A structured framework covering licensing compliance, occupancy sustainability, staffing risk, and real estate for lower middle market care home acquisitions.
Find Assisted Living Facility Acquisition TargetsAcquiring an assisted living facility requires specialized due diligence beyond standard business acquisitions. State licensing status, caregiver staffing levels, payer mix, and resident contract integrity each carry material risk. This guide walks buyers through the critical phases of evaluating a facility with 10–50 beds generating $1M–$5M in revenue.
Verify the facility holds a current, unrestricted state license and has a clean inspection history before proceeding with any financial analysis or LOI.
Request the current facility license, all state inspection reports from the last 3 years, and any deficiency citations, corrective action plans, or enforcement notices filed by the licensing agency.
Confirm the state's ownership transfer process, provisional license availability, required buyer qualifications, and estimated timeline — many states require 60–180 days for approval.
Search state ombudsman records, court filings, and ask seller to disclose all open resident grievances, family complaints, or personal injury claims filed within the past 5 years.
Validate revenue quality, occupancy sustainability, and true operational costs including staffing — the largest expense category in any assisted living facility.
Analyze trailing 24-month occupancy by room and resident, and break down revenue between private pay, Medicaid, and long-term care insurance. Private pay dominance significantly improves margins and valuation.
Review payroll records, employee roster with certifications and tenure, caregiver-to-resident ratios by shift, and trailing 12-month turnover rate. High turnover signals operational and cultural risk.
Identify owner compensation, personal expenses run through the business, and any one-time costs. Confirm whether the owner serves as administrator or primary caregiver — a common value risk.
Assess whether the physical facility meets current safety and ADA standards, and clarify real estate ownership structure before finalizing deal terms.
Commission a third-party property inspection covering fire suppression systems, ADA accessibility, HVAC, electrical, and plumbing. Deferred maintenance in care facilities creates significant liability and capex obligations.
If leased, review remaining lease term, assignment clauses, and landlord approval requirements. If owned, obtain a current appraisal and evaluate a PropCo/OpCo split to optimize financing.
Confirm the property's zoning designation permits residential care use, that all occupancy permits are current, and that the licensed bed count matches the physical facility configuration.
Most states require 60–180 days for ownership transfer approval. Some issue provisional licenses allowing operations during review. Buyers should budget for this timeline and negotiate closing contingencies accordingly.
Lower middle market facilities typically trade at 3.5x–6x SDE. Facilities with 90%+ occupancy, private-pay payer mix, clean licensing history, and owned real estate command the higher end of that range.
Yes. SBA 7(a) loans are commonly used for assisted living acquisitions to finance goodwill, working capital, and equipment. Real estate is often financed separately via SBA 504 or conventional commercial loans.
Regulatory risk is primary — a single substantiated citation or license probation can trigger occupancy loss and revenue collapse. Staffing instability and Medicaid reimbursement dependency are the next most critical concerns.
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