My email, phone, Skype and text message inboxes this afternoon were hot with the huge industry news that Brookdale and Emeritus are merging. I am not sure this is exactly right since it looks much more like Brookdale is gobbling up Emeritus: the Brookdale name and senior management will remain. The question really is what does this mean to the industry?
High Level Details
- According to the press release, the resulting company will be “the only nationwide network of senior living communities with fully integrated ancillary services across the continuum of care.”
- Following the merger there will be a Brookdale community within 10 miles of 6.5 million seniors 80 years or older.
- Emeritus shareholders will receive .95 shares of Brookdale stock for each share of Emeritus stock.
- The combined company will consist of 1,161 senior living communities in 46 states, with 112,700 units.
- Andy Smith, Brookdale’s CEO, will remain as/become the CEO of the new Brookdale.
- The combined company represents 10% of the total market and they do not anticipate any antitrust problems.
- After the merger Emeritus shareholders will own approximately 27% of Brookdale.
What It All Means
So the big question is what does it all mean? In some sense it is too early to tell but for what it’s worth here are my initial thoughts in no particular order:
- If you are an employee at a Brookdale community it means nothing, or close to nothing.
- If you are an employee at an Emeritus community it means close to nothing except for a possible shift in culture and, perhaps, policies and procedures.
- If you are a regional level team member at Brookdale, unless you are a really weak leader, it means little or nothing, except perhaps a realignment of responsibility.
- If you are a regional level team member at Emeritus your job is likely to be slightly at risk if you are a weak leader, otherwise the combined entities will still need a bunch of regional people.
- Corporate level leadership . . . over the first two years after the merger almost all will drift off to do other things, taking with them substantial personal wealth.
- It will be a big win for some vendors and a big loss for others. I would mostly bet on the vendors who already have a relationship with Brookdale, but I suspect some percentage of Emeritus vendors will end up on the winning side.
Broader Senior Living Implications
My first thought was, “WOW! This will really shake up the industry”, but I am not so sure. Maybe these things:
- At its’ core all senior living is local, which is why some buildings owned by big companies perform exceptionally well and some don’t perform so well. These things are driven almost exclusively by the quality of the local management and, to a lesser degree, local market conditions.
- I have often wondered if there is a size that is so big that the company becomes unmanageable in terms of building a quality culture, providing excellent care to residents, supporting families, staying out of trouble with regulators and the press and making a profit. We have seen some skilled nursing and hospital companies face serious problems because of their size. It will be interesting to watch how the new Brookdale manages this.
- The new Brookdale will become a much bigger target for organizations like Pro Publica.
- A big national company could also incite an increased level of interest in federal regulation.
- In general, the bigger the entity the harder it is to innovate, so we will have to see. The flip side is that it will give them many more resources to innovate should they choose to do so.
- Wearing a marketing hat I would generally rather be marketing against Brookdale than for them only because it becomes so easy to use FUD (Fear Uncertainty & Doubt) about this behemoth for-profit company. - Note: this is not a personal opinion that the FUD would be legitimate, but no doubt it will be used.
It all comes down to execution. If they do it right, if residents and team members come first, they have the potential to create an amazing new company that would be both transformative for residents and their families and would make shareholders a boatload of money.
Some websites worth exploring:
What are your thoughts?
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