Local agency leaders key to Pennant Group growth and M&A strategy
Pennant Group’s (NASDAQ: PNTG) strategy for seeking potential acquisitions is rooted in an operating model that emphasizes the role of local agency leaders. This approach will continue as transaction opportunities arise for Pennant, which CEO Danny Walker describes as a “growing business”.
For potential deals, Pennant is looking for agencies with high potential for organic growth that have “talented” local leaders or entrepreneurs in place. Pennant then leverages the resources of its platform to drive growth.
“We acquire high-quality senior agencies or communities that rely on a strong local team, but may have reached a stress point in their growth process that we can step in and help them achieve that growth” , Walker said. . “A lot of the owners are either small moms-and-pops or regionals, and they care a lot about continuing the legacy they’ve built on their operation. One of our calling cards is to continue to really highlight this heritage.
Walker made the remarks during Oppenheimer’s virtual 32nd Annual Health Care Conference.
In addition to promising sell-side leadership, Pennant is recruiting local directors from entrepreneurs in a variety of industries as well as candidates from the healthcare field, Walker said.
These administrators are responsible for building relationships with the community and referral partners and making business decisions on the ground, according to chief financial officer Jennifer Freeman.
The national platform provides a common electronic medical records platform, as well as financial, legal and human support, among other shared services.
Local administrators are encouraged to meet financial, quality and compliance criteria.
“We then group 3 to 5 operations together as clusters and incentivize those leaders, both upside and downside, into leadership, peer accountability and shared ownership,” Freeman said at the conference. . “This innovative operating model is our unique differentiator.”
This group of local administrators could see new members as the company accelerates its acquisitions after pausing in the fourth quarter of 2021.
Walker said Pennant is looking to acquire within its existing 14-state footprint as well as adjacent markets across all of its lines of business. Based in Eagle, Idaho, Pennant operates 88 home care and hospice agencies in addition to 54 senior living communities.
Pennant made 11 acquisitions in 2021, increasing to 15 in 2020. Pennant’s home health and palliative care segment saw revenue grow 22% to $309.6 million for the entire company. year 2021.
“We have these local leadership teams put together. It’s easier for us to acquire,” Walker said. “We sort of plant our flag in a state or a market; we start growing from there. We continue to grow, but we do so carefully, think about it, and ensure that we are focused on delivering long-term returns and growth. »