Larger home health and hospice acquisitions dominate the headlines (examples here, here, and here), along with their often nosebleed valuation multiples. When a large, fast-growing national platform sells for 15x or 20x EBITDA, smaller operators often wonder whether their business could fetch a similar multiple in a sale. Unfortunately, the answer is almost definitely "no." All else equal, smaller healthcare business fetch lower multiples than larger ones due to less geographical diversity, uncertain growth drivers, and operations that are often heavily reliant on the time and effort of existing ownership.
Valuation Multiples from Home Health and Hospice Deals Under $10m
Filtering our database to include only home-based services deals under $10m enterprise value - the very low end of the spectrum - provides a snapshot of multiples paid for small home health and hospice businesses. Out of 31 deals with reported EBITDA multiples, the median multiple was 4.7x EBITDA, and the range from the 25th to 75th percentiles was 4.1x to 6.5x. The median revenue multiple was 0.6x and the range from the 25th to 75th percentiles was 0.4x to 0.8x revenue.
How Can Small Home Health and Hospices Businesses Maximize their Valuation?
There are a number of things that sellers of smaller home health and hospice businesses can do to maximize their valuation:
Demonstrate a strong track record of profitability and growth. Buyers are more likely to pay a premium for companies that have a proven track record of success.
Highlight any synergies that a potential buyer could achieve by acquiring your company. This could include things like cost savings, revenue growth opportunities, or geographic expansion opportunities.
Target a wide range of buyers. Don't just focus on strategic buyers. Private equity firms and other financial investors can also be interested in acquiring smaller home health and hospice businesses.
Work with an experienced M&A advisor of investment banker. An M&A advisor can help you identify the right buyers for your company and negotiate the best possible valuation.
Home Health and Hospice Deals
Read Scope Research's take on other home health and hospice transactions:
About Scope Research
The Scope Research Healthcare M&A Valuation Database currently has financial details for 169 home-based services deals going back to 2010, 113 of which include reported EBITDA multiples. The home health and hospice databases can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.
Don't hesitate to reach out to Will Hamilton at will@scoperesearch.co with questions about your specific situation.