Analysis

Hospice to remain a hot target for SPACs ?

, Hospice news

Rising interest from special-purpose acquisition companies (SPACs) could make competition in an already active hospice M&A market more fierce in coming years. Like private equity and other investors, SPACs are drawn to hospice by surging demographic tailwinds from the aging population. 

Merger and acquisition activity continues to heat up in the hospice space despite record-high price tags for acquisitions. Hospice and home care sector multiples have reached record highs in recent years, with a recent report reflecting amounts reaching upwards of 29x in 2020 and beating 2019’s record high of 26x, according to PwC’s Health Research Institute. Acquisition activity in both sectors has outpaced other health care markets.

SPACs are joining private equity firms as growing entities in the hospice space. The number of private equity hospice deals reached an all-time high last year. Private equity hospice transactions rose nearly 25% from 2011 to 2020, according to a report from The Braff Group.

The U.S. Census Bureau projected in 2017 that 77 million people across the country will be 65 year or older by 2034, or 1 in every 5 people. This population will substantially increase demand for serious illness and end-of-life care, contributing to a strong growth trajectory for the hospice market. Hospice utilization has been on an upswing among Medicare decedents, climbing above 50% during 2018, the highest rate since the 1983 inception of the Medicare Hospice Benefit, according to research from Excel Health.

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