Assisted Living/Senior Care EBITDA & Valuation Multiples – 2024 Report

The following report provides EBITDA and revenue multiples paid by acquirers for assisted living & senior care companies in 2024. Our analysts collected this data from proprietary research, private equity networks, and interviews with M&A professionals between Q3 2022 and Q1 2024. (Sources)

The following tables display valuation multiples for the major subsectors within the assisted living industry, as well as EBITDA/revenue ranges.

EBITDA Multiples for Senior Care Companies, Q1 2024

Senior Care Company Revenue Multiples, Q1 2024

In their research, our analysts noted the following trends:

• Skilled nursing is profitable, but higher risk: Skilled nursing facilities saw higher EBITDA and revenue multiples than any other subsector within assisted living, however the specialization of the work makes it a riskier investment.
• Active adult communities showed the largest growth potential: Whereas some senior living subsectors saw a more modest growth in EBITDA as companies within that specialty grew in size, active adult communities saw a change of +4.5 in their EBITDA multiples.
• Representation provides alpha: Facilities that were represented by an M&A advisor earned 21% higher payouts than facilities that ran their own deal process.
• Longer deal processes mean higher payouts: ~40% of deals within the analyzed dataset took place over a 9-month period. Business owners interested in getting the best multiple should be prepared for a more lengthy deal process that may involve bids from several potential buyers to get the best possible price.

In the following section, we discuss how assisted living companies are being valued by acquirers in today’s market. We then provide a forecast of the direction assisted living M&A is going as of 2024.

How Senior Care Companies are Valued

Valuing assisted living companies involves two components: standard business valuations and real estate.

On the business end, senior care facilities are typically valued using a multiple of EBITDA. However, acquirers often adjust EBITDA for the purposes of showing how a facility would run under normal conditions (e.g. adjusting a new facility’s annual revenue/expenses to reflect how it is expected to run as a fully matured location).

Because senior care facilities combine residential living with a business model, the quality of the property is placed at a higher level of importance than in other industries. As a result, the standard valuation model of EBITDA is complemented by a focus on cap rates to assist buyers in determining the long-term return potential of the facility itself, as well as the inherent risk associated with procuring the property.

Senior Care Cap Rate Averages By Subsector

Valuing a senior care facility also requires looking at additional factors (e.g. occupancy rates, payer diversity, and local market needs) to get an accurate estimation of the business’ value. Consistent occupancy rates, for example, telegraph steady cash flow, while a high level of diversity in financing methods amongst occupants ensures a greater level of overall stability.

The State of Assisted Living M&A in 2024

While many industries have suffered moderate to severe losses over the last 4 years due to the pandemic and the economic downturn, senior care has remained relatively stable. Previous growth predictions have been fulfilled as the sector has grown ~3% since 2020, despite brief drops in valuations in late 2020 and H2 2022. This is best seen in the M&A deal numbers for 2022, which saw a 17% increase from 2021’s 450 to a total of 527 transactions.

The steady growth observed in this sector is largely due to the increase in demand; as the baby boomer generation progresses into its silver years, the need for adequate housing has increased. Experts have already charted the following trends:

• The senior population (65+) has increased from 15.4% in 2003 to 21.19% in 2024. This number is expected to increase to 23.4% by 2034.
• Approximately 6% of seniors live in some form of residential senior care (e.g. assisted living, nursing homes).
• The National Investment Center for Seniors Housing & Care (NIC) predicts that the U.S. will need to add 800K+ units by 2030. This number rises to ~1M by 2040.

As a result, cap rates have seen a general increase over the last 3 years, the notable exceptions being dialysis and hospice care, which suffer from heavy expenses related to a) purchasing and maintaining expensive medical equipment and b) round-the-clock care for residents, leading to reduced overhead that makes businesses less appealing to buyers.

Interestingly, skilled nursing facilities have seen the opposite effect, routinely posting a higher cap rate than any other subsector of senior care. The operative difference between skilled nursing and dialysis/hospice is that the former has increased specialization in care as well as greater liability on the part of these facilities, as patients in need of skilled nursing facilities are often more prone to accidents.

Senior Care Cap Rates By Subsector, Q1 2020 – Q1 2024

Where the observed sector growth is less certain is in actual revenue; although experts predict a growth in Medicaid/Medicare spending over the next decade to help cover increasing demand, legislative changes between different presidential administrations have thrown these predictions into doubt. As a result, the senior care industry is stretched in opposite directions by the assurance of reliable clientele generating steady cash flow and the risk of minimized government assistance, resulting in business owners will take on many of the costs associated with running their business.

Our analysts have made the following predictions:

• Private equity will continue to dominate senior care: Our data shows a great deal of PE activity over the last 5 years. With cap rates on the rise, firms will likely continue picking up companies with the intention of maximizing their returns through resale.
• Growth potential = higher multiple: Buyers will be more likely to consider a higher payout for facilities which prioritize expanding their enterprise to meet the increasing demand of the industry.
• Prioritizing diversification of financing methods will attract more buyers: Because of legislative uncertainty, facilities which prioritize taking in residents from various economic backgrounds are more likely to maintain a steady cash flow, thus earning a higher payout.  

Selling Your Assisted Living Company

The many elements of properly valuing a senior care facility make it especially difficult to do. As someone who has sold multiple businesses to strategic buyers and PE firms, I am a big believer in transparency, especially concerning valuations, which have long been obscured. I’m happy to speak with business owners to offer third party advice. You can reach me via the link below or through the contact page on this website.

Sources:

• Value of a Senior Housing or Assisted Living Facility (Haven Senior Investments)
• The Valuation of a Residential Assisted Living – The Real Estate and the Business (RAL Academy)
• Senior Living Valuations: What’s the Outlook? (National Investments Center)
• How to Sell Your Assisted Living & Age Care Facility for Maximum Value (Digital Exits)
• Care Home Valuation Guide (Eclipse Corporate Finance)
• U.S. Assisted Living Facility Market Size, Share & Trends Analysis Report By Age (Grand View Research)
• U.S. Seniors Housing & Care Investor Survey (CBRE)
• Skilled Nursing Cap Rates – Why Are They Higher? (Matthew Alley)