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Behavioral Health M&A Report: Q4 2020

Updated: May 17, 2023

A steady second half of 2020 bodes well for 2021.

Behavioral health M&A remained steadily active in the fourth quarter of 2020, with a total of 27 transactions, according to the latest data from M&A advisory firm Mertz Taggart. Announcements in addiction treatment led the segment in Q4 with some large groups moving forward on multiple acquisition deals.

The year finished with 97 transactions overall. 2020’s total number of deals were comparable to those in the previous two years, despite a global pandemic. In 2019, the segment witnessed 97 announcements, and in 2018 an even 100.

“The second half of 2020 was as strong as we’ve seen,” said Mertz Taggart Managing Partner Kevin Taggart. “Combine that with the threat of a near-term capital gains tax hike, and we expect an active 2021.”

He said new partnerships and access to capital will become especially important in the months to come as healthcare providers emerge from the coronavirus pandemic with a more competitive landscape than before.

“We know that financial mechanisms have been shifting,” Taggart said. “While loans and operating income remain the primary sources of capital, private equity investment could be the important variable that contributes to a more optimistic outlook for many behavioral health providers.”

Taggart believes the continued infusion of private equity assets combined with a clear forecast of pent-up demand for services will offer a boost to revenue by mid-year. Yet, providers that are able to build capacity quickly will also need to be resourceful in how they approach the imbalance of supply and demand, leveraging technology and strong operational sophistication.

“We see additional evidence of a positive outlook in behavioral health based on the number of new center openings across the country,” Taggart continued. “And these are brick-and-mortar locations, banking on an increase in in-person services, even as they continue to rely on telehealth visits.”

With an anticipated surge in demand, new center openings and private equity interest, Taggart believes M&A activity could reach a new peak in mid-to-late 2021. The last three years have demonstrated that there’s still plenty of room for strategic acquisitions in behavioral health.

Note: The sum of sub-industries (broken down above) does not always equal total sector deal volume, as some transactions include more than one sub-industry.

Addiction Treatment

In Q4, the deal activity continued for several growing PE-backed portfolio companies. As they add new locations, many are also launching rebranding efforts to unite their networks in name as well as in operations.

A recent survey from the National Association of Addiction Treatment Providers noted that providers are making significant investments in technology, which will likely set them up for more objective quality-of-care measurement, which also leads to improved reimbursement from payers.

“Buyers are definitely not looking to add scale for the sake of scale,” said Taggart. “Proven clinical quality and the ability to increase census has to be part of the growth strategy.”

It was a busy quarter for BayMark Health Services with a number of significant deals. The addiction treatment organization acquired Liberty Bay Recovery Center, a residential treatment center in Portland, Maine, making it the second residential offering in the BayMark network of more than 250 facilities across the United States and Canada. Mertz Taggart represented Liberty Bay in the transaction.

BayMark also announced the acquisition of Limestone Health, an opioid treatment program with three locations in Indiana, formerly owned by Springstone, Inc. The transaction represents BayMark’s first entry into the state. In December, it acquired Choices of Louisiana, which offers opioid treatment programs in three locations, and additionally in a separate transaction, it added Recovery Pathways, an office-based opioid treatment provider with three locations in Pennsylvania, to its roster. Also in December, BayMark acquired Echo Treatment Center in Pennsylvania, which will fall under the MedMark Treatment Centers brand. BayMark is a portfolio company of Webster Equity Partners.

Summit BHC has acquired Seabrook in New Jersey, adding a 153-bed inpatient center and three outpatient centers to its portfolio. The deal marks Summit’s first entry into New Jersey and brings the company’s total number of locations to 22. Mertz Taggart provided sell-side services for Seabrook in the transaction.

Landmark Recovery acquired Las Vegas Recovery Centers in December. Mertz Taggart provided sell-side services for Las Vegas Recovery Centers in the transaction. Landmark now operates in four states and plans to open 10 new locations in 2021.

Arisa Health announced the acquisition of the Wilbur D. Mills Treatment Center in Arkansas, which includes a residential and outpatient center as well as an apartment complex for those in recovery. It will be rebranded as Arisa Health Recovery at Mills.

Behavioral Health Group announced several deals in Q4. It expanded into Rhode Island with the acquisition of the Center for Treatment & Recovery, LLC, which will be rebranded as BHG Pawtucket Treatment Center. It also announced it had expanded its footprint in Alabama with the acquisition of Huntsville Recovery, Inc. and Stevenson Recovery, Inc. in October. The two locations will be rebranded with the BHG name. In November, BHG acquired Wellness Ambulatory Care in Tennessee. In all, the company operates across 15 states.

