy side,” said Jonathan Sadock, CEO and managing partner at Paragon Ventures. “These markets can be somewhat cyclical and now is a good time to be proactive and strategically explore exit or merger opportunities.” 

One company that hasn’t been shy about its ambitions: Quipt Home Medical, which in August said during an earnings call that it was strengthening its focus on M&A in the wake of the OMI-Rotech deal. The company, whose last-announced acquisition of a multi-state, respiratory-focused company was in September 2023, is looking in the $20 million and under range. 

“We think that we can still acquire companies in the 4% to 5% range prior to any synergies, which is where we've historically acquired companies – we’ll say in the $20 million and under space,” said Chairman and CEO Greg Crawford during that call. “That's where we see a lot of opportunity for us in the future, and that will be those tuck-ins.”