Preparing to Sell a Behavioral Health Business in 2026: What We Saw in 2025 and How Owners Can Prepare Now
- Emin Beganovic
- 8 hours ago
- 7 min read
Webinar recap featuring Kevin Taggart, Peter Thiessen, and Dr. Anke Stugk (Mertz Taggart Behavioral Health Team).
Behavioral health M&A can feel opaque if you haven’t been through it before. In this webinar, Mertz Taggart’s behavioral health team walked through what owners should do before launching a process, what buyers evaluate during valuation and diligence, and how the market performed across mental health, addiction treatment (SUD), and autism/IDD (ABA).
While this conversation took place earlier, the themes landed squarely on what mattered most in 2025—and what we expect owners to focus on as they prepare for 2026.
As Kevin Taggart put it at the outset, the goal was to help owners understand “preparing for a sale, the M&A process… and then a market overview,” with time for Q&A.
Below is a written summary that follows the structure of the webinar closely, including direct callouts and quotes.
Who Presented
Kevin Taggart opened by sharing Mertz Taggart’s behavioral health focus and deal activity. He noted the firm’s work across 34 states and a typical transaction size range of $5M to $100M in enterprise value, with many engagements involving founder-owned businesses.
Peter Thiessen introduced himself as a former CPA with behavioral health transaction experience dating back to 2005, including psychiatric hospitals and addiction treatment. He also offered the buy-side perspective: “When I knew that it was a competitive process… we typically did pay more.”
Dr. Anke Stugk (PhD in financial management) described her role supporting modeling and due diligence preparation, including guiding clients through Quality of Earnings (QoE) and other diligence work streams.
Selling a Behavioral Health Business in 2026: The Fundamentals Buyers Rewarded in 2025
Peter framed the first section around a question we heard repeatedly throughout 2025: “How do I prepare to sell?” His message was direct—preparation impacts timeline, buyer confidence, and value.
Clean, consistent financials (consistency is still the baseline)
Buyers want financials that are comparable year-over-year and month-over-month:
Categorize revenue and expenses consistently over time
Expect buyers to review 2–3 years of historical results
Reduce “messiness” before launch so diligence doesn’t become a cleanup project
Peter’s core point: “Clean consistent financials” accelerate the process and reduce friction.
EBITDA normalization: common, but needs to be cleanly presented
Founders often run certain personal or non-recurring costs through the business—buyers see it all the time. The key is to normalize cleanly:
Identify one-time or personal items
Normalize EBITDA by adding back those expenses
Present a clearer picture of sustainable earnings
Peter described it simply: “We call what we sort of do is EBITDA normalization.”
Forecasting and budgets: “plan vs. actual” mattered in 2025—and will matter more in 2026
In active 2025 processes, buyers frequently asked for forecasts and then evaluated how accurately they tracked.
Peter noted buyers want to understand:
Whether forecasts were realistic
Why performance varies month-to-month
Whether growth assumptions match reality
“If you forecasted 30% growth and it ends up being two… they’re going to ask questions.”
Avoid last-minute surprises (a 2025 deal-killer that’s fully preventable)
One of the strongest themes was disclosure. Issues don’t always end a deal—but surprises late in diligence often do.
Peter shared a CARF accreditation example where a serious risk wasn’t disclosed early. When it surfaced late, the buyer asked for time to evaluate it. The seller refused and the buyer walked—roughly 60 days before close.
The takeaway for 2026 planning: “It’s best to just bring them forward up front… there are always ways to get through that process.”
Operational Readiness: The “People and Process” Premium We Saw in 2025
Financials open the door. Operations keep the deal alive.
Retain key staff during a process
Peter shared an example from a recent process where a deal was derailed because a critical team member was terminated mid-process—without coordination.
“The buyer found out about it and said, ‘Okay, well we can’t obviously operate… without this key member.’ And they again walked away.”
2026 takeaway: If staffing changes are unavoidable, communicate early so the buyer sees a plan—not a risk.
Diversify payer mix and referral sources
In 2025, concentration risk was consistently discounted—especially payer concentration. Buyers prefer multiple payers and diversified referral channels.
Document processes + keep contracts organized
If the owner won’t remain long-term, buyers want “institutional memory” in writing—especially for clinical operations, compliance steps, payer/referral relationships, and back-office processes.
Peter summarized it as: “Documenting processes and having all of your contracts in order.”
Valuation Drivers vs. Red Flags: What Buyers Paid For in 2025 (and What They Penalized)
Owners asked all year how to increase valuation. The webinar framed it as value drivers versus red flags.
What drove higher valuations
Across 2025 conversations and outcomes, these “check the box” items stayed consistent:
Diversified payer mix
Strong, consistent financial performance
Strong management team (especially if the owner is stepping away)
Scalability (proven ability to replicate the model)
Clean clinical documentation + billing compliance (low denials, strong notes)
On scalability, Kevin made a point that matters for 2026 preparation: buyers value it more when it’s proven.
