In December 2024, BrightStar Care Founder Shelly Sun Berkowitz was within 10 days of closing a deal to sell the company, when she decided to step away.

“It just didn’t feel right,” she told me this week. “I didn’t feel like I was going to have the voice I wanted to have, I didn’t feel like the focus on quality and growth versus profitability was there, and that was really important to me.”

After making that difficult decision, she renewed talks with another potential buyer who had been in the mix: Peak Rock Capital. Less than two months later, a deal was forged. This week, the companies publicly announced the closing of the transaction, with BrightStar acquired by an affiliate of Peak Rock.

Now, one of the nation’s largest at-home care providers, with 400-plus offices and about 25,000 families served, is a portfolio company of Peak Rock. Sun remains a significant shareholder and will play a role in setting the strategic direction of the company going forward.

In this week’s exclusive, members-only HHCN+ Update, I share more details from my conversation with Sun Berkowitz about how the deal came together and what’s next for BrightStar, and I offer analysis and key takeaways, including:

• How the deal shows that the effects of COVID-19 continue to shape the at-home care sector
• What the transaction says about the current role of private equity versus strategics in driving M&A 
• What the go-forward strategy for BrightStar indicates about the future of the at-home care and senior living sectors

Inside the dealmaking process

The United States is approaching the two-year anniversary of the official end of the COVID-19 public health emergency, but the BrightStar deal shows how decisions made during – and because of – the pandemic are continuing to alter the landscape of the at-home care industry.

“I never thought I’d really sell my baby,” Sun Berkowitz told me. “And if COVID hadn’t happened, I don’t know that I would have.”

That’s because the pandemic drove home for her that BrightStar had grown into a large business with many stakeholders relying on her, as CEO and sole shareholder, to ensure the enterprise’s ongoing success and sustainability. This realization led her to feel a sense of obligation and urgency to create a succession plan not only for the company’s executive leadership but also its ownership.

Having led BrightStar through the teeth of COVID-19, Sun Berkowitz in 2022 engaged in succession planning in earnest. Near the end of that year, she selected an investment banker. In 2024, she passed the mantle of BrightStar CEO to Andrew Ray, and she commenced on the “dating process” to consider potential investors in the company.

That process was informed by conversations she had been having pre-COVID with leaders such as Karen Lynch, then the CEO of CVS Health (NYSE: CVS), and Paul Kusserow, then the CEO of home health giant Amedisys (Nasdaq: AMED). Lynch and Kusserow have been mentors to her, and BrightStar and Amedisys continue to have a “really great partnership,” Sun Berkowitz told me.

“So, I’ve benefited by being close to the strategics, to talk through what might an eventual ownership change look like for BrightStar,” she said.

Her ultimate move to partner with private equity versus a strategic buyer was informed by several factors, she told me, including that many of the strategics currently are going through a period of turmoil and struggle. As a result, their attention is focused in other directions rather than on doing a significant acquisition of a company such as BrightStar.

While Sun Berkowitz did not specify which strategics she was referring to, it’s no secret that the M&A landscape has shifted over the last several years. Organizations like UnitedHealth Group (NYSE: UHG) and Humana (NYSE: HUM) made huge plays in the space through the acquisitions of LHC Group and Kindred at Home, but now they are under duress, with significant pressure on Medicare Advantage. UnitedHealth faces various government inquiries and legal actions, including an antitrust suit to block its planned acquisition of Amedisys. Other significant players such as CVS Health also have been under investor pressure and considering major moves. And Walgreens today announced a $10 billion deal to go private through an acquisition by private equity firm Sycamore Partners.

Meanwhile, private equity firms are sitting on a huge amount of dry powder that they must put to work. As I explored in a Plus Update a few weeks ago, at-home care is among the health care sectors that PE firms are targeting. But some questions have been swirling around private equity activity in health care, with the federal and state governments holding hearings, issuing scathing reports about how care quality declines under PE ownership, and taking action to regulate this type of investment in light of spectacular failures such as the implosion of Steward Health Care.

In considering private equity suitors, a commitment to quality was the top priority, Sun Berkowitz told me. Her concerns related to this issue were one of the reasons she walked away from the deal that was so close to being finalized, and her confidence in Peak Rock’s approach was key to getting this transaction over the line.

“Hearing that they start their board meetings with a focus on quality and what’s going on [related to] safety, quality, those kind of initiatives, before getting to some of the things that might be more common to start with in other PE organizations, was very refreshing,” she said.

She emphasized that a reputation for quality is a differentiator for BrightStar in the marketplace, and is backed up by the company’s nurse-led clinical model, Joint Commission accreditation of agencies, and services spanning personal care, Medicare-certified home health and senior living. Therefore, she considered it imperative that any buyer would understand this and commit to maintaining and enhancing quality of care. And to help ensure this and continue to inform the longer-term strategy for the company, it was important for her to maintain an ongoing role.

“I was able to negotiate those type of parameters with Peak Rock Capital, and that meant a lot to me,” she said.

Going forward, Sun Berkowitz will remain on the board and will be a major shareholder in the company. She declined to disclose more details regarding the financial terms of the transaction.

