Chaz Bauer (left) and Michael Freeman speak at the HME Business FUTURE event in Nashville, Tennessee.
There’s a good chance of 2025 being a big year for home medical equipment (HME) dealmaking activity, industry insiders believe.
For starters, the strategic buyers that drove HME industry consolidation between 2017 and 2021 are ready to get off the sidelines, with their integration efforts near the finish line. Meanwhile, on the private equity side, investors have more dry powder than ever – and they’ll need to deploy it soon.
Michael Freeman, the chief business development officer for Viemed Healthcare Inc. (Nasdaq: VMD), has already seen signs of HME M&A picking up.
“There are a lot of suppliers out there, whether they’re right there with a bank or not, that are testing the market,” Freeman said in August at the HME Business FUTURE conference. “And I do feel there’s a lot of activity picking up, just looking at what’s coming across my desk now from the beginning part of the year to where I sit here today.”
Lafayette, Louisiana-based Viemed is a national provider of in-home medical equipment and post-acute respiratory health care services. Freeman joined the company a couple of years ago after previously leading transactions in the home health and hospice industries for roughly two decades.
As for the transactions on his radar, Freeman is seeing a lot of activity for the smaller HME suppliers, but also the “Grade-A-type suppliers,” he noted.
“I feel like it’ll be a good back-end of the year,” Freeman said. “[The industry] may not close deals by the end of the year, but we’ll likely get deals under, hopefully, LOI [letters of intent] that roll into next year.”
Chaz Bauer, the director of health-care investment banking for Fifth Third Securities, likewise expects HME transaction volumes to rebound to some degree in 2025.
“The first half of 2024 has been what many … believe is kind of the trough or the bottom of that activity,” Bauer said at FUTURE. “For those of us close to it, we’re starting to hear and see assets coming to market – or getting ready to come to market in the near future. And so I think that gives us some encouragement that activity is going to be picking up.”
Fifth Third Securities is a registered broker-dealer and investment advisor that offers a variety of financial services and products.
The HME industry is not a ubiquitous market, where companies, for the most part, only do one thing. Instead, it’s made up of several product and service areas, from bent metal and basic in-home medical supplies, to complex respiratory equipment and more.
Generally, there’s starting to be M&A activity across the board, Bauer said.
“It’s across categories,” he said. “Complex Rehab is active and will remain active. We’re seeing some things on the sleep side, the respiratory side, as well as CGM (continuous glucose monitoring) and diabetes. And there’s stuff out in the market in each one of those categories – mixed quality, but quality is starting to improve.”
Viemed: an inside look
During FUTURE, Freeman offered additional details on what Viemed is seeing on the M&A front, and how inorganic growth fits into the company’s plans moving forward.
Broadly, Viemed has established a track record of growing via organic growth. That’s unlikely to change, Freeman said, with organic growth remaining option number 1 on Viemed’s growth roadmap.
But the HME company is reviving its M&A engine at the same time.
“Viemed was founded on organic growth, and we’re going to continue to put a lot of emphasis on organic growth throughout the country,” Freeman said. “Two years ago, I joined the company. We cranked up our M&A arm, and we understand that there’s an additional value we can create by acquiring the right asset in the right market, where it makes sense.”
M&A typically falls into three buckets for Viemed: transformational platform deals, strategic tuck-in acquisitions and joint ventures.
“I’m looking at all,” Freeman said. “I’m casting a big net, but we’re being very selective on which targets we go after.”
The joint venture avenue is, perhaps, one of the most interesting ones for Viemed. Freeman previously worked in a similar capacity at LHC Group, one of the largest home health and hospice companies in the U.S. that’s now part of Optum.
LHC Group made joint ventures a calling card for the business, and Freeman sees parallels to what Viemed can do in the HME space.
Viemed already announced its first health system JV earlier in 2024 in a deal with East Alabama Health.
“I put together a lot of joint ventures in the home health and hospice side. We’re also following that same model in the DME space,” Freeman said. “There’s not a lot of health systems that still own their own DME. If they do, they may also have joint ventures already, or they may have sold them off a couple years ago. But there are still some out there.”
Additional considerations
HME Business Executive Editor Bob Holly (left) discusses M&A activity with Chaz Bauer.
HME dealmaking could also be buoyed by a more conducive overall macroeconomic environment for dealmaking.
The Federal Reserve recently announced a long-anticipated rate cut, which could make it easier for HME dealmaking. More cuts are expected, too.
“Our restrictive monetary policy has helped restore the balance between aggregate supply and demand, easing inflationary pressures and ensuring that inflation expectations remain well anchored,” Jerome Powell, chair of the U.S. Federal Reserve, said at a press conference.
Another positive development for M&A is the fact that some state-level legislation placing more oversight on PE – especially in health care – is starting to fail.
California Gov. Gavin Newsom, for example, shot down a law requiring private equity firms and hedge funds to get approval from the attorney general’s office when buying health-care assets.