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Q2 2023 Behavioral Health M&A Report

Updated: Oct 30, 2023

Headline: Behavioral Health M&A Report: Q2 2023

A total of 13 venture capital-backed transactions, representing nearly $400 million in new investment in the industry, highlighted behavioral healthcare’s transaction activity in the second quarter of 2023.

“The prevailing theme for the deals, most of which involved mental healthcare organizations, was a familiar refrain”, said Mertz Taggart managing partner Kevin Taggart: “Enable access for more patients who need services while saving the healthcare system and payers money. If you can show a path to do that at scale, you’ll likely generate investor interest.

Overall, 34 transactions were announced in the second quarter, in line with 33 in the first 3 months of the year, and payer investment in service providers played a significant role in behavioral health investment activity.

In one example, Optum Ventures, the venture capital arm of UnitedHealthcare subsidiary Optum, was a lead investor in a $75 million series D funding round announced by autism care provider Cortica in April. The investment helped Cortica to close deals to acquire two providers (detailed below). Meanwhile, Cigna was among the lead investors in a $52 million series C funding round announced by multistate behavioral healthcare provider Octave.

Chart: Total Behavioral Health Industry Transactions by Quarter
Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry.

We’re seeing more payer investment in service providers across healthcare,” Taggart said. “If a provider fits well into the value-based continuum, the payers want to have some influence.”

In the coming months, Mertz Taggart will be monitoring interest rates, however.

The marketplace for quality companies is still strong, but the extent of the rate hikes and expected duration will likely be the biggest drivers of M&A over the next 12 months”, Taggart said.

Addiction Treatment

In the second quarter, seven deals were announced within the addiction treatment subsector, four of which were private equity-backed strategic investments. In one such deal, Pinnacle Treatment Centers acquired four outpatient addiction treatment programs—three in New Jersey and one in Pennsylvania—from Recovery Centers of America. The sale by RCA was part of a strategy to divest from its freestanding medication-assisted treatment center business, CEO Brian O’Neill told Behavioral Health Business in April.

Meanwhile, Mertz Taggart served as the exclusive sell-side side advisory firm for Turning Point of Tampa, which received a strategic investment from private investment firm The Apen Group in June.

Chart: Addiction Treatment Transactions by Quarter

Other transactions involving addiction treatment organizations that were announced in the second quarter include the following:

  • Living at Reflections, a Novato, California-based substance use disorder (SUD) treatment provider, received an investment from Traverse Pointe Partners to create a partnership with Traverse Pointe’s The Hope House.

  • The Rise Fund, the multi-sector global impact investing strategy of TPG, announced an investment in Banyan Treatment Centers in June.

  • Community Medical Services acquired Brightside Clinics in a private equity-backed deal.

  • Aware Recovery Care raised $35 million in a series B funding round as the organization looked to expand its in-home addiction recovery and support services into new markets and strengthen its position in existing markets. Investors in the series B round were not disclosed.

  • Pathway Healthcare received an investment from venture capital firm Garden City Equity.

Mental Health

The mental health subsector saw 23 deals announced in the second quarter, down from 29 reported in Q1. ARC Health, a Thurston Group portfolio company based in Beachwood, Ohio, was particularly active, closing on transactions to acquire the following organizations:

  • Denver Wellness Associates, which operates two clinics in Colorado

  • Lyn-Lake Psychotherapy & Wellness, which operates multiple locations across Minneapolis and St. Paul, Minnesota

  • Los Angeles-based Silver Lake Psychology

  • Positive Change Counseling Services, a mental health practice in San Diego and Ventura counties in California

Chart: Mental Health Transactions by Quarter

Other private equity-backed strategic deals involving mental healthcare providers in the second quarter included the following:

  • Deep Eddy Psychotherapy Management acquired Dallas Counseling and Treatment Center. Mertz Taggart provided exclusive sell-side advisory services in this transaction.

  • Stella, a treatment provider for post-traumatic stress injury, anxiety, stress, depression, traumatic brain injury, and the neurological effects of long COVID, acquired the assets of psychedelic therapy provider Field Trip. Stella, a Sterling Partners portfolio company, also announced a new growth equity round of $7 million in May.

  • Provident Behavioral Health in St. Louis acquired fellow Missouri-based not-for-profit mental healthcare provider Care and Counseling.

  • Nystrom & Associates acquired Vantage Point Clinic & Assessment Center in Wisconsin.

  • Nomi Health, a national healthcare programs and payments company, acquired Phoenix-based I Am Wellness.

  • Harmony Health Group expanded with the addition of three Serenity at Summit facilities, acquiring the programs from outgoing operator Delphi.

  • Health Connect America completed acquisitions of First Home Care and North Star Counseling of Central Florida.

After a slowdown largely attributed to the collapse of Silicon Valley Bank in the first quarter, venture capital firms showed renewed interest in mental healthcare organizations. The following deals were announced in Q2:

  • General Catalyst Partners led a $3.2 million funding round for Somethings, a New York City-based virtual mental health support platform for LGBTQ+ youth.

  • Digital mental health startup Anise Health completed a $1.2 million pre-seed funding round led by Kicker Ventures.

  • Author Health, a platform that provides treatment for Medicare Advantage recipients with serious mental illness and substance use disorders, received $115 million in financing led by General Atlantic.

  • Uwill, a Boston, Massachusetts-based mental health and wellness solution for colleges and students, completed a $30 million series A funding round led by Education Growth Partners.

  • Scottsdale, Arizona-based EvolvedMD raised $10 million. Investors were not disclosed.

  • AptiHealth, a virtual mental health startup, raised $10.8 million, bringing its total funds raised to about $76 million, according to Behavioral Health Business. AptiHealth investors include Takeda Digital Ventures, Pivotal Life Sciences, Vista Credit Partners, Olive Tree Ventures, Claritas Capital, and What If Ventures.

  • Mantra Health, a provider of digital mental health programs for university students, raised $5 million in an investment round led by VMG Partners.

  • Digital behavioral health benefits company Spring Health raised $71 million in a funding round announced in April, bringing its valuation to $2.5 billion. Investors contributing to the new round were not named.

Autism Services and Intellectual/Developmental Disabilities

Transactions involving providers of autism and intellectual/developmental disabilities (I/DD) services remained modest, with four deals announced after four were reported in Q1. Armed with its new financial backing, Cortica closed on two organizations, acquiring Springtide Child Development in New England and Melmed Center, a developmental pediatrics and clinical research group based in Arizona.

Chart: I/DD/Autism Transactions by Quarter

Among others involving autism services and I/DD subsector, Including Kids, a provider of applied behavior analysis therapy for children with autism spectrum disorder, was acquired by fellow Texas-based ABA provider Empower Behavioral Health.


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