Money is pouring into biometric testing and home care franchising. The future of aging is not all puppies and kittens.
Let’s See How Long You’ll Live
AARP is right. DNA will be used by employers & insurers.
AARP sued a United States governmental agency to prohibit employers from accessing your DNA data. AARP says older people face “imminent harm” from allowing employers access to confidential health data.
Employers have Wellness Programs that can access biometric testing — including information on your DNA — as part of their “carrots and sticks” approach to health insurance. In its simplest form, a “carrot” is that non-smoking employees pay lower health insurance.
One person’s carrot is another person’s stick. It’s a stick when someone who is overweight, or carries certain genetic markers, pays more for health insurance…or is denied health insurance, or denied employment.
It’s financial technology, not health technology
A life insurance company has acquired a DNA-based predictor of mortality. There are biomarkers which tell how long you will live. Apart from your “biological age,” your DNA has its own age that can be revealed through genetic testing. That technology is now owned by a life insurance company. At their core, life insurance companies investment vehicles that hold stocks and bonds.
Now, granted, this is a small company with a penny stock that trades at $8. The total value of GWG is $45 million, which is “micro” by Wall Street standards. But GWG says this is…
“…the most innovative financial technology the life insurance industry has seen in over a century.”
Learn more: Insurance company buys DNA technology (press release); about these biomarkers: in the journal Nature; in Aging (the inpenetrable medical journal); AARP lawsuit (NYTimes); trailer for the movie Gattaca — a world where DNA testing is used to shape life decisions.
Now Serving our 4th Billion Senior
Home companion care gets “smarter money”
A companion care company just sold itself, again, to get money it needs to grow. They are looking for growth outside the United States.
This deal highlights that growth is hard to maintain in the increasingly competitive market for home care companions for seniors.
However, with the right partners, opportunity abounds.
The money in the deal
In 2012, the founders of Senior Helpers’ sold the company to a private equity company. The deal was a “management buyout” — which means the owner/managers keep a big stake.
Fast forward to 2016. The company had grown a bit — not much — since 2012. The market is more competitive. Deeper pockets may be needed.
In October, 2016, the management team sold Senior Helpers’ again, this time to a second private equity firm. The price: $125,000,000.
During the 4 years that Levin Leichtman owned Senior Helpers, the company grew from 270 to 285 franchise locations (according to press releases from the private equity firms).
Last week, the private equity firm sold its controlling position in Senior Helpers to a Altaris, another private equity firm for $125 million.
Altaris has $1.5 billion in equity capital, and focuses its investments into healthcare. So Altaris can be said to be specialists that know this industry, or “smart money.”
Insiders leaked to the press that this deal valued Senior Helpers’ at ~2 times the company’s revenue, and 12.5 times the cash flow the company generates every year.
(Investment bankers have their own agenda in leaking numbers to the press, and they are not always precise. I speak from experience as both an investment banker and a business media relations professional. So, with those grains of salt, the rumored value was 12.5x EBITDA and 1.952x revenue.)
Senior Helpers’ is in the business of franchising
Senior Helpers is a franchising company; its local franchisees operate the agencies for caregivers. Specifically, SH agencies provide “companion care,” which is not medical — care aides are not nurses and do not administer medicines. Companion care is not health care, it is help with everyday routines.
The initial fee to purchase a franchise license from SH is $44,500. A review of SH public materials implies that this fee is primarily for training. Franchisees pay 5% of top-line revenue to SH as royalties.
Looking for growth outside the US
Altaris seems to be a better partner for Senior Helpers’.
While demographics favor growth of in-home care, economics in the business are challenging (no, they are downright difficult) due to (a) limits on the number of seniors who can afford privately-paid in-home care; (b) increasingly tight labor market for hiring and retaining caregivers; (c) regional competition from app-based brands without legacy systems and franchise expenses.
Brand differentiation, awareness and marketing is becoming a prime driver of success. Firms that invest in developing their brands should thrive in this new economic environment. Brand building is a long-game and deep pockets are needed to catch-up.
Senior Helpers’ is now counting on growth from selling franchises way beyond the US, Canada and Australia. The international franchises offered on its website include 19 additional countries in Asia, Europe, though none in Central or South America or Africa.
McDonaldization of Home Care: Not all bad?
Tony Bonacuse and his partner Peter Ross co-founded Senior Helpers in 2001.
Between 2001 and 2012, Ross started a 2nd franchising company, Doctors Express. That company was also sold in 2012. I imagine that 2012 was a very good year for Ross, who today also heads a trade group for the home care industry.
In 2013, Bonacuse handed the President’s position to Craig Leonard, former COO of McDonalds, Japan. Bonacuse went on to start another franchising business, UnTattooU.
Some senior advocates have called out home care franchise operations for their standardization and “McDonaldization” of home care. Critics point to low-paid staff, inadequate training, and exceptionally high turnover (of staff and, therefore, in peoples’ homes).
You can read a critique of McDonaldization here.
However, McDonaldization brings services to more people. Yes, the business processes are cookie-cutter, but that creates efficiencies. Yes, prices are kept low, but that keeps the product within reach.
McDonaldization is not entirely negative. Even McDonalds has improved the quality of its food and treatment of employees.
If the home care industry can improve training, reduce turnover and still provide affordable care, the industry will have solved problems for itself and for seniors.