It was great to see so many people at NIC, and we were happy to hear of deals still getting done and of some healthy transaction pipelines as well. As we have been saying, M&A activity will slow as a result of the rate increases and other economic factors, but many deals will still be made. That is because there should be plenty of willing sellers in the next few quarters (or longer).
As soon as many of these owner/operators felt they were somewhat in the clear from the pandemic and even from staffing agency use, inflation hits and their margin recovery looked less likely. And after more than two years of heavy stress, plenty will say “enough is enough” and decide to sell. What is tough is that most will not have the luxury of waiting until it is a seller’s market again, especially if they are losing money and their rent increases can’t offset their higher expenses.
We heard from several brokers that the deluge may be beginning, with small owner/operators looking to move on. If they are selling struggling operations, investors could find some great opportunities at steep discounts, and we expect to see average prices across the senior care sectors drop later this year and into 2023 as a result. With higher rates, some buyers may even rethink some of the high prices paid for stabilized SNFs, but we’ll believe that when we see it.
