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KEEPING FAITH, MISSION AND HERITAGE IN TIMES OF CONSOLIDATION March - PowerPoint PPT Presentation

ZIEGLER INVESTMENT BANKING | SPONSORSHIP TRANSITION KEEPING FAITH, MISSION AND HERITAGE IN TIMES OF CONSOLIDATION March 6, 2019 PRESENTED BY Stephen Johnson Susan McDonough Managing Director Catholic Elder Care & Post Acute Specialist


  1. ZIEGLER INVESTMENT BANKING | SPONSORSHIP TRANSITION KEEPING FAITH, MISSION AND HERITAGE IN TIMES OF CONSOLIDATION March 6, 2019 PRESENTED BY Stephen Johnson Susan McDonough Managing Director Catholic Elder Care & Post Acute Specialist sjohnson@Ziegler.com smcdonough@Ziegler.com Chicago, IL New York, NY B.C. Ziegler and Company | Member SIPC & FINRA

  2. AGENDA S ECTION 1 • SURPRISED BY OPPORTUNITY S ECTION 2 • KEEPING THE FAITH; HONORING THE PAST; SECURING THE FUTURE S ECTION 3 • PRACTICAL IDEAS & NEXT STEPS E XHIBITS • A: CHARACTERISTICS OF PROACTIVE SENIOR LIVING ORGANIZATIONS • B: SELECT SPONSORSHIP TRANSITION CASE STUDIES • C: BIOGRAPHIES 2

  3. SECTION 1: SURPRISED BY OPPORTUNITY Stephen Johnson Managing Director sjohnson@Ziegler.com Chicago, IL B.C. Ziegler and Company | Member SIPC & FINRA

  4. SPONSORSHIP TRANSITION SENIOR LIVING IN THE NEWS . . . September 12, 2016 Lutheran and Mennonite retirement communities to merge February 6, 2017 Local retirement community Record Number of Nonprofit Senior joins with Ohio group Living Transactions in 2016 July 27, 2017 February 6, 2017 by May 13, 2015 Birch Hill Terrace to affiliate with RiverWoods ‘New era’ as The Kenney finalizes Heritage Ministries affiliation $6 million upgrade of Manchester retirement community to follow March 23, 2016 4

  5. SPONSORSHIP TRANSITION SENIOR LIVING CONSOLIDATION TRENDS Approximately 380 Not - for - Profit communities changed sponsor/owner between 2010 and Mid2017 5 Source: Ziegler Investment Banking (9/1/17)

  6. SPONSORSHIP TRANSITION MISSION DRIVEN • Fulfillment of Existing Mission – Execution of the existing mission • “we are have not reached everyone, there is more to do” • Expansion of Mission – Expanding the mission beyond or within a certain geographic scope • Redefinition/Shift in Mission – Organization views itself in a new light with a new purpose 6

  7. SPONSORSHIP TRANSITION A STRATEGIC PROCESS • Why called “Sponsorship?” • Regardless of how change is structured – affiliation, acquisition, merger, joint venture – the sponsorship changes • The term better reflects the complex process which goes far beyond a “transaction” • Strategic decision process results in a stronger mission for future for both organizations. Asking the question is strategic. 7

  8. SPONSORSHIP TRANSITION CONSIDERATIONS • Allows for greater strength of mission • Greater ability to generate economies of scale • Create depth of leadership in case of CEO and executive leadership succession • Attract better talent & leadership – Greater ability to pursue passions – Growth provides invigorating challenges; diversion from status quo – Compensation and benefits options increase with growth • Improved access to capital • Diversification in services insures long - term financial stability • Greater ability to expand into underserved markets • Additional programs and services enhance current customer experience 8

  9. SPONSORSHIP TRANSITION DEFINED “Affiliation” • In law , affiliation is the term to describe a relationship between two or more parties • Stated simply, 2 stay 2 (although 1 generally “controls” both) • Control is in the form of restructured Articles of Incorporation & Bylaws and a management contract As Opposed to “Merger” or “Acquisition” • In law , merger is the term to describe the combining of 2 or more companies into one • Stated simply, 2 become 1 • In an acquisition, one entity generally acquires the assets of another entity and either combines them with their own or places them in another entity 9 *Definition courtesy of Glenn Fox, Esq. of Saul Ewing

  10. 2018 LZ 200 GROWTH OF COMBINED UNIT MIX FROM 1990 BY AFFILIATIONS, MERGERS & ACQUISITIONS AND NEW CAMPUS GROWTH Projected Growth 2018 - 60,000 2019 MA Total New Campus Total 50,000 40,000 Units 30,000 20,000 10,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year 10 Source: Preliminary 2018 LeadingAge Ziegler 150 Publication (Data as of 12/31/17)

