senior living merger & acquisition perspectives 2018 … · active sector in the health care...

800.644.1704 |

SENIOR LIVING MERGER & ACQUISITION PERSPECTIVES

2018 YEAR IN REVIEW

bkdcorporatefinance.com

http://www.bkdcorporatefinance.com/

OVERVIEW & OUTLOOK

2

Senior living mergers and acquisitions (M&A) once again ranked as the most active sector in the health care services universe, with a record 426 transactions in 2018 (35 percent of health care services transactions), the highest level ever recorded for the sector. According to Irving Levin Associates, this represents an incredible 42.5 percent increase over 2017 and 19.3 percent growth over the previous record of 299 transactions in 2015.

Despite the increased M&A activity in 2018, valuations across some senior living sectors did soften a bit from 2017. The average price per bed paid for skilled nursing facilities (SNF) and assisting living facilities (ALF) was down by 21.4 percent to $64,000, and 15.8 percent to $186,400, respectively. Independent living facilities (ILF) fared better, with a modest 3.5 percent growth over 2017 to $238,100.

In the SNF arena, although valuations on a price per bed basis were down for the second year in a row, they didn’t figure to be sustainable from their peak of $99,200 in 2016. That figure had really been inflated with a number of new, higher acuity and private pay facilities, so a decline here was not unexpected, especially after factoring in operating pressures like reduced reimbursement rates, shorter lengths of stay and labor struggles. However, even though 2018 saw its second consecutive annual drop in price per SNF bed, average capitalization rates (a stronger comparable metric) actually improved, decreasing by 20 basis points to 12.1 percent. All-in-all, despite market headwinds, investors/operators clearly remain focused on positive demographics, the importance of scale and the still-favorable interest rate environment, continuing to actively pursue SNF transactions.

With regard to seniors housing, ALF and ILF valuations on a consolidated basis were only down slightly, to $203,540 per unit, a 9 percent decrease over 2017. Both new development on the ALF side, and a larger ratio of B and C properties being transacted were strong contributors to the decrease. Capitalization rates also showed a decline in valuation, with the consolidated ALF/ILF rate increasing by 40 basis points to 7.7 percent. Primary headwinds facing the seniors housing sector continue to be census declines, labor costs/shortages and the threat of new development.

Despite the mixed results for 2018, which included a booming transaction count and varied valuation metrics, 2019 looks to be another exciting year for senior living M&A, with 32 transactions already announced in January.

The charts and tables on the following pages offer additional color on deal volume and valuation data.

CONTENTS

National Deal Volume & Value

Deal Metrics

Public Comparables

Regional Deal Volume

About BKD Corporate Finance

ABOUT BKDCF

Founded in 1994, BKD Corporate Finance helps companies and stockholders go beyond their numbers by creating value through investment banking solutions that include mergers, acquisitions, sales, recapitalizations, management buyouts and financings.

SENIOR LIVING CONTACTS

Source: Irving Levin Associates, National Investment Center for Seniors Housing and Care

Chelsea Davidson

Assistant Vice President

Springfield, MO

417.865.8701

[email protected]

Austin Propst

Director

Springfield, MO

417.865.8701

[email protected]


mailto:[email protected]



NATIONAL DEAL VOLUME & VALUE

3

Source: Irving Levin Associates


65

74

84

77

87

62

77

90

78

11

7

81

10

0

70

77

11

9

94

10

6

93

74

10

3

2014 2015 2016 2017 2018

Quarterly LTC Deal Volume

Q1 Q2 Q3 Q4

302

357337

299

426

2014 2015 2016 2017 2018

Annual LTC Deal Volume

Long-Term Care35%

Physician Medical Groups

21%

Other15%

Behavioral Health7%

Home Health & Hospice6%

Hospitals6%

Laboratory, MRI, Dialysis4%

Rehabilitation4%

Managed Care2%

2018 Health Care Services Deal Volume

1,219 Health Care

Services Deals

$16.3

$9.2

$11.7

$25.6

$14.2

$14.4

$15.7

$13.6

2011

2012

2013

2014

2015

2016

2017

2018

Dollars Spent on LTC M&A($ in billions)


