By Stephen Tweed 

One of the things we do at Leading Home Care, and The Home Care CEO Forum is to monitor trends in the home care industry, and then lead discussion of these trends with leaders in the top tier home care companies.  One of the trends we have been monitoring since 2015 is the digital disruption of our industry by a handful of companies that raised Private Equity funds and then developed technology platforms to “Uberize” home care.

Last week, we saw the announcement of another major digital disruption in home care. Honor Technology, Inc. , the San Francisco based company that has raised $255 million in investment capital, has acquired Home Instead, the world’s largest franchisor of in-home personal care companies.  The acquisition was announced on August 6, 2021.  

According to the announcement, The combined organization represents more than $2.1 billion in home care services revenue and affirms itself as the largest player in the projected $500 billion home care industry. Honor’s technology and operations platform, paired with Home Instead’s leading global network, training leadership and relationship-based care, will serve as a foundation for a dramatic increase in innovation to benefit caregivers and clients through expanded offerings.

“For the past 27 years, Home Instead has demonstrated a powerful combination of leadership, passion, and innovation — elevating the standard of care globally and becoming the respected industry leader,” said Seth Sternberg, co-founder and CEO of Honor. “This is an incredibly exciting moment as we bring together the preeminent global home care brand and network with the best technology and operations platform to provide an even more amazing caregiver and client experience.

The Perfect Storm of Industry Trends

The announcement of the acquisition brings together the “perfect storm” of industry trends that we have been watching over the past few years:

1. The entrance of Private Equity investment into home care – We’ve been watching as many private equity firms have worked to gain entry into the home care sector.  PE firms have acquired 9 of the top 10 franchisors, five “Digital Disruptors”, and most of the home care software companies.  In addition, several large private pay home care companies have accepted private equity capital and are acquiring other smaller companies.
2. The Digital Disruption of Home Care – Since 2015 we’ve been monitoring a handful of technology companies, including Honor, that have developed platforms in an attempt to “Uberize” home care.  That is, to use technology to bring together clients and caregivers in a transaction similar to Uber and Lyft in the ride sharing industry. The other digital disruptors have shifted their business models, or closed completely.  Honor has been through three different business models before moving into acquiring other home care companies.
3. The Consolidation of Home Care – For a decade we’ve been watching and wondering when the home care industry would begin a major move to consolidate.  Private Pay in-home personal care is the fastest growing segment of health care in America. It is highly fragmented, with 26,000 companies in three different categories generating a median revenue of $1.958 million.

What Does This Mean for Home Care Leaders? 

Monitoring the trends is one thing. Analyzing the trends and using that information to make strategic decisions is another.  To get a better understanding of what this means to our industry, I asked some of the leaders in our Home Care CEO Forum for their thoughts.  Here are some of their comments:

“I always find it interesting when Venture Backed tech companies shift business models multiple times and then end up buying a “traditional” business (the very type of business they were supposed to disrupt).  I am sure at some point they had slides in their pitch deck on how they were going to take massive market share away from the Home Instead’s of the world.  While technology is important in all industries to improve efficiencies and profitability, there is still a human element that drives a business.  Culture, Strategy, Execution, Personal Touch, etc. I think it is worth keeping an eye on and will possibly give Home Instead owners an edge over other franchise operations, but it could also be a death sentence for franchisees who didn’t sign up to be a tech company.  Either way it will drive new ideas and competition so I think it continues to reinforce the need to implement technology and build a strong culture. ”  Jake Knight, CEO, Lend A Hand Home Care.

” I find it important to celebrate any major announcement in home care based on the intent to improve care to the millions who depend on home care services. I’m glad to see activity and interest in the business of eldercare. Home Instead has been a leader in the aging space and I’m hopeful that their transaction with Honor will be a positive one. Beyond well-wishes, I continue to be bullish on the premise that independently owned agencies will dominate the market share of paid caregiving. This business is a relationship business that thrives on local ownership and compassion. Systems, technologies, and resources are becoming more mainstream and equally available to providers even at the smallest size. In review of many of those technologies, I’m finding that the personal relationship aspect cannot be replaced.”  Kunu Kaushal, CEO, Senior Solutions Home Care, and Founder, Independent Home Care Alliance.

“I will be interested to see what happens to Home Instead after this. I am guessing they will be moving from franchising model as it doesn’t seem to make sense with what I understand of Honor’s model. I wonder if they will be moving in the direction of Home Care Assistance and will be buying back the franchises and make them traditional locations. Either way I think moves like this help the independent companies because decisions that are made thousands of miles away from the day to day action typically never work very well for the betterment of the client or the employee. Hopefully this will open up some employees for us!”  Aaron Stapleton, CEO, Queen City Home Care.

“To me the acquisition of Home Instead is quite interesting but not necessarily unexpected since Honor has been focused on building a network of homecare companies and Home Instead is one of the last remaining franchises not part of a PE group. The short-term impact will probably be having the other major franchises analyzing their business models and how they use technology throughout their organization.  As to Home Instead, there will probably be a long period of trying to integrate Honor technology and train caregivers as to its use. While Honor supposedly has some great technology, I believe many home care companies also are using similar technology to automate scheduling, clocking in and out, electronically documenting work done and communicating with families.  Those agencies who do not use such technology will be at a competitive disadvantage in the future.  The combined entity may have an advantage in recruiting if they can market themselves nationally with an app easy for prospective caregivers to use in applying for employment. While Honor has touted centralized hiring and scheduling, I do not see that working in the private pay space due to caregiver quality and client preference issues.”  Carl Bossung, Co-Founder, Senior1Care

Other Deals in the Home Care Consolidation Trend

While this acquisition is making big news, this is not the only transaction that we are watching.  Consolidation in the home care industry is making a major surge, and a number of members of our Home Care CEO Forum have sold their businesses in the past year.  And, a number of our members are making their own acquisitions.

Here are some of the large independent home care companies that have been making acquisitions recently:

• 24Hour Home Care
• Arosa
• Family Resource Home Care
• Family Tree In-home Care
• Home Care Assistance
• HouseWorks
• Nova Leap

Here are some of the franchise organizations that have been buying back franchises, or buying independent agencies to operate as company owned offices:

• Comfort Keepers
• Home Care Assistance
• Senior Helpers

We also learned last week, in a conversation with Erik Madsen, CEO of Home Care Pulse, that their company has been acquired by private equity group Cressy & Company.  Cressy &   Company also has ownership in home care software company HHAeXCHANGE, and several other health care companies outside the home care arena.

In addition to these companies, Honor is continuing to build their Honor Care Network, and they have also explored buying some independent agencies.

If you know of other home care companies that are  actively involved in mergers and acquisitions, let us know.  We want to continue to closely monitor this trend.

Let’s Discuss This Further.

During the month of September, the members of our four Home Care CEO Mastermind Groups will be having in-depth discussions about mergers and acquisitions in home care.  Our members are very interested in this trend, so we’ll have some outside experts talk with us about their take on this trend during our monthly Mastermind Town Hall. Then our members will discuss what this means to them in their individual CEO Mastermind Groups.

If you are an independent home care company between $1.5 and $40 million in annual revenue, and you would like to be part of a group of other owners of similar sized companies who don not compete with you, then consider becoming a member of a Home Care CEO Mastermind Group.