Dealmaker Q&A: Halifax Talks Acquisition of Sodexo’s Worldwide Home Care
Scott Plumridge shares the investment strategy behind Halifax’s acquisition of Sodexo’s Worldwide Home Care division and the challenges ahead
When private equity firm The Halifax Group agreed to acquire Sodexo’s Worldwide Home Care division in late September, it was strengthening its foothold in a sector it was already familiar with and fond of, says Scott Plumridge, managing partner at Halifax. Plumridge spoke to Middle Market Growth about the deal, how it fits into the firm’s broader investment strategy and what’s next for home care M&A.
Middle Market Growth: When sourcing the deal, what were you looking for in an investment target, and how did Sodexo’s home care division fill those requirements?
Scott Plumridge: Here at Halifax, we’ve been investing in healthcare for 24 years now. One of our favorite places to find investment opportunities is in the home healthcare and aging-in-place subsector of the healthcare industry. This is our fifth investment addressing that specific niche of home care and aging in place. And then on the other side, this business is a franchisor, and this is our fifth franchisor that we’ve owned institutionally. So, this is an area that we love and we’re very familiar with—actually, we helped to build a business back in our Fund 3 called Caring Brands International, which is one of the largest global franchisors of home care services. We’re just repeating a beloved investment thesis area through the business model of franchising that we know very well.
One of our favorite places to find investment opportunities is in the home healthcare and aging-in-place subsector of the healthcare industry.
The Halifax Group
MMG: What attracted Halifax to the home care sector initially, and how does this deal fit into your broader investment strategy?
SP: Taking care of people in the home is the venue of choice, almost without exception, on a global basis. In most circumstances, keeping people out of an institutional setting is going to save the payer money and, in most cases, seniors are independent-minded and increasingly want to stay in the home longer. So, it’s a win for the government or commercial payer and it’s a win for the individual who wants that independence.
There are a number of ways that one can participate in that mission of taking care of people in the home: We have [invested in] home infusion and complex respiratory [services] before, and we’ve [invested in] home medical devices to enable aging in place. So, there are a variety of ways to express this investment thesis, but they all point back to these same macro themes of allowing people to avoid an institutional setting as they age. And the fastest-growing part of our population here in the United States is the elderly population.
MMG: What are some industry headwinds you’re watching, and how do you plan to drive growth despite those?
SP: The biggest issue in this particular part of the market where Comfort Keepers [the U.S. arm of the Worldwide Home Care division] operates is a shortage of labor. Having invested in this sector for over a decade now, that’s nothing new to us. This has been the dynamic for these businesses for a long time, and, in fact, it’s an important reason why they exist—finding that scarce labor, training them exceptionally well, delivering a great service proposition to the client and then having additional resources on hand. To the extent that the caregiver becomes ill or wants to naturally take some time away for personal reasons, we can substitute in another caregiver. These are critical functions of why these businesses exist, and when we owned Caring Brands International, it wasn’t dissimilar. There’s a lot of demand for these types of services. The struggle in many cases is to supply the demand.
MMG: What are the strengths of the franchise model in today’s M&A market?
SP: We love the franchise business model, particularly for this very type of application. Healthcare is a local business. It’s people helping other people. And we believe that a franchisee—somebody in that market where it’s their livelihood, their personal mission—has the local relationships in their communities, they know the caregivers, they know the clients, and they’re willing to serve those stakeholders 24/7. They carry that work out much better than any corporate-owned entity possibly could. So that local presence, that ownership skin in the game, makes all the difference in providing a superior care experience for our clients.
MMG: The Worldwide Home Care division of Sodexo currently operates in eight countries. What are some of the challenges of acquiring a global company, and how do the standards of senior care differ from country to country?
SP: Each country has its own payer dynamics, its own regulatory dynamics that need to be understood and adhered to in a rigorous manner. But it’s interesting how similar some of the operational challenges are and how similar the demand is globally for most of the regions this business operates in. The fundamental proposition of matching great caregivers with folks who want to be taken care of in the home—that’s very similar across the operations.
This interview has been edited and condensed for clarity.
Hilary Collins is ACG’s Associate Editor.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.