Pandemic speeds up consolidation

YARMOUTH, Maine - After briefly hitting the pause button in March when “the world turned upside down,” buyers and sellers are back at the table, say M&A analysts.

While the HME industry certainly took a few hits, unlike the restaurant and hospitality sectors, for example, it proved much more resilient in the face of a public health emergency, says Pat Clifford, managing director, home medical equipment, for The Braff Group.

“DME is part of the solution for COVID,” he said. “Once buyers and sellers got comfortable—providers moving people to work from home and understanding how to (operate during the pandemic) and didn't suffer a big revenue fallout—they came back.”

Brief slowdown notwithstanding, the second quarter saw the formation of Spiro Health when America's HealthCare at Home, Cape Medical Supply and Health Complex Medical merged to form a regional platform; the launch of Aeroflow Ventures to enable Aeroflow Healthcare to seek expansion opportunities, including acquisitions and investment opportunities; and the acquisitions of both Solara Medical Supplies and ActivStyle by AdaptHealth.

Regional and national companies like these will continue to do well, predicts Brad Smith, managing director/partner at Vertess, which is on track for a “record” July.

“COVID has sped up consolidation,” he said. “If you are a DME owner and you look at the landscape, you see a lot of risk—industry risk, external risks, the pandemic and election—and every thing out there really flashes. I think that will drive a lot of owners who want to stay active to hitch to a larger company.”

Transactions are taking longer to close, however, say analysts. It comes down to due diligence, says Jonathan Sadock, managing partner/CEO of Paragon Ventures.

“If your business is ready and if you understand the real valuations of your business, plenty of buyers are out there for you,” he said. “The process takes a bit of time—it's not like the old days—but the due diligence process is so vitally important.”