M&A: Buyer appetite for HME improves

YARMOUTH, Maine - After a slow first quarter, buyer appetites for HME businesses are picking up, say M&A analysts.

“There's still more sellers than buyers, but transactions are getting done,” said Rick Glass, president of Steven Richards & Associates. “I think we are bottoming out on the reimbursement, and we're slowly starting to get some appetite even in the traditional HME and respiratory space.”

While reimbursement remains dire, the business-friendly new administration, along with new leadership at the Department of Health and Human Services and CMS, has analysts cautiously optimistic.

“We're not going back to the good old days, but some fairer treatment of providers might allow them to move forward,” said Glass.

Still casting a shadow on the improving market, however, is uncertainty around what could happen to the Affordable Care Act.

“We're seeing hesitation from people with the uncertainty over how a (healthcare overhaul) might impact Medicaid,” said Brad Smith, managing director/partner at Vertess. “If we could get some direction one way or another, I think that would help a lot.”

Where there isn't hesitation, say analysts: Buyers—whether they are national or regional players—are looking to expand their geographical footprint. Case in point: Rotech Healthcare last week announced it had acquired Griffin Home Health Care, which has three locations in North Carolina. Rotech currently operates in 18 markets in the state.

Also in Griffin's favor: It's simply a good business, says Don Davis, president of Duckridge Advisors, which advised Griffin in the deal.

“That was a good, family-run business over the years with a good reputation and also access to bid contracts,” he said. “There's not overwhelming value in the contracts—the value is in being able to offer the full line of products for referral sources.”

The supply space, which was hot in 2016, will stay hot in 2017, say analysts.

“CPAP supplies, urologicals, wound care—yes, I would expect we would continue to see consolidation there,” said Pat Clifford, managing director, home medical equipment, for The Braff Group.