“Our cap table is very aligned, our financial interests are very aligned,” she said of her position with Peak Rock. “But more importantly, I think [we are aligned in] our desire to do good, grow the company, and do it the right way.”

BrightStar’s future

Technology has always been a cornerstone of the BrightStar operating model; the company implemented its first proprietary tech platform in 2004, with the goal of tracking clinical, customer and employee metrics.

“Every franchise location we’ve ever opened has been on that technology platform, which has been really key to being able to gather and disseminate our best practices,” Sun Berkowitz told HHCN in a Changemakers series interview in 2020.

In late 2022, BrightStar embarked on a $4 million investment into data benchmarking for all franchisees. Today, the company has visibility into the net promoter score of every location and is tracking and trending a variety of key indicators such as falls, infections, readmissions and change of condition, Sun Berkowitz told me this week.

The Peak Rock affiliation will enable an even more accelerated pace of technology investment, which Sun believes is critical for the company’s strategy over the next three to seven years. That’s because, despite the current turmoil and uncertainty around many aspects of public policy and regulation, Sun Berkowitz sees a few mega-trends will continue to shape the at-home care sector.

“I think you have to assume that wherever there are shifts – if Medicaid is coming down, if Medicare Advantage will be challenged – more decisions will be based upon how can you reduce the overall cost of care,” she said. “I think that’s a tailwind that more will be delivered in the home versus in institutional type settings.”

However, to successfully ride those tailwinds, providers must have the data to show that they are indeed driving lower care costs while maintaining or improving outcomes, and that depends on technology, she said. And in terms of driving quality, she believes a key will be in implementing solutions that can enable more proactive interventions through predictive analytics.

“I think those that will grow will have to prove that they can deliver positive outcomes, because those that might be paying the bill, directly or indirectly, are rewarded based upon reducing the total cost and spend,” she said. “I think doubling-down and accelerating some of the other technology investments … that we want to make will position us well for that.”

Describing the present moment as “an interesting time for labor and immigration,” she stressed that the BrightStar workforce is entirely constituted of W-2 employees. While this insulates BrightStar from some labor-related risks, the bigger dilemma is that the labor pool will be insufficient to meet the surging demand for health care – and home care specifically – in the years ahead.

If workers from overseas or other untapped labor pools do not materialize, then the strategy becomes attracting workers from other U.S. employment sectors into at-home care, she said. This will inform BrightStar’s efforts to create its own workforce in the near- and longer-term.

Other headwinds relate to the BrightStar Senior Living business. After launching in 2014, the senior living business has evolved to focus largely on a small-home model under the brand BrightStar Care Homes. The growth of this part of the BrightStar enterprise has been constrained by high interest rates and rising construction costs, and now, uncertainty over the effect of new tariffs adds a further wrinkle.

Currently, the care home projects that make sense typically involve parties that already own land and only need to manage the construction costs, Sun Berkowitz noted. She hopes that within two to three years, the macro factors will shift to enable BrightStar Senior Living to push growth.

Expansion of the at-home care business does not face these same challenges related to land and construction costs and therefore can proceed more rapidly. Accelerating BrightStar’s entry into new markets and deepening its penetration in existing markets are key goals for the coming Peak Rock era, Sun Berkowitz said, but she also said that growth will be at a reasonable cadence.

“We don’t want to just add 100 locations and not be able to support them in the great way we’ve supported the ones that came before,” she said. “We have great alignment that we’re going to go ahead and get resources in place ahead of when the growth will accelerate, so we give the same level of support on a per-franchisee basis as we have in the past.”

In terms of existing franchisees, Sun Berkowitz said she was transparent with them over the last two years about her intentions to sell a majority of the business, so the deal itself is not a surprise. Five franchisees had been involved in the process leading up the deal, including engaging in conversations with Peak Rock. Still, the consummation of the deal was an emotional moment for some franchisees and for Sun Berkowitz herself. While she does not foresee any significant “day-in, day-out changes,” she also is confident that franchisees soon will experience benefits.

“Things that we would have probably taken two to three years to accomplish, we probably will accomplish in 12 to 18 months,” she said. “That will make their business model that much better, because the technology investments that we could make to help them recruit more, retain better, enable more national account partners, and make back office processing more efficient will allow them to be more sustainable, because they’ll be more profitable while not sacrificing at all the quality that makes us special.”

In addition to her ongoing role with BrightStar’s board, Sun Berkowitz is plotting her next steps. She has built a program at the University of Tennessee, her alma mater, focused on franchising. Currently that includes an undergraduate and certificate program, with content in development for graduate students.

“Franchising touches a lot of sectors and can be a really great way, particularly for franchisees, to create wealth, and address holistic income inequality in our country and in the world,” she said.

She also is investigating potential business models that could provide services and support for people with autism beyond their high school years. She “wouldn’t rule out another startup venture” to serve this space, she said, noting that one of her twin sons has autism. So, she has a personal connection and first-hand experience that she would bring to bear in any venture; should she form a company in the autism space, it would be an echo of BrightStar, which Sun Berkowitz founded after struggling to find quality care for her grandmother.

But whatever she undertakes, Sun Berkowitz has one overarching goal, she told me.

“I just want to have impact in this next stage of my life,” she said.