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Q1 2024 Behavioral Health M&A Report

Headline: Q1 2024 Behavioral Health M&A Report

Although mergers and acquisitions are up across the behavioral healthcare sector, relatively tight debt markets and a regulatory environment that is less than ideal for healthcare investment are creating headwinds.


A total of 42 deals were reported in the first three months of 2024, the most since the fourth quarter of 2022. This included 24 traditional “control position” M&A deals, and 18 "growth equity” deals in which investors (often venture capital firms) purchase what is usually a minority ownership stake in companies that show great potential for scalability.  Private equity was a large driver of M&A activity, accounting for 18 of 24 M&A transactions reported in Q1, including eight platform deals.

U.S.-based private equity firms continue to sit on a significant amount of “dry powder” – nearly $1 trillion in funds that need to be spent or returned to investors – and healthcare services, particularly behavioral healthcare, remain very attractive, Mertz Taggart Managing Partner Kevin Taggart said.


While private equity firms have an impetus to invest in behavioral health, their activity is drawing scrutiny from federal and state regulators. Several states have enacted legislation to more tightly regulate private equity involvement in healthcare, and officials from the Federal Trade Commission and Senate Finance Committee have expressed concern that private equity acquisitions could harm patients and payers by reducing options for care and driving up costs.

Taggart, however, expressed a differing outlook on PE’s impact on healthcare.


"In our experience, the private equity groups who ‘get it’ don’t come in and start finding ways to cut costs and play in the gray area. It’s quite the opposite,” he said. “Smart PE firms tend to understand that those companies that can save the health system money and provide quality patient outcomes will be most attractive. To do that, they need to continue to invest, scale and standardize. This is an incredibly underserved market which needs investment to grow.”


How the Federal Reserve handles interest rates will be a key factor that shapes M&A activity within the coming months. Broadly, behavioral healthcare has been somewhat insulated from the effects of interest rate increases. The Fed has hinted at upcoming rate cuts later this year, but if rates aren’t lowered, the more highly leveraged behavioral health platforms will begin to feel the impact, as banks become more diligent, debt financing becomes harder for buyers to obtain, and covenants with financial institutions become stricter.


Venture capital firms, meanwhile, have continued investing in behavioral health in Q1 2024, with 18 deals that accounted for more than $350 million. The success of mental health companies such as Talkspace, LifeStance Health, and Refresh Mental Health becoming publicly traded has motivated VC firms to look for “the next big thing” – fast-rising startups that could become big players in the industry in the coming years, Taggart said. Such investments are high risk/high reward propositions for venture capital firms.


“To use a baseball metaphor, while private equity hits singles and doubles more consistently by either acquiring a majority interest in established behavioral health companies or buying them outright, venture capital firms are swinging for the fences with these types of growth investments in startups,” Taggart said. “That approach yields a lot more strikeouts, but also the occasional grand slam.”



Addiction Treatment M&A


A total of 11 transactions involving addiction treatment providers were announced in Q1, on par with the 12 reported in the prior three months. Most notably, Acadia Healthcare made two acquisitions, the company’s first deals since January 2023. In February, Acadia closed on an acquisition of Turning Point Centers, a 76-bed specialty substance use disorder and primary mental healthcare treatment program in Utah. A month later, Acadia acquired three North Carolina-based comprehensive treatment centers (CTCs) from Sellati & Co., a Mertz Taggart client.


The acquisition of the Sellati & Co. CTCs was part of a strategy to expand Acadia’s presence in North Carolina, a state with an “immense need and progressive approach to behavioral healthcare treatment programs,” CEO Chris Hunter said during Acadia’s most recent quarterly earnings call. The organization now operates 10 CTCs in the state and 160 locations in 32 states overall.

Chart: Addiction Treatment Transactions by Quarter

Other transactions involving addiction treatment provider organizations included the following:


  • Avesi Partners invested in First Steps Recovery, a Fresno, California-based provider of adult-focused SUD treatment services. Mertz Taggart served as the exclusive M&A advisor to this transaction, representing First Steps.

  • Principles Recovery Center was acquired by Miramar Equity Partners.

  • Eleanor Health raised $22.23 million from an undisclosed investor, bringing the company’s total raise to about $104 million.

  • Pyramid Healthcare acquired Mountaineer Behavioral Health in a private equity-backed strategic deal.

  • Retreat Behavioral Health, a multi-state operator of addiction treatment and mental health services, was acquired by private equity firm Stonehenge Capital.

  • Tennessee-based Summit BHC expanded its network into New England with its acquisition of Sobriety Centers of New Hampshire in a private equity-backed transaction.

  • QuickMD, a national provider of telehealth-based addiction treatment, acquired Project Recovery, an addiction treatment clinic in South Dakota.

  • Blended Health, a private equity-backed, Texas-based outpatient services provider, acquired Connections Primary Care.



