Halfway through the year, the long-term care sector “continue[s] to see record-level activity and organizations exploring the benefits of a potential affiliation with another not-for-profit, as well as scenarios where a disposition/sale may be the most logical alternative.” That’s according to specialty investment bank Ziegler in its latest newsletter.
“These discussions take the form of both proactive organizations looking to gain scale and resources from a position of strength, and unfortunately, organizations in situations that may be in some form of financial distress with limited options,” Ziegler said.
Common motivators for transactions among operators are workforce challenges,
CEO turnover and economic pressures. Skilled nursing additionally is challenged by complexities of the healthcare marketplace, Ziegler noted.
“Since 2015, we have tracked nearly 850 not-for-profit, market-rate senior living communities that have changed hands,” wrote Lisa McCracken, director of senior living research and development at Ziegler. “When looking at some of the larger mergers, such as Evangelical Lutheran Good Samaritan Society joining Sanford Health, this number jumps to well over 1,000 communities.”
McCracken noted that just one fourth of the not-for-profit facilities and communities examined over the years transfer to other not-for-profit sponsors. The exception is continuing care retirement / life plan communities, which are the most likely to remain not-for-profit “unless it is a situation of financial distress where there is a sale and a competitive bidding process whereby the new sponsor/owner is generally the one with the highest bid,” Ziegler said.
Since 2015, 46% of changes in not-for-profit communities and facilities have been not-for-profit organizations being acquired by buyers from the private sector.
“This pattern has been most notable among freestanding nursing homes,” McCracken wrote. “Only roughly 10% of not-for-profit nursing homes that look for a new sponsor/owner end up going to another not-for-profit.”
A common strategy, she said, is for not-for-profit providers to have a dedicated person on staff to look for business opportunities and merger and acquisition opportunities. Another key strategy, according to McCracken, is continued reinvestment and expansions of existing communities and facilities.
