Private Equity Backing Becoming ‘Qualifying Criteria’ for Home Care Franchise Companies
The past few years have seen private equity players plant a flag in the home care space, particularly in the franchising world. In 2021, this trend has only increased with the heightened demand for home care services.
Roughly $66 billion in PE investment went out to various health care sectors in 2020, a 21% increase compared to 2019, according to statistics cited at a special hearing held by the House Ways and Means Subcommittee on Oversight in March.
Overall, the amplified attention from financial backers is a positive for the home care industry, according to J.J. Sorrenti, CEO of Best Life Brands.
“I think the demand is good for everyone,” Sorrenti said during a panel at Home Health Care News’ Franchise Forum. “It’s obviously good for the company — the valuations are increasing. It’s also good for the value of the franchisees’ businesses, having a financially strong franchiser with private equity [backing]. It allows for investment in times of crisis and for the company to be more flexible.”
Bloomfield Hills, Michigan-based Best Life Brands is the holding company for a handful of senior care companies, including home-based care providers ComForCare, At Your Side and Boost Home Health Care.
Backed by PE firm The Riverside Company, Best Life Brands’ portfolio includes over 400 franchise locations across the U.S. and Canada.
The CEO of another PE-backed company, Always Best Care, believes that interest from financial backers signals future growth from home care at large.
“Private equity firms are attracted to growth companies,” Jake Brown, CEO of Always Best Care, said during the panel. “The fact that there’s such a high interest in senior care franchisers is a testament to our industry and the future of our industry. They’re investing in something they believe has a trajectory and a lot of opportunity for growth.”
Roseville, California-based Always Best Care is a home care franchise company that operates across 224 territories in 30 states and Canada. The company is backed by PE firms Gemini Investors and Plenary Partners.
Brown noted that for senior care franchises, the involvement of a PE firm or strategic investor is also a sign that a company has made it to the big leagues.
“[Their involvement] is almost a qualifying criteria these days,” he said. “Otherwise, it might suggest you haven’t quite arrived.”
While the public health emergency has, no doubt, created further demand for home-based care, it’s unlikely that PE interest in the space is fleeting.
PE isn’t just shaping the future of the home care market, however. Strategic investors are also a factor, according to Synergy HomeCare CEO Charlie Young.
“I think the activity that we’ve seen is an indication of how outside markets see the value of home care,” Young said during the panel. “I would expect that you will continue to see private equity interest. I think what we’ve seen this year is, you’re starting to see what we would call ‘strategic interest,’ as well. The pandemic has shifted or accelerated aging in place.”
NexPhase Capital-backed Synergy is a Gilbert, Arizona-based non-medical home care franchise that operates roughly 380 franchise locations nationwide. The company offers companionship services, in addition to personal assistance, housekeeping, live-in care and 24-hour home care services.
Despite a mostly favorable view of PE partners, Sorrenti stressed the importance of teaming up with a firm that isn’t solely concerned with their ROI.
“Making sure that financial partner cares about the client and cares about the franchisee is really important,” he said.
Over the past few years, Best Life Brands has seen the majority of its growth come through franchise development. “We know the services we provide are so valuable, so getting more pins on the map and being more convenient to the client is really an initiative that we think is very important,” Sorrenti said.
On its end, Always Best Care has doubled in revenue over the last five years.
“A lot of that is just organic growth, with our franchise owners really pushing the envelope and growing their businesses,” Brown said. “We are finding great new franchisees to join our group and execute well.”
Synergy has seen consistent growth despite workforce-shortage headwinds. In 2020, the company hit a roughly 35% growth rate on new franchisees, and it has seen an even stronger trajectory in 2021.
“We have already eclipsed last year’s number this year,” Young said. “We’ve had and continue to have some great territories.”
Still, Young believes that the key to its success is creating a community for Synergy’s franchisees.
“When prospects come to look at us and think about joining our franchise community, culture is something that they’re really drawn to,” he said. “We are very focused on creating collaborative and connected culture. … We want to make sure we connect our franchisees together to help each other take advantage of opportunities.”