Q3 2025 Behavioral Health M&A Report

Behavioral Health M&A

Reading recent headlines, one might be inclined to think M&A activity across behavioral healthcare is in the midst of a slowdown. But while deal volume has receded from the highs of 2021 and 2022, behavioral healthcare is on track for a total number of mergers and acquisitions that still outpaces historic norms.

In the third quarter, 40 deals were reported—a figure that puts 2025 on track for about 167 transactions by year’s end. For comparison, behavioral healthcare was seeing roughly 100 deals per year completed before the COVID-19 pandemic.

“And a lot of deals lag, too,” added Mertz Taggart managing partner Kevin Taggart. “It could be three or four months before some transactions are announced publicly. When all is said and done, I would anticipate a final total for 2025 that ends up higher than the current projected total.”

While tighter lending environments and negative headlines—including Acadia Healthcare announcing the closure of multiple facilities and layoffs of about 400 employees and several bankruptcies announced by other provider organizations within the industry—buyers’ interest has not waned.

Mertz Taggart closed three deals in Q3, and has closed seven behavioral transactions to date for 2025, with more expected by year’s end.

“Deals are still getting done with attractive multiples for highly desirable companies,” Taggart said. “They're are getting a little harder to complete. We’ve had a few this year where the first buyer fell through, so we’ve had to move on to the second one. 

“Private equity is still reaching out to us weekly looking for behavioral health opportunities,” he added.

Of the 40 behavioral healthcare transactions announced in Q3, 10 were growth deals, continuing a trend that has emerged post-COVID. A threshold for such investments could be looming on the horizon, though, Taggart cautioned.

“We’re going to see some of these groups struggle to get additional investment because of their sky-high valuation,” he said. “They’re valued more like tech companies, and you still need people to operate them. But some are starting to do acquisitions as well, so we’ll see.

“I do think the growth capital market will slow because the brick-and-mortar groups can use technology as well.”

Overall, Taggart said, the firm expects a strong finish to 2025 and is bullish on 2026.

Addiction Treatment M&A

A total of eight transactions involving addiction treatment providers were announced in Q3, bringing the year-to-date total to 27. 

Prior to 2021, addiction treatment was a stalwart of deal volume. Activity has decreased in recent years, though, as organizations that could be counted on for making deals, such as Baymark, Behavioral Health Group, and to a lesser degree, Summit Behavioral Health, Pinnacle Behavioral Health, and others have slowed or stopped their growth through acquisition. 

“There are new buyers coming into the space. That’s taken a little while to ramp up,” Taggart said. “Overall, I’m still bullish, although out-of-network is still tough.”

To that point, Taggart noted a recent report that Pyramid Healthcare and Advanced Recovery Systems are preparing for sales. “These larger transactions, if and when they do happen and especially if they happen at strong multiples, will prompt more providers to do more deals,” he said.

Taggart said he expects to see the addiction treatment market begin to open up again in 2026.

Notable deals involving addiction treatment provider organizations in Q3 included the following:

Mertz Taggart advised St. Joseph’s Recovery Center in West Virginia on a platform transaction to an East Coast-based private equity group.

The Ridge Ohio, a rehabilitation services provider with two facilities in Ohio, received $18 million in investments from Prospect Capital Corporation and Thesis Capital Partners.

Bradford Health Services acquired three Texas-based programs: The Last Resort Recovery Center, Crestone Wellness and The Chapter House, making them one of more active buyers in the SUD market.

Luxury SUD treatment provider The Hope House, a portfolio company of Chicago-based private equity firm Traverse Pointe Partners, acquired Winward Way Recovery in Newport Beach, California.

Crossroads Treatment Centers expanded its footprint in Pennsylvania with a deal to acquire Family Health Services, an outpatient addiction treatment provider with two facilities in the greater Pittsburgh region.

Louisiana-based Nova Vital Recovery announced a statewide expansion in September with its acquisition of Magnolia Recovery Services. The deal complements Nova Vital’s recent addition of intensive outpatient programs in Shreveport and Monroe.

Mental Health M&A

The mental health subsector has continued its post-COVID acceleration in transactions, with 25 deals announced in Q3. Private equity firms have shown interest in mental healthcare providers, although buyers have gotten more discerning, Taggart said.

“They’re looking for more medical practices versus strictly counseling-based providers,” he said. “Psychiatry practices are well-positioned going into 2026. Offering ancillary services, such as transcranial magnetic stimulation and Spravato (esketamine), is also helpful for margin expansion as well.”

Among the most notable deals reported in the third quarter, The Carlyle Group is acquiring Psychiatric Medical Care in a $400 million, private equity-backed deal, according to a media report.

Mertz Taggart represented Modern Recovery/Avery’s House, a teen mental health program based in Arizona & Idaho.

All 10 growth funding deals reported in Q3 involved mental healthcare providers. This included value-based care provider AbsoluteCare raising $135 million in equity funding to expand into new markets.

Other growth deals announced:

Diana Health announced it raised $55.4 million in a Series C funding round led by HealthQuest Capital and several previous investors.

Digital eating disorder treatment provider Equip Health raised $46.6 million, according to public documents filed with the SEC.

Another telehealth provider, the youth-focused startup Cartwheel Care, disclosed that it has raised $35 million of a $44 million funding round, led by an undisclosed investor.

Other transactions involving mental healthcare providers in Q3 included:

Rosecrance Behavioral Health, a not-for-profit therapy and SUD treatment provider, acquired Ascend CHC in a move that will allow Rosecrance to add eating disorder care and specialty sports and performance counseling services.

Cerebral, a telehealth-based provider, acquired Resilience Lab in a private equity-backed strategic deal.

Uwill, an international provider of mental health and wellness solutions, acquired tbh, which provides support for students and young adults facing basic needs insecurity and mental health challenges.

Nystrom & Associates acquired the Minnesota-based operations of Ellie Mental Health, creating a combined organization that operates 84 locations across five states.

Autism and Intellectual/Developmental Disabilities M&A

Within the autism and intellectual/developmental disabilities (I/DD) subsector, eight deals were reported in Q3, bringing the year-to-date total to 27. Since the blockbuster year of 2021, in which 44 deals were announced, autism and I/DD provider organizations have faced significant headwinds from wage inflation, especially among behavioral technicians, Taggart said. However, as wages began to settle in 2024, momentum for deal activity has renewed.

The transactions involving autism and I/DD therapy providers included the following:

Mertz Taggart advised a Northeast ABA provider as a platform for a Canadian private equity firm.

Achieve Partners acquired Westside Children’s Therapy, a provider with 30 centers in the Chicagoland area. 

First Children Services secured a strategic growth investment from Station Partners to support its continued expansion.

Redwood Family Care, a multi-state provider of I/DD services, acquired Minnesota-based Eagles Wing, which offers residential and day support services to individuals with developmental disabilities.

A Change in Trajectory, a Van Nuys, California-based, family-oriented agency that serves individuals with special needs, was acquired by Pine Street Group, an investment holding company that targets middle and lower-middle market businesses.

DOMA, a Minneapolis-based provider of I/DD services, announced its acquisition of Payee Support Services in Ohio, strengthening its presence in the Midwest.

Following the retirement of longtime CEO Jack Priggen, Cardinal of Minnesota, a provider of residential and in-home services for persons with disabilities, has been acquired by The Cottages Group of Burnesville.

Q3 2025 Behavioral Health M&A Report.pdf

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