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Q2 2022 Behavioral Health M&A Update

Updated: Oct 12, 2022

Behavioral Health M&A Report Q2 2022

Total transaction volume across the behavioral health care sector saw a modest decrease in the second quarter of 2022, dipping to 30 deals announced from the 44 that were reported in the first three months of the year.

The decline, however, is not necessarily a product of surging interest rates or the equity market, said Mertz Taggart Managing Partner Kevin Taggart. Instead, Taggart said, the volume of behavioral healthcare transactions has been—and continues to be—seller-driven.

“There has been a lot of talk about financial markets and their impact on mergers and acquisitions,” Taggart said. “While I agree a few additional points in interest rates can have a huge impact on a large transaction, we’ve been somewhat insulated both in the behavioral health industry and lower middle market.”

Total Behavioral Health M&A Transactions by Quarter

Note: Total industry transactions does not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry.

Private equity and venture capital accounted for 24 of 30 (80%) transactions in the second quarter. Notably, the sector saw several significant venture capital rounds, all of which had some level of technology that provided scalable accessibility to patients.

While the appetite for larger M&A transactions outside of behavioral health seems to be slowing this year given some of the current macroeconomic trends, the lower middle market is expected to still be a seller’s market in behavioral health, Taggart said.

“Even though transaction volume is down, Mertz Taggart is still very bullish on behavioral health and expects multiples and demand for quality companies to remain strong through the remainder of 2022,” he said.

Addiction Treatment M&A

The addiction treatment subsector saw its transaction volume continue to decline, with eight deals announced in the second quarter, which was down from 15 in Q1 and 31 in the fourth quarter of 2021. With just eight deals reported, Q2 had the lowest volume of addiction treatment transactions dating back to mid-2018.

Addiction treatment M&A transactions by quarter

The quarter did see a pair of provider organizations complete significant venture capital-backed funding rounds. Bicycle Health raised $50 million in series B funding. The funding round was led by InterAlpern Partners and also included Questa Capital, City Light Capital and First Cressey Ventures. Bicycle Health said the funding will be used to expand the organization’s virtual telehealth opioid use disorder treatment services.

Meanwhile, Boulder Care, a Portland, Oregon-based startup, announced that it raised $35.73 million through a combination of series B1 and B2 venture funding from Qiming Venture Partners, Goodwater Capital and Laerdal Million Live Fund, as well as investors from previous rounds including Tusk Ventures, Greycroft Partners, First Round Capital and Gaingels.

Other deals in the addiction treatment category that were announced in the second quarter include:

  • The Sylvia Brafman Mental Health Center expanded its treatment offerings with its acquisition of Through the Archway, a spiritual immersion addiction treatment program.

  • Thrive Capital Management announced a platform deal for Harmony Recovery Group.

  • Three provider organizations announced private equity-backed strategic deals: Community-based drug and alcohol addiction treatment provider Pinnacle Treatment Centers acquired Stepping Stone of North Carolina, a private, outpatient opioid addiction treatment program. Monument purchased fellow digital alcohol recovery program Tempest. And Bradford Health Services expanded its addiction treatment offerings into Mississippi with its acquisition of The Estate at River Bend.

  • Modern Recovery acquired SpringBoard Recovery, creating a new Arizona-based umbrella organization known as Modern Recovery Network.

Mental Health M&A

Although down from the record high number of transactions reported in Q1, deal volume in the mental health subsector remained strong in the second quarter, with 17 transactions announced. Venture capital and private equity accounted for all but three deals in the mental health space.

Mental Health M&A Transactions by Quarter

Five provider organizations announced venture capital funding rounds in the second quarter:

  • Digital emotional support startup Circles raised $16.5 million in series A funding. The round was led by Zeev Ventures; Lior Ron, head of Uber Freight, NFX and Flint Capital, and Sir Ronald Cohen also participated.

  • Parallel Learning announced plans to expand from the current six states in which it operates to between 18 and 23 by the end of the year after securing a $20 million series A funding round led by Tiger Global Management.

  • Family mental health services provider Handspring Health closed a $6.2 million seed round that was co-led by Newark Ventures and NextView Ventures, along with participation from 25madison Ventures, Arkitekt Ventures, Quantum Angels and several health care operators.

  • Concert Health raised $42 million in series B funding for its collaborative care treatment model. The round was led by Healthy Ventures.

  • Iris Telehealth announced a $40 million series B funding round that will support the company’s plans for national expansion. The round was led by Concord Health Partners and Columbia Pacific Advisors.

The following private equity-backed strategic acquisitions were reported:

  • Mindpath Health acquired Acacia Counseling and Wellness, a telehealth and outpatient mental health provider that specializes in treating college students.

  • Spring Health expanded its family mental health service offerings with a deal to acquire the family wellness platform Weldon.

  • CM Counsel acquired Karner Psychological Associates, an outpatient mental health services provider in Albany, New York.

  • Transformations Care Network expanded into Washington state with its acquisition of LightHeart Psychological Associates.

Three private equity platform transactions were announced:

  • Havencrest Capital Management invested in Deep Eddy Psychotherapy, a psychology practice with three locations in central Austin, Texas.

  • Ellie Mental Health, an outpatient mental health clinic operator and franchisor, received an investment from Princeton Equity Group.

  • Bay Area Clinical Associates, a mental health services provider for children, entered into a partnership with private investment firm Frontline Healthcare Partners.

An additional three deals in the mental health sector were also reported:

  • Irwin Naturals completed its acquisition of KHC Capital Group and its portfolio of five Ketamine Health Centers facilities in Florida.

  • Kelly Services acquired Pediatric Therapeutic Services, a specialty firm that provides state and federally mandated in-school therapy services.

  • Moriah Behavioral Health acquired Ignite Teen Treatment and Eden Center for Eating Disorders in a deal involving three provider organizations based in Nevada.

Autism Services and I/DD M&A

The autism services and intellectual/developmental disabilities (I/DD) subsector saw seven deals announced in the second quarter, a slight increase from Q1, but still below average for the category.

 Intellectual/Developmental Disabilities and Autism Transactions M&A by Quarter

With the exception of Constellations Behavioral Services being sold to its 150 employees and restructuring as an employee stock ownership plan, all other deals announced by autism and I/DD service providers involved private equity firms.

Four private equity platform deals were announced:

  • Graham Healthcare Capital made an investment in an undisclosed applied behavior analysis therapy provider.

  • Private equity firm Enhanced Healthcare Partners added autism therapy provider Howard J. Chudler & Associates as a platform investment.

  • Frontline Healthcare Partners announced a recapitalization and growth investment in ABA therapy provider JoyBridge Kids.

  • Health Enterprise Partners made a strategic investment in autism spectrum disorder treatment company Proven Behavior Solutions.

Meanwhile, Stepping Stones Group made a private equity-backed acquisition of therapeutic and behavioral company HM Therapy, and private investment firm Atar Capital announced a sixth acquisition through its portfolio company Pathways Health and Community Support, closing a deal for Psychological Assessment & Intervention Services.


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