top of page

Q4 2022 Behavioral Health M&A Update

Updated: May 16, 2023


White Mertz Taggart Logo on a blue background with text that reads Behavioral Health M&A Report: Q4 2022

The departure of 2022 marked the arrival of a new trend in behavioral healthcare merger and acquisition activity: Venture capital firms have flocked to the space, taking a particular interest in mental health.


Behavioral healthcare remained hot, as 49 total deals were announced in the final three months of 2022. That figure is on par with the 50 reported in the prior quarter. Just as mental health saw the most M&A activity of any behavioral healthcare subsector in Q3, such was the case again in Q4, with 33 transactions announced. However, venture capital firms accounted for 16 behavioral healthcare transactions—all in mental health—in the fourth quarter, a sign of investor enthusiasm for various forms of mental health treatment services in the wake of the COVID-19 pandemic.



a bar graph outlining the total behavioral health industry transactions  by quarter for Q1 2019 through Q4 2022
Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry.

The emergence of venture capital is a significant shift in the M&A landscape in behavioral health. Whereas traditional private equity firms—which have accounted for much of the M&A activity across behavioral healthcare in recent years—tend to invest in established (and sometimes struggling) companies and buy a majority ownership, venture capital firms spread their investment dollars across several startups and up-and-coming organizations through. Each deal offers a potential higher upside but also a higher failure rate than traditional private equity investment.


“A combination of an already red-hot mental health sector, technology, and the ability to scale quickly make venture capital firms’ interest in mental health somewhat unique,” Mertz Taggart managing partner Kevin Taggart said. “I don’t see this phenomenon spreading to other areas of behavioral health because those don’t lend themselves to technology quite as easily, which is what VC typically invests in. While venture capital firms arrived in mental health en masse to close out 2022, don’t expect them to stick around", Taggart said.


“It is most definitely a short-term phenomenon,” Taggart said. “How short-term is yet to be decided, but the current pace is unsustainable, and we’re already seeing a number of these high fliers scale back, close, or struggle with public perception because of some of their business practices.”


Mertz Taggart completed four behavioral healthcare deals announced in the fourth quarter:

  • Private equity firm Eads Bridge Holding acquired Connecticut-based Stokes Counseling Center in a platform deal.

  • Acadia Healthcare acquired four comprehensive addiction treatment centers in Georgia from Brand New Start.

  • Beachwood, Ohio-based ARC Health, a Thurston Group portfolio company, acquired Lotus Consulting, a comprehensive mental health therapy practice in Michigan.

  • A multi-state SUD treatment facility with over 300 beds. The buyer and seller requested that this transaction remain anonymous.

Looking ahead, M&A activity in the first half of 2023 could largely hinge on the debt markets, both of which “are a little shaky,” Taggart said.


“We’ve had several debt providers and private equity groups say they are starting to see some ‘green shoots’—signs of recovery—in recent weeks regarding the debt market,” Taggart noted.


Addiction Treatment M&A


Addiction Treatment M&A remained steady, as 12 deals were announced in the fourth quarter, down slightly from a busy third quarter, with 14 transactions announced. Dating back to the start of 2019, an average of 14.75 transactions involving addiction treatment providers have been reported.



Bar graphs showing addiction treatment transactions by quarter Q1 2019 through Q4 2022

Four private equity-backed strategic acquisitions of addiction treatment programs were announced in the fourth quarter:

  • Integrative Life Network expanded its portfolio of facilities by acquiring Shadow Mountain Recovery in New Mexico.

  • Pinnacle Treatment Centers added MBA Wellness Services.

  • Baymark Health Services announced deals for two operators of office-based opioid treatment (OBOT) programs: Tennessee-based Nashville Recovery and Fritz Clinic, a group of six centers in Alabama.

Other deals involving addiction treatment programs in Q4 included the following:

  • The Apen Group invested in Recreate Behavioral Health Network in a private equity platform deal.

  • Aurora Health acquired Cornerstone Treatment Facilities Network, an inpatient addiction care company.

  • According to a media report, Ark Behavioral Health raised at least $11 million of a $20 million funding round, securing an investment from an undisclosed party.

  • Lee Equity Partners, a middle-market private equity firm, acquired a majority ownership interest in Bradford Health Services from Centre Partners. Centre retained an ongoing equity stake.

  • Arizona-based T&R/Sabino Recovery announced that CEO Thomas Isbell and board chairman Roy M. Serpa acquired Cypress Lake Lodge in Woodville, Texas.

