M&A Strategy Considerations for Senior Care Providers

As the senior care industry continues to evolve, many owner/operators are looking to grow market share or exit.

The challenging environment has led to an unprecedented number of ownership changes. Occupancy issues, staffing challenges, regulatory burden and reimbursement uncertainty have created a vortex for dealmakers. Obviously, the key to a good deal is for the seller and the buyer to attain a satisfactory conclusion.

So, how can that be accomplished?

The baby boomer generation, a group of 73 million people born between 1946 and 1964, will all reach the age of 65 by 2030. As such, numerous aging facilities have been built or are under construction. With a bright future, many investment dollars are targeting this industry as all indications point to abundant revenue in serving this aging population.

By definition, due diligence is a comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential. With an influx of opportunistic equity, sellers have an opportunity to capitalize on the demand and buyers must beware of bad apples.

A carefully thought-out strategy must be used by both parties when determining the purchase/sale price. The average cost of care in a skilled nursing facility topped $10,000 per month in 2024, while assisted living units average nearly $4,500 per month. These figures represent an average across the nation and will fluctuate by domicile, but the transaction dollars are significant to both parties.

With pricing differing by state, what factors determine the value of a deal?

The Facility

• Year built, construction type, recent upgrades (roof, exterior/interior); What capital improvements are necessary to attract residents?
• High-cost capital systems (fire suppression, boilers, HVAC)
• Prior physical losses (Is mold or legionella an issue?)

Location

• Do surrounding demographics support occupancy?
• Is there a bountiful workforce to meet the demand?
• Is it in a friendly or unfriendly jurisdiction with regard to litigation?
• Referral sources

History

• How has occupancy been in the past?
• Why is it for sale?
• What is the financial picture today?
• What is the facility’s reputation?
• What are past claims and ratings?

In addition to the above due diligence, evaluations must consider numerous other factors such as recent regionally appropriate transactions. Past financial performance, payables/receivables, current unpaid or future contingent liabilities must also be addressed. Will the purchase involve escrow? What is the exit strategy for the seller? What contingencies are in place for the buyer?

As documented, numerous questions arise in a formal due diligence process. There is no silver bullet for addressing the concerns of either party. No matter the comfort or the scope of diligence of the process, uncertainties remain.

However, an emerging mechanism for transferring risk is becoming popular in the U.S. market. Having been used in other parts of the world, Transaction Insurance policies have gained increasing acceptance as an effective tool to assist buyers and sellers in mitigating risk and overcoming deal obstacles.

In essence, the insurance products can be used by either the purchaser or seller, or both, to speed the transaction and provide a clean exit and reassurance should a future liability arise post close. Products available today include Representations & Warranties, Contingent Liability and Tax Liability. These products reduce escrow and provide a clean transaction for both parties.

Oswald’s Transactional Risk and Aging Services teams work together to provide peace of mind in all M&A deals through quicker transactions and combating uncertainty.

In the management of risk, no area is more susceptible to exposure than the transaction of a business. Due diligence and forensics will play a role in all deals, but a solution has emerged to best mitigate and most importantly transfer risk, allowing a successful transaction to occur and providing the ultimate M&A strategy for both buyer and seller.

This article originally appeared in 2018 and was updated in 2025.