With fewer opportunities for mergers and acquisitions in the home care space, operators will need to find scale or develop a niche to weather the regulatory and cashflow headwinds that are likely to follow the launch of the new single In-Home Care program.
Currently, there are only a small number of larger players in the sector – and the majority of merger and acquisition activity is centred on private operators.
Not For Profits rarely sell their home care businesses – PresCare is the only large Not For Profit to divest its home care business in recent years after it went into receivership.
The business was acquired by myHomecare, the largest Home Care Package provider in Australia with 20,000 clients – itself the result of a number of mergers and acquisitions which saw a partnership formed between Sydney-based Quadrant Private Equity, the Royal Automobile Club (RAC) of Western Australia and the Mann family.
Stuart Miller, CEO of myHomecare, sees two fronts for mergers and acquisitions: the first, organisations that see the increasing demands of compliance, staff shortages, real revenue reduction and pick their time to exit the sector and concentrate on their core offerings.
“They become partnership or acquisition opportunities where all parties can gain value,” he adds.
The second is those smaller operators that have been hit hard by the recent regulatory changes including payments in arrears, the CHSP cash adjustments and the future consolidation of the Support at Home program.
“Just the first two will take over $1 billon of cash out of the sector and have already started to put a lot of small organisations under financial pressure,” Stuart stated.
“For us, that front becomes an opportunity to ensure that clients and staff are looked after without getting the industry a bad reputation for failure.”
Marcus Darville, Managing Partner at Quadrant, says that despite the smaller number of merger and acquisition opportunities in home care, the sector remains a good investment – provided operators have the scale and workforce required.
“In reality, the big players tend to stay big and the small players tend to stay small,” he said.
“Although you don’t have the physical assets, the infrastructure of people and systems and density in certain geographies is still extremely important.
“I would argue it’s still quite a ‘sticky’ segment because clients are wedded to their carers and you also need to have the critical mass of carers that people can have reliable care.”
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