  • AtlantiCare finalized an agreement to acquire John Brooks Recovery Center in New Jersey.

  • Spero Health, a Tennessee-based outpatient addiction treatment provider, acquired My Turning Point, a Kentucky-based program with four locations.

Mental Health M&A


Thirty-three transactions involving mental health organizations were announced, down from the 37 reported in Q3, but still the second-highest quarter on record dating back to the start of 2019.


Bar graph showing mental health transactions by quarter from Q1 2019 through Q4 2022

The following transactions involved venture capital firms:

  • London-based digital pediatric behavioral health company Healios received a $16 million investment led by AlbionVC to expand in the U.S.

  • Vanna Health, a severe mental illness startup, raised $29 million ahead of its launch.

  • Forge Health, formerly Strive, announced in December that it had secured $10 million in new funding as part of a $21.5 million funding effort.

  • BehaVR and OxfordVR, a pair of behavioral health-focused virtual reality companies, merged in a deal supported by a $13 million series B funding round led by Optum Ventures and Oxford Science Enterprises.

  • HelloHero, which previously operated as Enable My Child, disclosed in November that it had raised $4.3 million of a $5 million round.

  • Wellin5 announced that it closed a $2 million seed funding round.

  • Outpatient mental health provider Resilience Lab closed a $15 million series A funding round led by investment firms Viewside Capital Partners and Morningside.

  • Options MD, a telehealth startup that provides care for treatment-resistant depression, announced $2.35 million in pre-seed funding led by Bread & Butter Ventures.

  • Hazel Health closed a $51.5 million series C1 funding round led by Bain Capital Venture Partners.

  • Mindful Care announced a $7 million funding round led by Sopris Capital.

  • According to a media report, Valera Health, a New York-based virtual psychiatric care provider, raised $44.5 million in a previously unannounced funding round with participation from 12 investors.

  • Folx Health, an LGBTQIA+ digital health startup, announced plans to add mental and behavioral health services following a $30 million series B funding round led by 7wire Ventures.

  • Brave Health secured $40 million in a series C funding round led by Town Hall Ventures.

  • InStride Health launched with $26 million to expand its virtual pediatric services in a funding round led by .406 Ventures.

  • Sensorium raised $30 million in a funding round led by Sante Ventures.

The following deals involving mental health organizations were also reported in the fourth quarter:

  • Irwin Naturals announced four acquisitions in the fourth quarter: Clare Clinic (an operator of 3 clinics in Florida doing business as Florida Mind Health Center), Dura Medical, Tri-Cities Infusion and Wellness Clinic, and Ketamine Infusions of Idaho.

  • Consonance Capital Partners acquired a majority stake in Embark Behavioral Health in a sale valued at approximately $400 million with a multiple range of 12 to 15 times EBITDA.

  • Newport Healthcare, a national network of programs for teens and young adults, acquired Minnesota-based Prairie Care.

  • Inflow, a cognitive behavioral therapy-based self-help app, acquired telehealth clinic Lina Health.

  • Turnwell Mental Health made a private equity-backed strategic deal for Montana Psychiatry & Brain Health Center.

  • Sondermind Provider Network announced in November that it acquired integrated neuroscience company, Total Brain.

  • Reverie Mind acquired Arizona Ketamine Treatment and Research Institute for an undisclosed sum.

  • Color Health acquired Mood Lifters in a private equity-backed strategic deal.

  • In addition to its deal to acquire Lotus Consulting, ARC Health announced acquisitions of three other mental health provider organizations: Focus Forward, The Relationship Therapy Center, and The Ross Center of Northern Virginia.

  • Northern Wyoming Mental Health Center announced a merger with Volunteers of America Northern Rockies.

  • California-based Precise Behavioral acquired Rose Health, a mental health startup based in Washington, D.C.


Autism Services and Intellectual/Developmental Disabilities M&A


Five transactions involving providers of autism and intellectual/developmental disabilities treatment services were announced in Q4, matching the number of such deals in the prior three months.


Private equity was involved in each of the deals:

  • JoyBridge Kids acquired Independence Behavioral Services in a private equity-backed strategic transaction.

  • Stepping Stones Group announced a deal to acquire Building Blocks Behavior Consultants in a private equity-backed transaction.

  • Soar Autism Center secured $16 million in equity funding, according to a media report.

  • Acorn Health acquired seven centers—six in Florida and one in Virginia—from Breakthrough Behavior.




Comentarios


bottom of page