Buyers 'sharpen their pencils'

The twin specters of national competitive bidding and the 36-month oxygen cap continued to put a chill on the mergers and acquisitions market for HME during the first quarter of 2009, analysts reported.

“Uncertainty is driving the lack of activity - not knowing how much you are going to get paid down the road for these services,” said Rick Glass, president of Steven Richards & Associates, an M&A firm in Tarpon Springs, Fla.

NCB isn't expected to roll out until at least 2010, possibly giving the industry time to get the program squashed. Analysts also believe a proposed oxygen reform bill could loosen the market's purse strings.

“If the New Oxygen Coalition (NOC) proposal happened to go through in the next few months I think the market could pick up dramatically,” said Glass.

For the deals that are getting done, it's a buyer's market, say analysts. Regional players continue to make acquisitions based on geography and convenience.

“There are people that are real opportunistic,” said Bob Leonard, an analyst with Pittsburgh-based M&A firm The Braff Group. “If a business is within the buyer's geographic region, and they can absorb it readily and not pay too much money, they'll buy it.”

Surprisingly, the weak economy isn't affecting the market too much, say analysts.

“Overall, the strategic buyers aren't short of cash,” said Bruce Burns, president of Albuquerque, N.M.-based M&A firm Affinity Ventures. “Normally, the strategics don't leverage their deals dramatically, but they are being more careful and sharpening their pencils on those deals.”

However, the economy has diminished the appetite of private equity firms, say analysts.

“They have to commit more capital today then a year ago,” said Jonathan Sadock, partner and CEO of Philadelphia-based M&A firm Paragon Ventures. “Their ability to leverage a transaction has been challenged.”