  11. SPONSORSHIP TRANSITIONS NFP CUMULATIVE DATA Cumulative Totals (2010-YE 2018) by # of Transactions & # of Communities 600 568 500 405 400 345 300 254 174 200 385 320 111 264 75 100 204 51 36 149 97 63 29 41 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Transactions Market-Rate Communities Note: Includes market - rate communities; excludes government subsidized 11 Source: Ziegler Investment Banking 12/31/2018

  12. SENIOR LIVING CONSOLIDATION TRENDS MARKET DRIVERS Complexities of Complexities Healthcare of Healthcare • Occupancy Leadership pressures Turnover Financial • Competition Technology Pressure • Higher pt. acuity Demands Complexities • Negative revenue Competition of Healthcare impact Hospital Leadership Financial Consolidation Turnover Pressure Leadership Technology Influence Ability to Leadership Turnover Attract & Demands Retain Talent Turnover Technology Hospital Reinvestment • As Boomer CEOs Demands Consolidation Requirements retire, can serve Access to Competition Access to as catalyst to Capital Capital explore affiliation Financial Access to Hospital Competition • CEO recruitment Pressure Capital Consolidation challenge for Diversify Ability to Reinvestment Growth Attract Talent Service Lines smaller Requirements Capital organizations Diversify Complexities Ability to Access to Service Lines of Healthcare Capital Attract Talent TODAY 12 1990 2000 2010

  13. SENIOR LIVING CONSOLIDATION TRENDS MARKET DRIVERS  Needed large - scale visibility in local market  Greater market power w/ consolidation Complexities of  Healthcare consolidation elevating sophistication Healthcare of local hospitals/health systems  Need to invest in EHR/EMR platforms  Need large - scale branding to facilitate Ability to Attract recruitment Talent/Workforce  Scale leads to greater professional development Management opportunities  Growth in for - profits leading to greater competition for staff 13 Source: Ziegler Investment Banking

  14. SENIOR LIVING CONSOLIDATION TRENDS MARKET DRIVERS Driver Definition Complexities of Healthcare Service delivery complexity has increased. Bundled payments, HIPPA, regulatory environment, managed care pressure, star ratings Leadership Turnover Largely CEO turnover, but greater influence when no clear successor among C- suite team. Retirement of the Boomers. Technology Demands Used to be just enterprise -related technologies, then healthcare- related, now consumer technologies are an added element Financial Pressure Includes occupancy - related as well as exposure related. Higher expenses, liability, personnel & benefits. Competition For - profit competition, consumer choice is greater than ever Reinvestment Requirements The need to devote capital to campus reinvestment and repositioning Access to Capital Greater scale generally means greater access to capital for growth Hospital Consolidation Hospitals growing into regional systems looking for regional partners Diversification of Business Ability to expand service lines (affordable housing, HCBS, etc.) Lines Attracting Talent/ Workforce Strong leaders are looking for upward mobility and professional development Management opportunities. Competitive compensation packages. Growth Capital Investment requirements; planning for future growth 14

  15. SENIOR LIVING MARKET CONSOLIDATION TRENDS MARKET DRIVERS Very Large Metro 5,000,000+ Large Metro 2,500,000+ Medium Metro 1,000,000+ Small Metro 500,000+ Sub -Metro 250,000+ Exurban 100,000+ Rural 15

  16. SPONSORSHIP TRANSITION STRUCTURE ALTERNATIVES High Asset Transfer Sponsor (Member) Transfer Collaborations Low Risk / Benefit Low High 16

  17. SECTION 2: KEEPING THE FAITH; HONORING THE PAST; SECURING THE FUTURE Susan McDonough Catholic Elder Care & Post Acute Specialist smcdonough@Ziegler.com New York, NY B.C. Ziegler and Company | Member SIPC & FINRA

  18. SPONSORSHIP TRANSITION DEFINING THE OPPORTUNITY • Entered into as intentional strategic consideration • Outcome of a thoughtful and intentional process – with adequate transition plans • Resources of sponsor align with organization • The joining organization is acknowledged for the contribution it will be making to the new sponsorship organization such as a new service line. • The sponsorship “feels” much more like a partnership approach to meet environmental challenges such as health care reform, changing market expectations and regulations. • Opportunities to expand mission are greater together. INTEGRATION 18

  19. SPONSORSHIP TRANSITION THE ROLE OF FAITH & VALUES • Across the past five years, 80% of the NFP to NFP sponsorship transitions have been among faith -based providers – 52% were with another faith - based organization (may/may not be within the same denomination) – 20% of those within the same faith/denomination • Catholic- sponsored entities are under increased pressure – Generally larger proportion of healthcare beds – Shrinking number of sisters and aging congregations 19 Source: Ziegler Investment Banking, 4/1/18

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