After a rough 2015, when the M&A bubble burst in this sector, deal volume in 2016 showed signs of recovery. Fifty-seven deals were announced in 2016, a 12% increase compared with the previous year.

A few companies accounted for several deals. Jordan Health Services, a portfolio company of Palladium Equity Partners, led with five transactions. Epic Health Services, a portfolio company of Webster Capital, announced four deals, as did Kindred Healthcare (NYSE: KND). The latter company surprised many observers with its announcement that it was leaving the skilled nursing space to concentrate more on long-term acute care hospitals and home health and hospice agencies.

We expect at least a similar level of activity in this sector in 2017, as Kindred Healthcare adjusts its portfolio. Since its acquisition by HealthSouth Corporation (NYSE: HLS) two years ago, Encompass Home Health and Hospice has been on the M&A sidelines. That may change this year, as the company has marked between $50 million and $100 million for acquisitions in 2017, according to executives on its Q4:16 earnings call.