A Management Group headed by a West Point Graduate (BS Engineering, MBA Marketing, Phd. Business) is developing a unique business opportunity in the Home Health Care Industry, which is growing at 9% a year. There is a big push by Medicare to straighten out the industry as it would save them billions a year in hospitalization expenses (1/4 the expenses). The problem is that there are about 14,800 agencies that are run by mom and pop operators and they are plagued by non compliance (record keeping + billing + fraud) issues so they are imposing heavy fines on agencies that operate below standard. Many are selling since they have difficulties complying and are stuck in the 1990s.
The potential industry has not yet been realized and has not kept up with today’s stock market valuations , but there are some corporate entities that see this potential and are buying up agencies and turning them around increasing value by 5 to 10 x original worth. There are numerous profitable agencies that are being sold out there cheap. These individual agencies have revenues of $ 250k, but turned around and run professionally this can easily increase to $ 2 MM.
The Management Group consists of consultants to a number of owners and realize the business potential. They wish to roll up several of the agencies that net an existing combined EBITDA of $2 MM to $5 MM. The Management Group will start with one or two very large agencies that will be used as a base and depending on the speed of purchase and the appetite of a Private Equity partner. The plan is to grow to 40 agencies @ $16 MM and eventually roll up about 150 agencies at a cost of $70 MM+. Presently there is an opportunity to start a base for these buyups with the purchase of two large agencies that are for sale with EBITDA of $1 MM.