The Braff Group: HME Market Shows Decline
The Braff Group (TBG), a middle market merger and acquisition firm that specializes in the home health care,
hospice, infusion therapy, specialty pharmacy, home medical equipment and staffing market sectors, released its fourth
quarter 2006 merger and acquisition transaction trend report.
Based upon preliminary year-end numbers, there
were 41 deals announced and/or completed in the fourth quarter of 2006, down 25 percent from the third quarter of this year
and down 35 percent versus the same period last year. For all of 2006, there were 207 deals; a decline of 22 percent compared to 265 transactions announced and/or completed in 2005.
"Not unexpectedly, in a year of substantial unknowns regarding potential further cuts to oxygen reimbursement, the
greatest decline came from the home medical equipment sector," commented Dexter W. Braff, president of The Braff
Group. "While Medicare legislation passed at year end did not include these cuts, an atmosphere of heightened risk
remains, which will likely make 2007 another challenging year for M&A in the HME arena."
Although full year deal volume in infusion therapy and specialty pharmacy was down slightly in 2006 in terms of raw
numbers, the M&A market in these sectors remains strong. "We are seeing more acquisition interest in these sectors,
particularly from private equity sponsors, as buyers look to capitalize on expectations of increased utilization, introductions of new, complex, high-margin therapies, and a reasonably predictable reimbursement climate," said Chuck Gaetano, TBG managing director for home infusion therapy and specialty pharmacy.
The brightest spot in 2006 was the home health care sector, which set a transaction volume record of 86 deals up 6 percent
over the previous year's record of 81. This marks the first time that home health has led all the other sectors in
transaction activity. "This is just what we expected as we entered 2006," said Steven Braff, TBG managing director for home health and hospice. "A combination of high demand from both strategic and financial buyers, stable reimbursement, and an extremely favorable industry outlook has made for an extremely attractive M&A environment. With Medicare reimbursed services receiving a rate increase this year, we fully expect this trend to continue in 2007."
This article originally appeared in the January 2007 issue of HME Business.