Mental Health M&A


In the first quarter, 28 transactions involving mental healthcare providers were announced, up slightly from the 26 reported in each of the final three quarters of 2023. Venture capital firms showed a particular interest in mental healthcare companies in Q1, with 14 providers in the subsector announcing funding rounds.

Chart: Mental Health Transactions by Quarter

Chief among them was Accompany Health, a Bethesda, Maryland-based startup that raised $56 million in a Series A funding round led by venture capital firm Venrock, along with participation from ARCH Venture Partners, IVP, Granite Capital Management, and Evidenced. Accompany Health is using the funds to build out an integrated behavioral, physical, and social care platform.


Other mental healthcare provider organizations that announced funding rounds in Q1 included:


  • Vita Health, a provider of suicide prevention services, closed on a $22 million Series A funding round led by CVS Health Ventures, along with participation from: LFE Capital, Athryium Capital Management, Flair Capital Partners, CU Healthcare Innovation Fund, Connecticut Innovations, and HopeLab.

  • Headlight, a startup formerly known as Sokya Health, raised $18 million in new funding that was led by Matrix and Epic Ventures.

  • Blackbird Health, a provider of youth mental health services, announced it raised $17 million in a round led by Define Ventures.

  • LifeGuides, an employee wellness company, completed a $16.5 million funding round. Participating investors were not announced.

  • Virtual mental health company Tava Health raised $16 million in January, according to SEC filings. In March, the company announced that it raised an additional $4 million in a Series B funding round led by Catalyst Ventures.

  • Virtual eating disorder treatment provider Arise raised $6.5 million in a funding round led by BBG Ventures.

  • Being Health, a mental health organization based in New York that offers in-person and virtual services, secured $5.4 million in funding from 18 Park and HDS Capital.

  • FamilyWell Health announced that it has secured $4.3 million in seed financing in a round led by .406 Ventures, with participation from GreyMatter Capital and Mother Ventures.

  • InSite Health, a New Jersey-based psychiatric care provider, raised $2.9 million. Investors were not disclosed.


The following deals involving mental healthcare providers were also announced:


  • Senior Care Therapy, a provider of psychology and mental health services for the geriatric population, received an investment from lower middle market private equity firm Madison River Capital.

  • Virtual reality platform XRHealth raised $6 million in a funding round let by Asabys Partners.

  • HCAP Partners, a California-based private equity firm, announced the acquisitions of Behavioral Medicine Associates, Workers Compensation Psychological Network, and Reservoir Health, which are being merged under the name PAX Health.

  • Acentra Health, a provider of clinical services and technology solutions for government healthcare agencies, acquired EAP Consultants.

  • Beacon Behavioral Partners, a provider of support services for behavioral health practices, announced the acquisition of three organizations: The Neuropsychiatry & TMS Group (Mertz Taggart, provided exclusive sell side representation), an outpatient mental healthcare provider based in Tampa, Florida, Genesis Behavioral Health Care Services, and Precise Clinical Neuroscience Specialists.

  • Outpatient mental health platform Hightop Health acquired Roots Behavioral Health.

  • ReviveHealth announced an expansion of its integrated whole-person care offerings with its acquisition of BHS, a provider of employer and student mental health solutions.

  • Spring Health acquired exclusive rights to Bloom’s suite of self-guided therapy tools and digital content.

  • Digital mental health provider UpLift acquired TAO Connect, an online platform with mental health tools and resources for college students.

  • Parallel Learning received an investment from VC firm Rethink Impact.

  • Uwill, a rapidly expanding on-campus mental health services provider, acquired Christie Campus Health, which offers counseling and mental health and wellness support for students at more than 100 colleges.

  • Ketamine Wellness Clinic of Orange County has acquired Mind Space Ketamine Infusion Clinic.



Autism and Intellectual/Developmental Disabilities M&A


Five transactions involving autism and intellectual/developmental disabilities service providers were announced in Q1, with the most notable being a $55 million funding round for Forta, a San Francisco, California-based organization that helps parents become registered behavior technicians and pays them from payer reimbursements for services delivered to their child.

Chart: Addiction Treatment Transactions by Quarter

The following deals were also announced:


  • The EdTheory Group, a provider of K-12 special education and related services, announced a collaboration with A.G.E.S. Learning Solutions and Proficio Speech Therapy Group to form Proficio Therapy Services.

  • California-based Autism Spectrum Interventions was acquired by private equity firm Fletch Equity.

  • Behavioral Framework, a provider of applied behavior analysis therapy, received an investment from Renovus Capital Partners.

  • Not-for-profit Children’s Autism Center announced an expansion of its services with its acquisition of Child’s Play Plus in Northeast Indiana.


If you are interested, you can also download the Q1 2024 Behavioral Health M&A Report via the following link:


Q1 2024 Behavioral Health M&A Report
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