Deal of the Year, Small Market, 2017: Levine Leichtman

Levine Leichtman capitalized on the growing preference among seniors to stay in their homes.  

During the Los Angeles firm’s four-year investment in Senior Helpers, a franchiser of in-home companion care and personal care to patients suffering from diseases like dementia, the portfolio company saw organic EBITDA growth of about 250 percent. Top-line growth also accelerated, with systemwide sales climbing about 60 percent.

Levine Leichtman’s October 2016 sale of Senior Helpers to Altaris Partners produced a 74 percent internal rate of return and a 10.1x multiple of invested capital for the firm. Shareholders also scored a large dividend less than two years into their investment after the firm raised an incremental term loan.

Value Creation

Levine Leichtman focused on differentiating Senior Helpers from its competitors, creating value through same-store-sales growth, a new franchise-development process and international expansion.

Perhaps the most unusual initiative was the franchisee M&A program rolled out in 2014, Matthew Frankel, a senior managing director at the firm, told Buyouts.

The program’s premise was that Senior Helpers would offer a financial incentive to a franchisee to buy a competing local non-Senior Helpers business, he said. The franchisee would acquire a book of business, thus growing its own top line, while paying royalties associated with the acquired business to the franchiser.

Other key drivers of same-store growth included developing specialized offerings tailored to elders suffering from Alzheimer’s, dementia and Parkinson’s disease.

Partnerships with organizations including Alzheimer’s Foundation of America and Michael J. Fox Foundation as well as with TV personality Leeza Gibbons added even greater visibility to the brand. 

A new head of franchise development helped reengineer the entire process of how Senior Helpers adds new franchisees to the system, as the company in its early days had scaled quickly but lacked a careful screening process, Frankel said. The new model proved successful, with new territory openings nearly tripling to about 28 in 2016, from 11 in 2013. 

Another notable EBITDA generator was international development, with sales more than tripling in Australia. A new franchise agreement was signed in Canada just months before the sale of Senior Helpers, opening the door for development across more than 70 territories.

“It proved to the buying community that this was a strategy that has legs and one that can be replicated in other markets,” Levine Leichtman partner Bob Poletti said. “The aging baby-boomer demographic is not a U.S. phenomenon. It’s really a western-world phenomenon.”

Sale Process

Setting the stage for a sale, Frankel said, was the company achieving its goal of doubling EBITDA well ahead of the underwriting forecast.

The auction commanded more than 30 initial bids from a broad buyer universe. Ten-plus management meetings were held, and Senior Helpers ultimately received six letters of intent in the final round.

To accelerate the process, the sponsor provided third-party sell-side diligence materials and draft purchase documentation, plus it encouraged folks to show up at the LOI date with their diligence work basically finished.

“We knew by that time that we weren’t negotiating with people that were 70 percent done,” Frankel said. “We got a large set of buyers that were basically done and we could utilize that. There’s price, terms and certainty [in negotiation], and we had already taken certainty off the table.”  

The result? A purchase agreement with Altaris was signed within eight days of the bid date. The asset’s enterprise value at exit was more than three times the enterprise value upon its initial investment less than four years earlier.

Photo courtesy of Senior Helpers