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Last summer, the home care technology company Honor acquired Home Instead. It was one of the largest – and perhaps surprising – deals in the non-medical home care space in recent memory.
It’s been just over a year since the deal was officially announced and a company worth over $2 billion was formed.
In hindsight, the deal was important for more reasons than its striking size.
It was a large home-based care deal in which the acquirer was not necessarily a home-based care provider itself. Additionally, the deal itself was not the crux of the strategy being taken by either party – what came immediately after, and what Honor and Home Instead expected to ultimately follow, was.
Furthermore, the transaction also involved franchisees, which are increasingly pushing back on some of the new frontiers that their franchiser is looking to explore.
This week, I talked to Honor CEO Seth Sternberg, who I’ve chatted with multiple times over the past year.
This time, we took a look at what is currently going on at Honor and Home Instead, how the last year has gone as the companies integrate – and what’s to come.
While the conversation was initially focused on the one-year anniversary of the deal, it also became about this kind of M&A, in general, and what needs to happen for deals to work in the long run.
In this week’s exclusive, members-only HHCN+ Update, I explore the Honor-Home Instead deal just over a year later, interweaving highlights from my conversation with Sternberg.
A year later
When a technology company acquired one of the biggest home care companies in the world, it was a shock to some. But in retrospect, it was part of a much larger trend: home-based care companies being acquired more strategically.
Instead of private equity players buying providers to flip them, health systems, insurers and technology companies like Honor were more interested in integrating and utilizing providers’ services as part of a longer-term plan.
Honor acquired Home Instead in August 2021. That was just four months after Advocate Aurora Enterprises – a part of the large health system Advocate Aurora Health – acquired another one of the largest home care franchise companies around in Senior Helpers.
Senior Helpers CEO Peter Ross told me that the vast majority of buyers circling the company at the time were private equity players, and that he did not expect for a health system to come in and snatch it up.
“There was a lot of high demand throughout the process, which was a very competitive one,” Ross told Home Health Care News just after the deal was finalized. “We felt Advocate really shined, and we came away just very impressed.”
The following March, UnitedHealth Group’s (UNH: NYSE) Optum announced it had agreed to acquire one of the largest home health organizations in the U.S. in LHC Group Inc. (Nasdaq: LHCG).
As we look back at those and similar deals, it’s hard for me to look forward and think we won’t see some of the same moving forward.
Non-medical home care has its larger “seat at the table,” and meanwhile, the home health industry is under a bit of duress with the proposed payment cuts.
It only makes sense, then, for more large, strategic acquisitions to take place in my mind. After all, for organizations that care about outcomes first and foremost – which of course could yield monetary dividends – all good home-based care organizations still hold great value.
“Certainly the strategic buyers that are in the marketplace know the issues, they know where to look, they know the reality of the business,” Braff Group Senior Managing Director Mark Kulik said last week at FUTURE. “That due diligence process also goes a bit more smoothly.”
Smooth doesn’t necessarily mean quick, however. But a good part of strategic acquisitions is that the two parties can take time to integrate and plan without experiencing perceived losses.
In the meantime, the acquirer finds out what may or may not work, as well as additional perks that may have not been considered previously.
“There literally is no answer. No answer in the sense that it’ll be a long while,” Sternberg told me when I asked when he felt the integration process would be finished. “You never stop iterating on your structure, your HQ structure, your team structure. You’re never really done.”
Finding the right way to integrate
When Honor and Home Instead first met, they realized each had wanted to deliver on the same concept of having a “one-stop shop” for seniors and families trying to navigate the care landscape. At the time, neither could do it alone.
So once the acquisition closed, it was the right time to launch “Honor Expert,” which is a technology platform that helps seniors do that navigating. Home Instead gave Honor Expert legs to stand on, but in the future – if successful – it will likely lead to more referrals for the Home Instead network.
“Honor Expert has been super interesting,” Sternberg said. “Mostly, we’re looking at the dominant areas that people are calling and asking questions about. We didn’t know what questions people would have and where people would really need help. So that has been very interesting.”
There have been a few thousand calls and online chats into the Honor Expert network since it launched, and Honor is reporting high satisfaction scores from those callers.
While Honor Expert is one of the marquee launches from Honor since the Home Instead acquisition, the biggest focus has been the integration of the teams.
Sternberg has since found what he believes are the two ways to deal with integration after a large deal like this one: either completely integrate, or allow the acquired company to basically continue standing alone.
If an acquirer isn’t sure which one it should choose, the latter is the best option at first. The logic there is that once you completely embed the teams, it’s hard to go back if it’s not the right path. If you don’t embed at first, it’s easier to embark on that process after.
“The acquisition is going super well,” Sternberg said. “A big thing that we had to really focus on was just how to integrate the teams. And what the right model was for team integration. What we ultimately settled on was actually a really close integration of the teams, where we truly brought the various teams together under one structure.”
In addition, Honor is bringing on individual franchisees to its platform. That has been an interesting process in its own right.
But what that has really done is also allow Honor to work out any remaining kinks in its platform to better suit the needs of more home care agencies.
“It teaches us new tools that we have to build into the care platform to help serve that style of operation,” Sternberg said. “So we’re building more tools, for example, than we did before. Those are around giving the Home Instead owners visibility into the service and the underlying nuts and bolts of the service that we had previously built. They want that level of detail to be able to talk directly to their referral networks about it.”
Acquiring a Senior Helpers or Home Instead is obviously different from an LHC Group or another home care agency that is not franchised.
There needs to be buy-in from the top for the deal to happen, but for the deal to work, there needs to be buy-in below with the franchisees. And that’s still a work in progress.
“Everybody was shocked,” one Home Instead franchise owner told Home Health Care News at the time of the deal. “I think that includes people at corporate.”
I asked Sternberg if there were still issues with franchisee buy-in, and whether or not there were some who were resistant to change.
“That’s kind of like asking, ‘Are humans ever resistant to change?’” he responded. “You tend to find there are these classic adoption curves, where you have early people who love change, and they want to lean into change. Then you have the middle of that curve, if you will, where people tend to then follow once those first people get there. And that’s kind of what you just expect from any new system that you’re adopting into an existing system.”
While the integrating may never be fully done, the acquisition portion of the deal is.
Moving forward, Sternberg believes the combined company’s value proposition is even stronger now than they would have imagined when the deal was first completed.
“We’re at a place now where we literally have the largest worldwide network, but also have the most advanced technology platform – by far – in service of older adults,” he said. “That was our theory when we put these companies together, but we didn’t know how crazy the markets would become. But it’s even more important on the other side. Because in these unstable markets, it turns Home Instead’s way of operating with having these really deep relationships, coupled with scale, is a really, really big deal. Because the world is clearly going to consolidated scale.”
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