It may be a seller’s market in the home care and hospice industry, but buyers are scrutinizing potential deals more closely. Mergers and acquisitions experts offered cautious words Wednesday during a webinar sponsored by WellSky, a technology and services company to the home care industry.

The expert panel said many home care and hospice agencies are eager to sell now because valuations are high, but some deals are coming apart because sellers become impatient as private equity firms and larger agencies complete the due diligence process.

“Sellers seem to be more willing to dump a problematic buyer,” Preston Brice, a partner at Grant Avenue Capital, said. It’s putting pressure on us to get more creative.”

Home care, home healthcare and hospice have been a hotbed of M&A activity over the past two years. There were 57 deals completed in the first half of this year, according to M&A advisory firm Mertz Taggart. That puts the industry on pace to top its record of 107 deals in 2020.

A number of cross currents are driving M&A activity. An aging demographic and the introduction of the Choose Home Act, aimed at driving more care into the home, are motivating buyers to purchase home care and hospice firms. Burnout from the COVID-19 pandemic, staffing shortages and challenges from Medicare’s Patient Driving Groupings Model reimbursement system are motivating agencies to sell.

Brice said his private equity firm is looking more closely at regulatory compliance, staff turnover and leadership before inking a final deal with an agency. Ross Sallade, an attorney for law firm Polsinelli LLP, said deals often get bungled when sellers hire auditors to clean up their books.

“I am starting to see more deals in a seller-friendly market where the seller is going out and doing their own billing and coding audit,” Sallade said. “They are going out and hiring their own auditor expecting their own records to be reviewed and putting forth a very clean, crystal clear billing and coding audit. You see buyers starting to question whether they can rely on those.”