DEAL METRICS

4



$76.6

$85.9

$99.2

$81.4

$64.0

$188.7

$189.2

$193.6

$221.3

$186.4

$246.8

$192.9

$228.2

$230.1

$238.1

2014

2015

2016

2017

2018

Average Price per Unit by Facility Type($ in thousands)

SNF Average AL Average IL Average

13.10%12.60% 12.50%

13.00%12.40% 12.20% 12.20% 12.30% 12.10%

9.40%8.80%

8.37% 8.44%7.57% 7.34% 7.85%

7.30%7.70%

6%

8%

10%

12%

14%

2010 2011 2012 2013 2014 2015 2016 2017 2018

Average Historical Transaction Capitalization Rates

Skilled Nursing Facilities Assisted/Independent Living Facilities


PUBLIC COMPARABLES

5

Public Comparables by Facility Type

Source: Irving Levin Associates, Capital IQ


Skilled Nursing

Company TickerRecent Price

(2/15/19)

LTM Revenue

($M)

LTM EBITDA

($M)

EBITDA

Margin

Stock Market

Cap ($M)

Diversicare Healthcare DVCR $3.68 $568 $28 4.9% $24

Genesis HealthCare GEN 1.59 5,022 382 7.6% 162

National Healthcare NHC 83.88 980 103 10.4% 1,278

The Ensign Group ENSG 52.19 2,041 183 9.0% 2,750

Assisted/Independent Living

Brookdale Senior Living BKD $7.04 $3,521 $534 15.2% $1,314

Capital Senior Living CSU 6.56 460 74 16.1% 205

Five Star Quality Care FVE 0.90 1,112 -30 -2.7% 46

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

SNF & AL/IL Public Comparables vs. Dow Jones U.S. Health Care

Providers Index

January 2017-February 2018

Skilled Nursing Assisted and Independent Living Dow Jones U.S. Health Care Providers Index


REGIONAL DEAL VOLUME

6

2018 Deals by State

WA

OR

CA

MT

ID

NV

AZ

UT

WY

CO

NM

TX

OK

KS

NE

SD

NDMN

IA

MO

AR

LA

MSAL

GA

FL

SCTN

NC

IL

WI MI

OHIN

KY

WV VA

PA

NY

ME

VTNH

NJDE

MD

MA

CTRI

AK

HI


11–19 Deals

5–10 Deals

1–4 Deals

0 Deals

20 or More Deals


85

69

52

102

81

37

U.S. North Central U.S. Northeast U.S. South Central U.S. Southeast U.S. West International

2018 Deals by Region


ABOUT US

BKDCF, a wholly owned subsidiary of BKD, LLP, helps companies and stockholders go beyond their numbers by creating value through investment banking solutions that include mergers, acquisitions, sales, recapitalizations, management buyouts and financings.

Founded in 1994, BKDCF is staffed with experienced investment bankers and financial analysts. In addition, the firm draws on the resources of BKD with its network of accountants, auditors, tax professionals, business consultants and industry-specific consultants.

BKDCF is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation.

The professionals of BKDCF have more than 200 years of combined experience

helping company owners plan for and execute their growth and exit strategies.

From managing the sale of a company to negotiating the acquisition of a

competitor or raising debt and equity capital to improve financial and operational

flexibility, BKDCF can help you to develop a specific course of action for achieving

your desired results.

Construction &

Engineering

Financial

Services

Business

ServicesManufacturing

&

Distribution

Health

Care

Consumer

Services &

Products

Energy

Technology,

Media &

Telecom

INDUSTRY FOCUS

BKD/BKDCF OfficeBKD Office

Chelsea Davidson

Assistant Vice President

Springfield, MO

417.865.8701

[email protected]

CONTACT US – SENIOR LIVING TEAM

7

Austin Propst

Director

Springfield, MO

417.865.8701

[email protected]





senior living merger & acquisition perspectives 2018 … · active sector in the health care...

Documents