The seniors housing and care mergers and acquisitions (M&A) market hit an annual record in 2024 with a total of 700 publicly announced transactions, a 26% increase over the previous high of 560 transactions in 2022. Did the investor-fueled optimism lead to a productive start to 2025?
It appears so, as 201 seniors housing deals closed domestically in the first half of 2025, just shy of the 221 closed deals in the second half of 2024. Nearly 100 skilled nursing transactions closed in the first half of 2025, lagging 2024 activity by 9%. The total of 301 closed transactions verifies the industry is showing continued momentum as the end of 2025 approaches.
Given robust dry powder and more market certainty, sustained M&A activity is expected into 2026, as many are reporting robust pipelines. Further, the creation of the U.S. Department of Housing and Urban Development (HUD’s) Express Lane is fueling optimism, as it can lead to eight-day commitments.
As owner-operators seek to lessen business risk and mull strategic alternatives, playing offense remains critical. Highlighted below are a few key considerations to ensure owner-operators are successfully positioned to optimize transaction goals and objectives.
Have Operations Been Optimized?
Owners and investors are seeking to optimize portfolios as the industry seeks to accelerate transformative solutions to mitigate industry-wide pressures. Optimization strategies include referral and partnership opportunities that enhance scale and services, expansion opportunities that boost the portfolio’s average size or vintage, and the implementation of artificial intelligence to boost operational efficiencies. As exit strategies are contemplated, companies and their owners need to identify key areas of future upside that drive a competitive advantage in the marketplace.
When is Stabilization Expected to Occur?
A granular financial and operational assessment—including identification of target performance benchmarks and a market comparison—further informs the transaction process. Although stabilization does not need to be fully substantiated prior to going to market, an upward trend will catch investors’ attention, allowing for a bidding war, ideally. Moreover, even though investors will not provide a dollar-for-dollar credit for pro forma stabilization, they will pay a premium for the opportunity to capture upside on their own. Moreover, given the dynamic capital markets, investors are employing creative transaction structures that can provide incremental returns and bridge valuation gaps between parties.
Identification of Optimal Transaction Timeline
Given that investors are scrutinizing corporate cash flow on a facility-level basis, owners need to closely examine performance to target an optimal transaction timeline. To maximize transaction success amidst turbulent markets, any transaction process is commenced once run-rate momentum approaches stabilization. However, in addition to corporate performance, any transaction process should also consider the forward impact of a softening rate environment. To ensure sellers are positioned strongly in the market, careful consideration as to timing of stabilization—both of the capital markets and the entity-level operations—is required. Working with an experienced firm like Lument can ensure clients are strongly positioned in the marketplace, with access to credible and qualified buyers.
Conclusion
Dynamic capital markets require creative transaction structures and careful, thoughtful planning. Sellers mulling strategic alternatives in 2025 need to hire a proven advisor with a successful sell-side track record that can drive competitive tension and maximize purchase price. The anticipated softening rate environment, coupled with moderating inflation and improving operating dynamics, propelled M&A activity to record levels in 2024. The industry is anticipating sustained deal volume in 2025 – particularly as portfolio deals regain traction and targeted operational efficiencies drive the need for consolidation. Launching a transaction process, even in an exploratory capacity, early in the year will position sellers to maximize benefits once the anticipated rate cuts occur.
With over 53 years of combined success, the Lument M&A team has the depth of expertise to effectively and seamlessly help clients accomplish goals and objectives despite turbulent capital markets. Lument’s full suite of services provides unmatched market coverage. Combined with our expertise in underwriting and advisory services, Lument provides clients the benefits of working with a one-stop shop. As such, Lument takes a holistic approach to any transaction process (See “Strategies to Maximize Transaction Success Amidst Turbulent Capital Markets” for additional considerations). The analysis is informed by ongoing conversations with tenured investors and is further supported by an active pipeline of transactions in market. Supported by deep sector expertise—$14 billion in closed transactions with over $1 billion closed during the pandemic—Lument has demonstrated it can effectively guide owner-operators as they formulate strategic alternatives. As you consider your goals, we welcome you to give us a call so we can provide you with a customized and confidential analysis to inform your decision.
