Aged care homes are selling for prices well above their most recent valuations, fuelling a surge in merger and acquisition (M&A) activity across the sector, according to aged care consultancy Pride Aged Living.
“We’re working on transactions where the client had a valuation done in the last six months, and the offers that have come in have significantly exceeded that,” Stephen Rooke, Director with Pride Aged Living, told The Weekly SOURCE. “It’s the first time in a while that’s been the case.”
Pride is currently advising on three major transactions, with more in the pipeline:
- Wesley Mission’s Rayward Facility, Carlingford – 22km northwest of the Sydney CBD – where Wesley Mission and Anglicare are entering into an opco/propco arrangement developed by Pride.
- A Sydney metro residential aged care home, now in the second round of a competitive process.
- A Victorian home care business, with a limited Expression of Interest (EOI) process underway.
“For each transaction, there are 20 or 30 interested organisations,” Stephen said.
Certainty driving deals
Stephen attributes the renewed appetite for acquisitions to the policy certainty delivered by the new Aged Care Act.
“Organisations that find the certainty beneficial are saying, ‘We now know what size we need to be. We know what sector we want to be in. And we also know which geographical areas we want to be based in,’” he explained.
“That allows them to look at opportunities and be quite commercial about them – whereas before, there was hesitation.”
The wave of interest spans the spectrum: smaller operators seeking scale and sustainability, mid-tier providers chasing size thresholds, and select large players looking for quality homes. There is also overseas interest.
However, a strong M&A market doesn’t create new beds. With Government forecasting demand for 10,600 new places a year for the next decade, acquisition activity alone won’t meet future need.
Interest in acquiring existing sites or brownfield developments for new greenfield projects remains “limited,” Stephen added.
