Industry Insights

Another Big Year in Long-Term Care & Senior Housing M&A

March 2016
Author:  Austin Propst

Austin Propst


Corporate Finance

Health Care

910 E. St. Louis Street, Suite 200
P.O. Box 1190
Springfield, MO 65801-1190 (65806)


The long-term care (LTC) and senior housing industry saw record-breaking merger and acquisition (M&A) activity in 2015. The number of successful transactions increased by 18 percent—from a previous record high of 302 transactions in 2014 to 357 transactions in 2015. This marks the sixth year in a row with year-over-year increases in transaction volume.

In addition, 2015 was a record year for deal value, with $14.2 billion in total transactions. Transaction activity for the fourth quarter of 2015 also was up from the previous quarter. According to Irving Levin Associates, Inc., the fourth quarter saw 106 completed transactions, up from 100 in the third quarter and 94 transactions in the fourth quarter of 2014.

Regional Outlook

Click on the links below to view LTC M&A activity by BKD region.

East Region LTC M&A Activity

North Region LTC M&A Activity

South Region LTC M&A Activity

The upward trend in valuations has continued as well. From 2014 to 2015, average capitalization rates in the skilled nursing sector improved 20 basis points, while average cap rates in the assisted and independent living sector on a combined basis improved 30 basis points, reaching 12.2 percent and 7.3 percent, respectively. Assisted living cap rates were 7.7 percent, while independent living cap rates came in at 6.9 percent for 2015. The average price per bed for skilled nursing facilities was $85,900—up 12 percent from 2014—while the average price per unit for assisted and independent living facilities on a combined basis was $190,000—down slightly from $208,000 in 2014.

Exceptionally low interest rates continue to help create a favorable M&A environment, increasing values for sellers through lower cap rates and enabling buyers to take advantage of reduced capital costs. In addition, buyers in a competitive environment may be more inclined to negotiate purchase price.

Financial and strategic investors are optimistic about LTC and senior housing M&A for 2016. Financial investors, including real estate investment trusts, will continue to pursue investment opportunities in the sector, especially as interest rates stay low and options for higher-yield assets remain slim. Strategic buyers also are being highly acquisitive because of attractive interest rates and a desire to build scale to help counteract increasing regulatory costs and reimbursement pressures.

The charts and tables below offer additional information on historical transaction volume and recent valuation data.

Transaction Volume

Transaction Value

Valuation Metrics

Source:  Irving Levin Associates, Inc.

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