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Q1 2023 Behavioral Health M&A Update

Updated: 7 hours ago

White Mertz Taggart Logo on a blue background with text that reads Behavioral Health M&A Report Q1 2023

Mergers and acquisitions within the behavioral healthcare sector plummeted in the first quarter of 2023, with a confluence of factors driving activity down to a level not seen since the beginning of the COVID-19 pandemic.


The 27 total deals announced in the first three months of 2023 were the fewest since the second quarter of 2020 — the start of the pandemic—however, it is a figure in line with pre-COVID quarterly numbers.



A bar graph showing total behavioral health industry transactions by quarter starting with Q2 2019 and ending with Q1 2023
Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry.

The slowdown can be attributed to the following three factors:


Reversion to the mean. Experiencing burnout and/or having concerns about the looming potential of an increase in the capital gains tax from 20% to as much as 40%, many within the field have been particularly motivated to sell over the past two years.

“The tax issue is not in the forefront currently, but it could spring up again,” Mertz Taggart managing partner Kevin Taggart said. “This has been on the Biden administration’s agenda since before the election, and we wouldn’t be surprised if this gets worked into a bill before all is said and done.”


Banking crisis. As previously noted in the Mertz Taggart report for the fourth quarter of 2022, venture capital firms have flocked to behavioral healthcare, taking a particular interest in mental health, and were responsible for much of the activity at the close of 2022. However, the recent collapse of Silicon Valley Bank — the biggest banker to venture capital firms — has slowed VC-backed deals significantly. Three of the four largest bank failures in US history have occurred over the last several months, so the lending environment is more difficult for buyers. This has caused delays and cancelations of transactions.


While still attractive to buyers, mental health transactions have slowed. The COVID-19 pandemic enabled many mental healthcare providers to scale their operations with an increased demand for services and the emergence of telehealth. Although demand for such services remains, it is possible that utilization has waned somewhat from pandemic-era levels.


Another way M&A trends are reverting to the mean of pre-pandemic levels is the amount of activity — or lack thereof — from private equity firms. Just 10 platform transactions and 10 private equity-backed strategic add-on deals were announced in the first quarter of 2023. Combined, this was the fewest PE-involved transactions announced since the third quarter of 2020.


“Although mergers and acquisitions have slowed over the last quarter, activity is still at very high levels. Deals are just taking longer to get completed,” Taggart said. “The remainder of the year will be stronger than Q1.”


Addiction Treatment M&A

Just four deals in the addiction treatment subsector were announced in the first quarter. That figure is one-third of the 12 reported in the prior three months and the lowest of any quarter on record since 2019.


“There are fewer buyers and less demand in addiction treatment,” Taggart said. “The buyer landscape has shifted. Many traditional buyers have paused for various reasons, and those who are buying are being very disciplined in their acquisitions.”



A bar graph outlining addiction treatment transactions by quarter starting with Q2 2019 showing through Q1 2023

The following transactions were completed in Q1:


Private equity firm Avesi Partners invested in Muir Wood, a provider of integrated, adolescent-focused services in a platform deal.


Ascension Recovery Services acquired Wise Path Recovery Centers in West Virginia in a private equity-backed strategic deal.


SimpleTherapy, a digital musculoskeletal pain recovery solution for employers and health plans, announced its acquisition of Halcyon Behavioral, a behavioral health and wellness company.


Lifepoint Health, a diversified healthcare delivery network, acquired Cornerstone Behavioral Health El Dorado in Arizona in a private equity-backed strategic deal. Lifepoint also acquired a majority ownership interest in national behavioral healthcare services provider Springstone.


Mental Health M&A

Although down from the prior quarter, deals involving providers of mental health services remained above average in Q1, with 23 transactions announced.



A bar graph outlining mental health transactions by quarter from Q2 2019 to Q1 20233

Other deals involving mental healthcare organizations included the following:

Backed by the private equity firm Thurston Group, ARC Health announced they acquired Wellington Counseling Group, the Colorado Center for Clinical Excellence and Lilac Center.

Recovery Centers of America acquired mental health and addiction treatment provider Adolescent & Young Adult Advocates in Bryn Mawr, Pennsylvania.


Middle market investment firm Patriot Capital partnered with Turnwell Mental Health Network in a private equity platform deal. Also announced in the first quarter: Scottsdale Mental Health & Wellness Institute joined the Turnwell Network.


Behavioral health services platform Health Connect America completed its acquisition of North Star Counseling of Central Florida in a deal backed by Palladium Equity Partners.

Irwin Naturals completed an acquisition of Serenity Health, a ketamine clinic based in Louisville, Kentucky.


Mental Health Partnership raised $5 million in a deal reported by Open Minds. An investor was not identified. Meanwhile, Denver, Colorado-based provider The Collective Integrated Behavioral Health raised $11 million in its second funding round in as many years, according to Behavioral Health Business.


GV, previously known as Google Ventures, invested $28 million in mental health-focused startup Firsthand, according to BH Business.


NOCD, a Chicago-based behavioral healthcare technology firm, raised $34 million in a funding round led by Cigna Ventures.


The Stepping Stones Group acquired Catalyst Speech Language Pathology in a private equity-backed strategic deal.


Array Behavioral Care, formerly known as Insight Telepsychiatry, announced a $25 million funding round led by CVS Health.


After seven years of managing Northside Behavioral Health Center in Tampa, Florida, BayCare Health System announced in January that it has acquired the not-for-profit community mental health center.


Acadia Healthcare announced that it has acquired CenterPointe Behavioral Health System, a large provider based in St. Charles, Missouri.


Cornerstone Montgomery acquired Southern Maryland Community Network in a deal between behavioral healthcare providers in Maryland.


Autism Services and I/DD M&A


Deals involving providers of autism and intellectual/developmental disabilities (I/DD) services remained slow, with four deals announced in Q1. Many of the consolidators who historically have been active within the subsector “have shifted toward more of a de novo strategy rather than paying a premium for an acquisition,” Taggart said.



A bar graph outlining I/DD/Autism M& A transactions by quarter from Q2 2019 through Q1 2023

The following deals involving autism and I/DD treatment organizations were announced:


Digital autism provider AnswersNow completed an $11 million Series A funding round led by Left Lane Capital, along with participation from American Family Institute for Social Impact, Blue Heron Capital, Difference Partners and former CEO Lani Fritts.


Apara Autism Center, a portfolio company of private equity firm Havencrest Capital Management, completed its acquisitions of Autism Learning Collaborative, as well as the Missouri operations of Early Autism Services.


Private equity firm MBF Partners acquired ABA Connect in a platform deal.


In a deal between a pair of not-for-profit providers, Port Health became an affiliate of Easterseals UPC.

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