The senior living and care sector has seen a record number of transactions in the first half of this year among organizations looking to merge, “as well as scenarios where a disposition/sale may be the most logical alternative,” according to specialty investment bank Ziegler.
“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,” Cathy Owen, vice president of senior living research at Ziegler, wrote in a new report.
The uptick in transactions is not unexpected but rather a continuation of a trend brought on largely by labor challenges and rising costs. A year ago, Ziegler noted that not-for-profit long-term care merger and acquisition activity was moving at a record pace.
Only about a fourth of not-for-profit communities merge or are sold to another not-for-profit sponsor, and that has been the trend for the past decade, according to Owen.
Continuing care retirement / life plan communities are the most likely type of property to remain not-for-profit, unless they are in financial distress, “and a competitive bidding process occurs whereby the new sponsor/owner is generally the one with the highest bid,” she said.
A significant increase in long-term care closures have occurred since the pandemic four years ago, according to the report.
“This number has jumped since 2020 when the COVID-19 pandemic hit and placed disproportionate pressures on nursing home providers,” Owen said. “Additionally, as we sit here in 2024, pandemic-related funds from the government are no longer available and that, coupled with workforce and expense pressures, have resulted in some providers, often freestanding nursing homes, making the decision to cease operations.”
