Mergers and acquisitions in the nursing home sector made up a staggering 40% of all senior care deals in June – a surprising jump compared to April and May, which saw 42.5% in SNF deals for both months combined.
“We know the buyer interest is there, so this means more SNF owners got off the sidelines to sell their facilities,” Ben Swett, senior care analyst for LevinPro LTC, said in a quarterly data preview. “We’ll see if this helps valuations settle a bit, and we bet that they will.”
Jason Dopoulos, managing principal for White Oak Healthcare Partners, said the group is seeing four or five deals every week, or what he considers some serious buying propositions.
The group is a subset of White Oak Healthcare Finance, which is a subsidiary of White Oak Global Advisors – a $7 billion private equity fund.
LevinPro said overall deals are expected to hit 550 for 2022, a record for the senior care industry by about 100.
Q1 saw 139 deals, LevinPro found, followed by 135 deals in the second quarter.
Forty-nine deals were announced in April and 34 in May, while June saw 52 transactions.
LevinPro’s database collects information on more than 5,000 long-term care deals and markets itself as a resource for providers and investors in the senior care industry.
Of course, that figure could be stymied by higher interest rates and a potential recession looming, according to the data, but the numbers for the first and second financial quarter are promising.
Dopoulos said he has just started to see interest rates increase for SNF properties; the sector has been known for its federal financial support throughout the pandemic.
“We’ve just seen a feeding frenzy because of the capital,” added Dopoulos. “The only thing I’ve seen change recently is how interest rates can affect transactions.”
Buyers have started to ask for price concessions on deals that haven’t closed yet, he said, as they go on the hunt for more equity while leverage is clipped.
“If you’re asking for 80%-85% leverage, there’s a razor thin margin if rates go up a lot,” added Dopoulos. The ability of an operator to service the debt becomes more difficult.
The pricing “frenzy” could slow down as a result, not necessarily overall nursing home deal activity, according to Dopoulos. Regional operators, the “‘mom and pop”’ facilities, are still looking to sell as they face a continued workforce shortage and are forced to turn to expensive agency use.
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