As 2023 passes the halfway mark, not-for-profit senior living and care merger and acquisition activity continues at a record pace, according to specialty investment bank Ziegler.
Discussions on the benefits of a potential affiliation with another not-for-profit, as well as potential sales, are most commonly driven by workforce challenges, CEO turnover, significant expense pressures or the complex skilled nursing marketplace, according to an article by Ziegler Director of Senior Living Research and Development Lisa McCracken.
That data collectively reflect not-for-profit senior living and skilled nursing properties, excluding affordable senior housing.
A fairly consistent trend over the past several years is that only approximately one-fourth of communities or facilities in transition transfer to another not-for-profit, according to McCracken. Since 2015, about 46% of not-for-profit acquisitions have been by private-sector buyers. The trend is most pronounced among freestanding nursing homes, of which only 10% of not-for-profit facilities end up going to another not-for-profit entity, she wrote.
Nursing homes also made up the largest number of not-for-profit closures. Between 2015 and the end of the second quarter of 2023, not-for-profit closures sat at 16.9% — jumping to 27.9% from the second-quarter 2020 through today.
“What that shows is that in the past few years, we’ve seen a shift in the number of closures,” McCracken told McKnight’s Senior Living. “Those closures are largely nursing homes that have felt the pressure of the pandemic, workforce challenges, reimbursement shortfalls and so forth.”
Continuing care retirement / life plan communities are the most likely type of property to remain not-for-profit, unless they are in a situation of financial distress, she wrote.
Many not-for-profit senior living and care organizations are devoted to growth, business development and M&A activity and are proactive in scanning the market for potential like-minded partners, along with continuously reinvesting in and expanding existing communities.
Ziegler supports that growth strategy, McCracken said, rather than providers “waiting until the only options are an asset sale, bankruptcy or even closure.”
An August 2022 Ziegler CFO Hotline survey showed that 30% of senior living and care executives planned to incorporate affiliations or acquisitions into their growth plans in the next two years — the highest level reported since March 2020, when Ziegler first asked executives about growth plans.
