One of the faster-growing home care organizations in the United States is now trying to grow even faster. PE Hub reported Monday that CareFinders Total Care is trying to lock down additional growth capital.
Hackensack, New Jersey-based CareFinders provides home care services to more than 8,500 patients throughout New Jersey, Pennsylvania and Connecticut. The company employs more than 7,000 caregivers.
The company’s main source of income is Medicaid managed care, which yields some of the smallest margins industry-wide.
According to PE Hub, CareFinders is in the process of seeking a private equity deal, a search that could “stretch into summer.” The publication noted that CareFinders is being advised on financial matters by global investment bank Moelis & Company.
Citing “three people with knowledge of the process,” PE Hub reported that the home care provider’s growth-capital process is expected to produce a multiple of 11 or 13 times CareFinder’s EBITDA of more than $35 milliion. Those numbers would put a hypothetical deal north of $450 million.
In the last five years alone, the home care company has executed more than 25 transactions.
In the past, a long and diligent process has been paramount when it comes to closing deals, CareFinders CEO Jim Robinson previously told Home Health Care News.
“For us, we don’t need to go mile-wide, inch-deep — we’re really looking for depth,” Robinson said in December 2019. “Because this is such a mom-and-pop business, you really have to do a fair amount of due diligence. Not just on the financial part, but specifically on the clinical side — the quality of care, patient chart-checking and employee file-checking as well. That way, we have as good of a handle as possible on the quality of the organization.”
In recent years, CareFinders has focused on regional density in the Northeast. In 2019, Robinson estimated that the New Jersey, Pennsylvania and Connecticut home care markets added up to about $3 billion.
Pennsylvania, in particular, has been a key part of CareFinders’ growth strategy. With roughly 3 million enrollees, the state has a large Medicaid population.
Last December, the company purchased Union Home Care, a Philadelphia-based home care services provider.
“You’re not going to catch us looking for acquisitions in Hawaii or California,” Robinson said at the time. “We’re really focused right here in the Northeast. We’re big in New Jersey, we’re bigger in Connecticut, and now into Pennsylvania.”
The company kicked off 2021 with the acquisition of ORI HomeCare — a Philadelphia-based home care and respite care provider — in January.
Additionally, CareFinders acquired the Clarks Summit-based At Home Quality Care and Philadelphia Home Care Inc. in 2019.
Overall, CareFinders has nine offices in Pennsylvania.
Securing additional growth equity could give CareFinders fuel to secure even more acquisitions at a time when home care assets are at a premium.
The fourth quarter of 2020 saw at least 15 home care-related transactions. Prior to Q4 2020, eight deals were the height of M&A action in the home care space, according to data from M&A advisory firm Mertz Taggart.
Dealmaking action began to heat up toward the end of last year and in early 2021 because payers saw how valuable home care has been throughout the public health emergency.
“It was a vital resource in managing chronic conditions, especially with individuals avoiding in-person trips to the doctor,” Mertz Taggart wrote in its quarterly M&A update.
CareFinders did not respond to requests for comments from HHCN.
Apart from growing rapidly, CareFinders has also been focused on bolstering its recruitment and retention efforts amid the pandemic.
To this end, CareFinders implemented “appreciation pay” for all of its workers. Similar to hazard pay, appreciation pay means an additional lump sum at a time when work conditions have increased in risk.
Since rolling out additional pay in April, the company has financed this endeavor on its own without a state Medicaid reimbursement increase.
“It’s definitely going to be a financial hit for the company, but I don’t know if we could really go forward as the same company and not do something like this for our team,” Robinson previously told HHCN. “It almost moves out of financial decision making into, ‘What’s the right thing to do?’”
Aside from funding CareFinders’ M&A activity, landing a growth investment could leave the company room to further finance recruitment and retention.