‘We’re Never Going Back to an Institution-First Model’: Home Care Veteran Ready to Lead New Aging-in-Place SPAC

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A new blank-check company is hunting for aging-in-place businesses to take public.

And unlike other senior care-related special purpose acquisition companies (SPACs) launched in the past year, this one — DTRT Health — is led by a well-known home care veteran with ample public experience.

“There’s quite a number of fascinating public-ready companies of scale, of size that are doing good work, have great management teams in place and come with really wonderful histories,” DTRT CEO Mark Heaney told Home Health Care News. “In my view, the public would enthusiastically support their work by investing in them.”

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In essence, SPACs are shell companies that raise money to acquire or merge with businesses looking to hit the public market. A SPAC often has a two-year timeline to identify and strike a deal with its target, with any money raised returned to investors if an acquisition or combination never materializes.

For businesses, the appeal of teaming up with a SPAC is a quicker way of going public compared to traditional means.

“We are a pathway,” Heaney, former CEO of the Frisco, Texas-based Addus HomeCare Corporation (Nasdaq: ADUS), said. “We are simply an opportunity for a public-ready company to become public.”

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DTRT Health Acquisition Corp. was officially announced at the beginning of September, with pricing of its initial public offering of 20 million units priced at $10 per unit. On Sept. 2, the SPAC became listed on the Nasdaq Capital Market under the ticker “DTRTU.”

Financial services firm Cantor Fitzgerald & Co. acted as the sole bookrunner, with full-service boutique broker Odeon Capital Group LLC serving as the lead manager for the offering. As for the SPAC’s name, “DTRT” is an acronym that stands for “do the right thing,” Heaney explained.

“The reason we picked that name was very intentional,” he said. “‘Do the right thing,’ that mantra is very important to us. Our mission is to make it possible for people to live at home for as long as they want to live there.”

Forming DTRT

Addus was founded in 1979 as a home cleaning service that mostly focused on serving downtown Chicago residents. The company added to its service mix when it landed a small contract from the City of Chicago to carry out certain chores for the city’s at-risk senior population.

Heaney spent over three decades at Addus, serving at different times as COO, CEO and chairman of the board. As CEO, Heaney helped lead Addus’s successful IPO in 2009, three years after the company was acquired by a private equity firm.

The long-time home care leader believes he can use that background to help guide DTRT’s future target.

“I’ve been there and have years of experience feeling what a public-company CEO might experience,” said Heaney, who has remained an active participant in many of the large home care industry associations since leaving Addus. “I can speak with some authority to a target company and its management team, about what it’s like going through the whole year-plus process of an IPO. I can speak with authority to what you want to be careful and thoughtful about, especially the first year as a public company, as you build your credibility and get your sea legs.”

Broadly, DTRT is exploring several different types of opportunities, from home health and home care providers, to transportation companies and more. The SPAC is also keeping an open mind around EMR platforms and data companies, Heaney said.

What the target is, however, it will somehow be linked to aging in place.

“We want to be clear that we will invest in any service or product that is involved in the provision of — or the supporting of — care in the community,” Heaney said. “We’re not going to invest in hospitals. We’re not going to invest in emergency rooms.”

DTRT announced itself to the home-based care world in September, but the fundraising process began in early spring. Heaney and the rest of DTRT’s management team, which includes COO Arion Robbins and CFO Don Klink, wrapped up that process with a virtual roadshow in August.

Robbins comes to DTRT from the PE space, most recently serving as principal at Revelstoke Capital Partners. Klink has over 25 years of health care services experience, including serving as CFO at Addus from 2015 to 2016.

During those fundraising efforts, DTRT’s investment pitch was pretty straightforward.

“Home care is the fastest-growing segment, of the third-largest segment, of the largest economy in the world,” said Heaney, who added that he couldn’t comment on current DTRT targets or how close the SPAC was to its first combination.

The SPAC boom

As of Sept. 1, SPACs had raised capital in nearly 420 IPOs in 2021 alone, according to market research firm Statista. Together, that group has raised well over $105 billion in funding — a huge jump compared to previous years.

In 2020, 248 SPACs raised more than $83 billion in funds, CNBC detailed in a June report. The year before, 59 SPACS raised more than $13 billion.

The SPAC frenzy of late 2020 and early 2021 has pushed all sorts of people to become “sponsors,” the individuals or companies who launch SPACs. In February, former NFL quarterback Colin Kaepernick revealed he was launching a social justice SPAC, for instance, while hedge fund manager Bill Ackman raised a $4 billion SPAC in July 2020.

A handful of the SPACs have already pursued senior care-related businesses.

In December, a SPAC called Deerfield Healthcare Technology Acquisitions Corp. merged with CareMax Medical Group and IMC Medical Group Holdings. Today, the entity, CareMax Inc. (Nasdaq: CMAX), provides primary care, specialty care and coordinated services to older adults across 42 medical centers in Florida.

“Our centers really provide all of the services to close the entire care continuum of the seniors that we serve,” Carlos de Solo, CEO of CareMax, recently told HHCN.

Richard Burke, the founder and former CEO of U.S. insurance giant UnitedHealth Group (NYSE: UNH), launched his own SPAC in November 2020: Senior Connect Acquisition Corp.

“The senior market offers compelling growth trends, controls a disproportionate share of financial wealth, and presents significant opportunities and unmet needs in a broad range of areas, from lifestyle to health care,” an S-1 financial filing from the SPAC described.

Cano Health Inc. (NYSE: CANO) and Clover Health (Nasdaq: CLOV) also went public via the SPAC option.

“Going public will enhance our ability to execute on our mission of improving every life, providing significant capital for the company to scale and improve health outcomes for seniors across the United States,” Clover President and Chief Technology Officer Andrew Toy told HHCN last October.

‘Home care is the solution’

For the most part, the SPAC boom has since cooled. After raising more than $82 billion in the first quarter of 2021, SPACs managed just $11.9 billion in Q2, according to CB Insights data.

The CNBC SPAC 50 Index tracks the 50 largest U.S.-based pre-merger blank-check deals by market cap. After soaring earlier in the year, the index is now in negative territory.

The CNBC SPAC Post-Deal Index, made up of the largest SPACs that have come to market and announced a target acquisition or combination, has similarly seen all of its year-to-date gains washed away.

Generally, a key predictor of a SPAC’s success is its sponsor, market experts say.

“Just like in any other IPO, there are good companies and bad companies, and for SPACs, it’s largely about the sponsor,” Peter Cecchini, director of research at New York-based investment advisor Axonic, said during a June interview.

In the case of DTRT, Heaney and the SPAC’s other executives will be happy to offer their expertise, connections and guidance to the aging-in-place company they partner with. At the same time, the company’s existing management team will ultimately determine its own destiny.

A SPAC automatically bringing “another layer of management to report to” is one of the biggest misconceptions of the model, according to Heaney.

While DTRT is still charting its course, its commitment to home- and community-based services (HCBS) is etched in stone.

‘’Home care is the solution,” Heaney said. “It’s the long-term solution, and it will be forever. We’re never going back to an institution-first model. It’s never going to happen.”

In addition to being DTRT’s CEO, Heaney is still engaged in his partnership with PE firm Post Capital Partners, largely focused on community-based care. DTRT is an entirely separate venture, he was careful to note.

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