Understanding Platform Acquisitions in Home Health & Hospice Mergers and Acquisitions (M&A)

Private Equity (PE) groups utilize platform acquisitions to enter new industries, including home health and hospice. PE groups, sometimes referred to as financial buyers, are key players in the healthcare mergers and acquisitions (M&A) landscape. These buyers can range from small family offices to large financial firms that raise significant capital to invest across different industries. For home health and hospice owners, understanding how PE groups approach acquisitions can shed light on how your business may fit into their strategy.

What is a Platform Acquisition?

When entering a new sector, PE buyers typically start by purchasing a mature, well-established business—known as a platform. The platform serves as the foundation for future growth, with smaller, often less established companies added as “tuck-in” acquisitions over time. Each tuck-in is intended to add value by achieving a specific strategic goal for the platform, such as expanding services, strengthening geographic presence, or broadening the patient base.

The process of securing a platform and integrating smaller tuck-in acquisitions is known as a roll-up strategy and allows PE firms to rapidly scale operations and maximize the overall value of their investment. Most PE groups pursue this strategy with a general five-to-seven-year investment timeline, after which they aim to exit the business and deliver returns to their investors. While the majority follow this timeframe, some PE groups may extend their holding period depending on market conditions and portfolio goals.

The platform business often provides synergies with tuck-in opportunities, allowing for the elimination of overlapping back-office or administrative functions and related expenses in the acquired company. The platform essentially allows the PE firm to operate as a strategic player, utilizing existing synergies for additional acquisitions to effectively reduce the per acquisition cost, versus a non-synergistic buyer.

What Makes a Business a Platform?

As stated above, a platform is a mature, well-established business with sophisticated systems in place. These are often larger entities, although there is no specific industry-wide size threshold. Ultimately, it’s in the eye of the individual PE group whether a business qualifies as a platform opportunity for their purposes. In many cases, the existing systems and leadership are often more important than the company’s actual “size.” What looks like a platform to one PE firm might not look like a platform to another; and a business that looks like a platform to a PE firm with no current investments in the home health or hospice spaces might look like a tuck-in to a much larger strategic player. It’s all in the eye of the beholder.

For larger strategic buyers that are well-established state, regional, or national operators, most acquisitions look like “tuck-ins” to their existing businesses. Notably, once PE groups close on their platform or initial investment in the space, they also begin to look at future acquisitions from the perspective of a strategic player.

A platform opportunity generally needs:

• A strong and scalable operating model
• Sophisticated back-office systems (billing, HR, compliance)
• Experienced leadership

These elements give a business the foundation it needs to act as a platform and serve as a “backbone” for the roll-up strategy. While there is no set size, in the highly fragmented home health and hospice sectors, platform opportunities are typically generating at least $20 to $30 million or more in annual revenue, although there are some smaller, sophisticated operations that could also be viewed as suitable platform opportunities. The appeal of most smaller agencies, however, is as tuck-in opportunities, not an initial anchor investment.

Why it Matters for Owners

Platform deals often present unique financial opportunities for sellers. In many cases, PE groups want existing owners to remain involved, providing continuity and leadership as they pursue their roll-up strategy and acquire tuck-ins. A common feature of these transactions is a rollover of equity, where a portion of the sale price is “rolled over” by the seller. In this scenario, the seller maintains an ownership stake in the business going forward rather than cashing out entirely. This allows them to team up with the PE firm and share in their growth efforts, essentially giving the seller a “second bite at the apple.” The rollover percentage can vary significantly from deal to deal and buyer to buyer.

For agency owners who are not ready to retire but want to take some chips off the table and find a sophisticated partner with additional resources, positioning as a platform acquisition allows for some immediate liquidity, potential for collaboration, and the chance for a second payout down the line.

Conclusion

Platform acquisitions play a central role in how private equity groups enter and scale investments within the home health and hospice industries. For agency owners, understanding what makes a business “platform ready” and how PE groups look at these transactions can provide valuable perspective when considering a sale. Whether your agency is best positioned as a platform, a tuck-in, or both, knowing how buyers approach these strategies can help you position your business to achieve the outcome that aligns best with your goals.

An M&A Guide You Can Trust

Stoneridge Partners is a national healthcare mergers and acquisitions advisory and strategic consulting firm that manages complex transactions for home care, home health, hospice, and behavioral health companies.

We’ve been in business for over 25 years and have assisted owners just like you sell their healthcare-related businesses. We have accumulated a deep network of motivated buyers during our 25 years, and we have years of experience as operators, attorneys, and development professionals. We’ve been in your shoes, and we know the daily challenges you face.

If the thought of a potential sale is of interest to you, let us help you optimize your prospects for a successful transaction and the highest valuation.

So how do you start? Please visit our website at www.stoneridgepartners.com or contact us at 800-218-3944 for a confidential conversation.