“The more you can prove it out that you’ve done it two or three times, it gives a buyer a lot more confidence.”
Red flags that slowed deals or reduced value
Peter outlined what still triggered deeper scrutiny:
Declining revenue (especially mid-process)
Low EBITDA margins vs. peers
Customer / payer concentration
High staff turnover
Open audits or pending audits (Medicaid, Medicare, payer audits)
Significant grant revenue (especially if new or relationship-dependent)
On grant revenue, Peter’s buyer view was straightforward: “Significant grant revenue tends to get… discounted,” particularly if it’s newer or tied to a single relationship.
Deal Timeline and Process: How to Use 2025 Lessons to Run a Better 2026 Sale Process
How long does it take?
In 2025, the team continued to see rare cases close in ~60 days when everything was ready and responsiveness was immediate. More commonly, processes landed in the six to nine month range, sometimes longer due to complexity and state-specific regulatory steps.
The typical process (from teaser to close)
Preparation / pre-marketing
Build the Confidential Information Memorandum (CIM/SIM)
Send a teaser
Collect NDAs
Share the CIM/SIM
Receive IOIs
Shortlist and run management meetings / site visits
Receive LOIs
Enter exclusivity + due diligence
Negotiate definitive agreements + close
Why competition mattered (and why it’s a 2026 strategy lever)
Kevin emphasized that competitive tension isn’t just theory—it materially changes outcomes.
“The lowest offer was 40% of the highest offer.”
That spread is the reason the team prefers a broader process, even though it’s more intensive.
Peter reinforced the buy-side reality: “It puts pressure on buyers” to deliver stronger terms when they know competitors are involved.
5) Due Diligence: The 2026 Preparation Checklist Buyers Will Expect
Dr. Anke described diligence as “exciting” for her team, but “daunting” for owners—mostly because of volume. Her message was practical: preparation makes it manageable.
Quality of Earnings (QoE) comes first
QoE typically involves:
The buyer’s internal review
A third-party QoE firm examining financials, billing data, and revenue quality
Anke’s point: start answering diligence questions before going to market.
“We ask all those questions prior to even go out to market… it will feel like questions are answered five times.”
Clinical chart review: a risk-and-readiness exercise
Chart review often includes 50 to 200 charts, depending on services and scale.
“It’s not about pointing the finger. It’s more about what is the buyer actually buying and where is there room for improvement.”
Anke shared an example where payer documentation requirements changed, and the provider was able to tighten documentation before it became a larger issue.
Legal diligence: intimidating list, normal process
“‘N/A’ is an answer.” Not every question applies, and organization is what keeps the process moving:
Consistent filenames
Structured data room
Timely responses to avoid delays
Why buyers spend so much on diligence
Kevin added that buyers are essentially paying to identify risk—sometimes spending hundreds of thousands, and occasionally over $2 million, across legal, accounting, and clinical/coding advisors depending on deal size.
2025 Market Signals Across Behavioral Health: What to Carry Into 2026
Kevin closed with the market view and addressed the question everyone asks—multiples—while noting they vary widely by subsector, payer model, margins, and scalability.
2025 was more active than the headlines suggested
Kevin noted Mertz Taggart’s behavioral health deal activity and said it was the busiest year since the 2021–2022 surge, which he described as atypical relative to longer-term baseline volume.
Sub-sector notes from 2025
Addiction treatment / SUD
Some historic strategic acquirers slowed, reducing overall deal volume from a few well-known buyers. Out-of-network models remained more challenging—though select exceptions can still attract strong interest.
Autism / IDD (ABA services)
After wage inflation, rate compression, and notable industry disruption, the space appeared more stable in 2024 and more competitive in 2025—especially for well-run assets.
Outpatient mental health
Buyer demand remained strong for:
Psychiatry practices
Psychiatry + counseling combinations
TMS and other ancillary services in structured outpatient settings
Kevin also noted that multiples cooled from peak years, even as premium assets still command strong outcomes.
Venture capital vs. private equity in mental health
Venture-backed, tech-valued models expanded rapidly earlier, particularly around telehealth. Kevin suggested those valuations and growth trajectories face pressure relative to prior years, while private equity remains more conservative and EBITDA-driven.
What Owners Should Do Now to Prepare for 2026
If you’re planning for a 2026 exit—or want the option to sell on your timeline—these were the most actionable takeaways:
Make your financials consistent and clean (2–3 years, same categories).
Normalize EBITDA properly and be ready to explain adjustments.
Create real forecasts and track plan vs. actual monthly.
Reduce concentration risk (payers + referral sources).
Stabilize your team and document processes so the business runs without you.
Get “diligence-ready” early (QoE prep + chart readiness + organized contracts).
Run a process that creates competition—because spreads can be meaningful.
Request the Slides or Continue the Conversation
If you’d like a copy of the webinar deck or want to discuss how these 2025 themes apply to your business as you plan for 2026, reach out to Mertz Taggart for a confidential conversation.
Contact: info@mertztaggart.com
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