Long-term care deals dominated the health care mergers-and-acquisitions landscape in February, clocking in at 32 transactions, according to a Friday report from Bloomberg Law’s transactions advisory board.
That number is double the next-closest sector, health care information technology and software, which racked up 16 deals for the month, according to the list compiled for Bloomberg by investment bankers ECG Management Consultants and Provident Healthcare Partners LLC.
The long-term care sector has seen 61 total transactions to date, putting it off to a strong start in 2019, Hector Torres, a principal at ECG in Chicago, told Bloomberg Law. Private equity investors played a major role in that push; more than a third of the month’s transactions in long-term care involved private equity firms, he noted.
One notable example was Genesis HealthCare’s (NYSE: GEN) purchase of 15 SNFs that it previously leased from Welltower Inc. (NYSE: WELL), a transaction completed in a minority partnership with the private investment firm Next Healthcare Capital. The overall transaction came in at $204 million, with KeyBank underwriting a $142.1 million loan to help Genesis and Next make the purchase.
Private equity is making a splash in other ways in the skilled nursing arena this year; the New York City-based Northwind Group recently announced a new health care lending platform for providing debt and preferred equity capital to seniors housing and skilled nursing real estate operators and owners. In fact, national health care operators should consider selling non-core assets to expansion-minded private-equity firms this year, Big Four audit and accounting firm PwC argued in a January report.
But not all private equity is created equal. The skilled nursing chain HCR ManorCare, which was taken over by the non-profit health system ProMedica in a deal with Welltower, was constrained by its former private equity ownership, The Washington Post reported late last year. The chain had been owned by the private equity firm Carlyle Group since 2007.
To have success in skilled nursing, private equity can’t blindly take the same models and approaches that have found success in other industries, several experts have noted.
“It can lead to a lot of challenges down the road if you’re not investing in the business, you’re not investing in the people, and you’re not approaching it the right way,” Frank Small, chief investment officer at Greystone Healthcare Investments, told SNN in December 2018.