Discovery Behavioral Health acquired Prosperity Wellness Center, a 40-bed residential treatment center in Washington, representing the 10th brand added to the Discovery portfolio. The organization operates four existing outpatient centers in the state as well. Center For Discovery and Cliffside Malibu merged in 2018 to form Discovery Behavioral Health as a newly created parent company, backed by Webster Equity Partners.

Autism Services & Intellectual/Developmental Disabilities

Individuals with autism spectrum disorder and intellectual/developmental disabilities were among those experiencing added distress in 2020 attributed to reduced access to services because of the pandemic, according to a report from the National Institutes of Health. As a result, more individuals will likely need a higher level of care in 2021, including involvement from family and loved ones.

“Care that extends to the family will be a sought-after service offering,” Taggart says. “We should expect to see buyers looking for acquisitions to enhance comprehensive services and whole-person care.”

SPG in October announced two deals. It acquired applied behavioral analysis (ABA) provider Family Support Center as well as Go2Consult, a speech and language services provider. The transactions broaden the geographic coverage for SPG, a portfolio company of Ridgemont Equity Partners.

Blue Sprig Pediatrics, Inc. announced a deal to acquire the assets of the Michigan-based Momentum Autism Therapy Services, a center- and home-based provider of ABA services.

Pharos Capital Group, LLC in December acquired Catalyst Behavioral Solutions, a Utah-based mental and behavioral health services provider, marking its seventh acquisition. Catalyst offers Catalyst Academy, a program for children.

In a platform deal, New Capital Partners and OSF Ventures, part of the OSF Health System, acquired DotCom Therapy, Inc, provider of virtual counseling and therapy for autism spectrum disorder.

Caravel Autism Health announced the acquisition of Behavior Therapy Solutions of Minnesota. The combined organization will serve children with autism and their families through a network of six autism therapy centers in the state.

Apara Autism Centers in December acquired Behavior Pioneers, a provider of ABA services with four locations in Texas.

Mental Health

Even now, providers are still wrestling with parity issues, Taggart said. Therefore, mental health organizations that have beneficial in-network contracts with payers will be attractive to strategic buyers. And consolidation will help providers gain the scale they need to bring much-needed leverage to the negotiating table.

And any organization that can demonstrate comparable quality of care and reasonable profitability through the use of virtual appointments will be an attractive target.

Pathways Health and Community Support, LLC completed the acquhereisition of Access Family Services, Family Behavioral Resources, and Autism Education and Research Institute—three intervention service organizations which will be combined into one entity. Pathways operates in 18 states and the District of Columbia. Previously, Atar Capital acquired Pathways from Molina Healthcare in 2018.

Monte Nido & Affiliates, a portfolio company of Levine Leichtman Capital Partners, acquired Rosewood Ranch, L.P., a network of three eating disorder treatment facilities in Arizona. With the transaction, Monte Nido now operates 29 residential and outpatient facilities in 11 states.

The Stepping Stones Group, announced the acquisition of Ardor School Solutions, a provider of school-based therapeutic and behavioral health services. Stepping Stones is a portfolio company of Five Arrows Capital Partners. The deal expands the organization’s geographic footprint into New Mexico and Arizona.

ProtoCall Services, a 24/7 telephonic crisis intervention provider acquired The Shrink Space, a referral management software platform that is used in higher education with a national network of more than 4,000 licensed clinicians, prescribers and treatment centers.

Private equity firm Kelso has acquired a majority interest in Refresh Mental Health, an outpatient mental health network with 200 locations nationwide. Kelso’s stake in Refresh was acquired from affiliates of investment firm Lindsay Goldberg, which helped found Refresh in 2017. Locations acquired in this platform deal include outpatient substance use disorder, eating disorder and mental health treatment centers.

Summit Behavioral Healthcare LLC purchased the shuttered 92-bed Clear View Behavioral Center in Colorado for $29.2 million in a deal that closed in December. Summit intends to apply for a new license and begin operations within the first six months of 2021.

In a platform deal, Revelstoke Capital Partners acquired Family Care Center, which provides outpatient psychiatry services to the U.S. Armed Forces and veterans in Colorado. The organization plans to expand services in the state and in new geographic areas.

Latticework Capital Management in December acquired Beacon Behavioral Hospital, which operates seven intensive outpatient locations and four inpatient hospitals in Louisiana. Now with this platform deal, leaders plan to expand into new states and add new service offerings.

Magellan Health, Inc. in December completed a transaction to acquire a 70% interest in Bayless Integrated Healthcare, an outpatient behavioral health and primary care provider in Arizona. Magellan’s core competency has been in managed care, however, the organization has the option to buy the remaining equity in Bayless within the next 36 months. Bayless brings additional integrated health, telehealth and other provider capabilities to the Magellan portfolio.


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