Lincare, Gentiva benefit from 'good fit'

CLEARWATER, Fla., and ATLANTA - Don't read too much into Lincare's decision to buy the HME, respiratory and home infusion business of Gentiva Health Services, industry watchers say.

"I wouldn't say this means Lincare plans to start knocking down huge deals any time soon," said Bob Leonard, an analyst for The Braff Group, a Pittsburgh-based mergers and acquisition (M&A) firm. "It's an opportunity that was a good fit for Lincare, and it was a good fit for Gentiva."

After months of rumors, Lincare announced Feb. 4 that it was acquiring about 40 of Gentiva's locations in seven states. In 2009, the locations earned $55 million in revenue.

The acquisition allows Lincare to add to its base of 700,000 customers in 48 states; it allows Gentiva to focus on its core business of home health and hospice services, industry watchers say.

Due to the smaller size of Gentiva's locations (on average, they earn about $1.3 million in revenue each), Lincare will likely roll them up into its existing 1,056 locations, they say.

Although terms of the acquisition were not disclosed, Lincare likely got a good deal due to a downturn in the market and economy, and Gentiva's eagerness to sell, industry watchers say.

"Gentiva is a large, successful home health company that dabbled in HME because they thought there were some synergies, but in the end, it was too different of a business," said Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based M&A firm.

Lincare may not be "knocking down huge deals," but it will continue to make acquisitions, industry stakeholders say.

"I think they've been doing fewer acquisitions, but they've been quietly and opportunistically acquiring companies if something comes up that fits," Leonard said. "They'll continue to do that."