Home healthcare industry sees increase in 4Q99 M&A activity
By MEREDITH BONNER
HHBR Editor
While the number of mergers and acquisitions (M&As) reported in the entire healthcare services industry hit its lowest level in four years, the home health sector in 4Q99 saw an increase.
According to Irving Levin Associates’ (New Canaan, CT) 4Q99 Health Care Merger and Acquisition Report, there were 16 publicly announced M&As in the home healthcare sector in 4Q99, compared to 12 in 4Q98, an increase of 33%. The number of transactions is up 45% from 3Q99, when the sector announced 11 deals.
Stephen Monroe of Irving Levin said statistically, the increases "could be a quirky thing." But he said that, more likely, the home healthcare industry is beginning to see a turnaround.
"When home health hit the wall, so to speak, everyone starting saying, Yes there are mistakes; there is the fraud and all the problems,’ but what I could tell was that home health is not going to go away."
He says what the industry is experiencing now is that after there were so many closings, and so many companies going out of business, there are a number of people that did stay.
"Now the tides seem to be turning," Monroe said. "Four months ago, when some home health companies started reporting profits and, lo and behold, they were not losing money anymore they were saying they were over the hump." He added that it is still going to be ugly for a while, but the industry seems to be over the hump.
"These companies, on a smaller scale, will start to be active in the acquisition market again," said Monroe.
As a whole, the healthcare services market did not fare as well in 4Q99, reporting 141 M&As, 16% fewer deals than in 3Q99 when the industry announced 168. The healthcare arena reported 217 deals in 4Q98, according to the report. The number of deals in 4Q99 is at its lowest level since 2Q95 when 139 deals were announced, Monroe said.
But for now, home health seems to be emerging from the shadow of the last two years’ troubles. Monroe said another light at the end of the tunnel for the industry could be the emerging technology associated with home healthcare. But providers nor investors should get their hopes up too quickly.
"I think it still will be slow go in 2000, compared to the heyday of a couple of years ago," Monroe said, adding that more investors and lenders are "still cautious about the industry." He also said another big factor is what the government is going to do.
To purchase a copy of the Health Care Merger and Acquisition Report, call (800) 248-1668.
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