Repositioning Businesses
Established in 1966, Interim is one of the nation’s largest providers of home healthcare services through a national franchise system. Its franchisees, who operate more than 325 branches across 37 states, deliver a range of home healthcare services, including home nursing, home hospice care, and home assisted living. Interim provides daily care to approximately 50,000 people and generates annual systemwide sales of approximately $750 million.
Background
Interim’s prior owners originally invested in the business in 1997, shortly before a significant legislative change dramatically impacted the home healthcare industry. Over the next few years, Interim embarked on a difficult organizational and balance sheet restructuring. They undertook an expensive, company-owned branch expansion and a diversification of service lines outside home healthcare. The result was that Interim was not tightly focused, and growth in its core home healthcare franchising business had stalled. Nonetheless, Interim’s franchising business was stable, had a strong brand name, and was well positioned to benefit from a powerful demographic trend—the graying of America.
After owning the business for nine years, Interim’s owners retained an investment bank to manage a sale. Sentinel was contacted because of our franchising and healthcare services capabilities.
Opportunity
- To reposition Interim and return it to a pure-play home healthcare franchisor. Key elements of the repositioning included:
– Divesting noncore healthcare operations and Interim’s captive healthcare software assets
– Refranchising all company-owned branches and transitioning Interim into a pure franchisor
Accomplishments
Refocused the Business: Interim refranchised all its company-owned branches, divested its noncore travel nurse staffing and occupational health businesses, spun off its physician staffing business, and sold its captive home healthcare software division. Concurrently, Interim rebuilt its new franchise sales capability, which had been dormant for a decade.
Recruited New CEO to Replace Retiring Founder. Prior to Sentinel acquiring Interim, its founder/CEO indicated his desire to retire after more than 40 years of active management. With the hiring of Kathleen Gilmartin, a proven home healthcare executive and nurse by training, we effected a smooth leadership transition.
Expanded Home Healthcare Service Offerings: Recognizing additional opportunity in home healthcare, Interim launched two new services—home hospice care and home assisted living. Similar to home nursing care, these services cater to an aging population and are now offered by many of Interim’s franchisees.
Strong Growth and Free Cash Flow: Interim’s home healthcare sales grew every year during Sentinel’s ownership. Importantly, profit growth significantly outpaced revenue growth, and having divested its capital-intensive noncore businesses, Interim’s free cash flow grew significantly.
Outcome
In 2012, having held the investment for six years and successfully achieved our investment objectives, we sold Interim to a financial buyer in a successful management buyout transaction. During our ownership, we helped Interim to transition into a focused home healthcare franchisor and expand its home healthcare service offerings. The result was that Interim accelerated its growth and significantly increased its free cash flow.