This case study assesses the suitability of the AtHomeCare, Inc. investment according to the criteria laid out in the case. It looks at the factors that make for a good roll-up strategy and how the company measures up in terms of these criteria.
Susan Chaplinsky
Harvard Business Review (UV6543-PDF-ENG)
September 21, 2012
Case questions answered:
- Is there a macro rationale in terms of market size and growth for the investment?
- Within this macro rationale, does the company possess a unique differentiator?
- How strong is the management team?
- How good is the business model? How does this company make money?
- What factors make for a good roll-up strategy? How does AtHomeCare measure up in terms of these criteria?
- What are the IRR and cash-on-cash returns to the (i) base-case stand-alone model and (ii) base-case-with-acquisitions model? (Produce an Excel spreadsheet to support your calculations).
- How do you evaluate the tradeoffs between going ahead on a stand-alone basis, waiting until an add-on acquisition surfaces, or passing on the deal altogether?
- What decision would you make with respect to AtHomeCare, Inc. if you were a member of the investment committee?
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AtHomeCare, Inc.: Health Care Services Rollup Case Answers
This case solution includes an Excel file with calculations.
AtHomeCare, Inc.: Health Care Services Rollup Case Study
Assess the suitability of the AtHomeCare, Inc. investment according to the criteria laid out in the case.
1. Is there a macro rationale in terms of market size and growth for the investment?
There is a macro rationale for market size and growth for the investment as the healthcare industry is not completely immune to a major financial crisis such as the subprime one.
It inculcates both the macro and micro-environment factors that impact AtHomeCare’s Letter Of Intent (LOI).
The diligent analysis of macro-environment factors encompasses foreign exchange exposure, employment, which impacts the purchasing power and insurance, state aids regarding health insurance, political risks, regulatory framework, etc.
2. Within this macro rationale, does the company possess a unique differentiator?
The current macroeconomic and regulatory outlook suggested some near-term softening of the demand for home healthcare services and possible reductions in Medicare or Medicaid reimbursement rates.
In the longer term, the large cost advantage of home health care, like that provided by AtHomeCare, Inc., over institutional care showed strong growth.
3. How strong is the management team?
Ardent had engaged an outside consultant to evaluate the management team and CEO’s skills and competencies. CEO Jake Cosgrove had graded out with a strong overall score of A.
McCullough became familiar with Cosgrove in his prior position and knew him to be an energetic, entrepreneurial-minded executive. Nonetheless, Ardent’s due diligence had also revealed constrained resources on management staff under the previous VC ownership.
It also planned to hire additional staff, such as a COO and head of sales and marketing, to allow Cosgrove to spend more time on strategic issues and grow the business more effectively.
4. How good is the business model? How does this company make money?
There are several reasons why the AtHomeCare, Inc. (AHC) business model is a good one. Firstly, AHC’s business model is…
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