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- Q1 2022 Behavioral Health M&A Update
After the final three months of 2021 saw a surge in merger and acquisition activity across all sectors that was fueled by a wave of sellers eager to exit the market, deal volume in general for the first quarter of 2022 returned to more modest levels, with at least 41 behavioral health transactions closed. However, there is one notable exception. The mental health sector remains hot, with 26 transactions announced in Q1, shattering the previous record of 16 set in the fourth quarter of 2021. Note: Total industry transactions does not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. The success of LifeStance and Refresh Mental Health in recent years has piqued buyers’ interest in the mental health sector, said Mertz Taggart Managing Partner Kevin Taggart, CM&AP. “Both of those companies have been wildly successful with multiple sales over the last couple of years, including LifeStance going public in 2021,” Taggart commented. “Private equity started seeing the success of both of those groups in 2020 and 2021. There is a lag between the time they decide to get into the market and when they start making acquisitions, which I believe was reflected in the Q1 numbers.”. Refresh itself was one of Q1’s most notable acquisition targets. In March, the company was acquired by Optum, the UnitedHealth Group subsidiary that provides pharmacy benefit management and healthcare services. While not necessarily reflected across all of behavioral health in Q1, demand for provider organizations remains robust. Bankers and buyers are now rebuilding their pipelines, and Taggart said he expects to see a strong back half of 2022, barring any unforeseen developments on the macroeconomic level. “There is a strong demand for mental health companies,” he observed. “The rest of behavioral healthcare will also be attractive, although perhaps not quite to the same level.” Addiction Treatment A total of 14 addiction treatment deals were announced in Q1—a figure in line with most quarters dating back to late 2019, but down from the 31 deals announced in the fourth quarter of 2021. Both financial institutions and potential buyers appear to be rebuilding their pipelines to start 2022 with one notable exception. BayMark Health Services, backed by the private equity firm Webster Capital, has remained active, completing three deals: In January, BayMark acquired the online addiction treatment platform Kaden Health. A month later, the company expanded into Indiana and grew its AppleGate Recovery brand with a deal for Lucina Treatment Centers, a group of five office-based opioid treatment programs. In March, BayMark added Pathfinders Recovery Centers, which operates programs in Scottsdale, Arizona, and Aurora, Colorado, as well as Emerald Isle Health and Recovery in Surprise, Arizona. Webster Capital also announced a new partnership in February with Oceans Healthcare, a behavioral healthcare company with 33 locations, including 23 inpatient hospital campuses, across the Southeast. Meanwhile, after completing three transactions in nearly six years previously, Acadia announced two addiction treatment/mental health deals in Q1, acquiring Centerpointe Behavioral Health Kansas City and Orlando Health. Other deals in the addiction treatment space announced in the first quarter include: Amulet Capital Partners, a middle-market private equity firm, announced it has recapitalized Lighthouse Behavioral Health in Columbus, Ohio. Burrell Behavioral Health and Preferred Family Healthcare announced a partnership to create a newly named not-for-profit behavioral health and addiction treatment provider known as Brightli. Royal Life Centers, an addiction treatment provider with 8 locations, has been added to the portfolio of CMJ Health Services. Heritage CARES, a virtual behavioral health, substance misuse, and suicide prevention company, merged with YouTurn, a platform for therapist-led video content for stress, behavioral health, and substance misuse. Retro Capital Group announced a platform deal for Resurgence Behavioral Health. Summit BHC acquired seven psychiatric hospitals in six states from Strategic Behavioral Health. Mental Health As noted above, while activity in other subcategories slowed in the first quarter, mental health transactions surged, with a record 26 deals announced, surpassing the previous high of 16 in the fourth quarter of 2021. In the most notable deal of the first quarter, UnitedHealth Group subsidiary Optum acquired Refresh Mental Health from the private equity group Kelso & Co., according to media reports. While terms of the deal were not disclosed, Kelso acquired Refresh at a valuation of about $700 million in December 2020. “Optum and Refresh Mental Health are excited to expand effective behavioral care to patients through a more coordinated health system,” an Optum spokesperson told Axios. “Together, we will be able to drive deeper integration between medical and behavioral health care and advance personalized care to patients through value-based care.” Private equity drove most of the transaction volume in mental health, accounting for 16 of the 26 deals announced. This includes two acquisitions by Health Connect America, a behavioral health platform backed by Palladium Equity Partners. Health Connect America acquired Pinnacle Family Services in North Carolina and Healing Educational Alternatives for Deserving Students (HEADS), a Florida-based, trauma-focused provider. Among the other transactions in the mental health space that were announced in the first quarter: Digital provider Brightside Health raised $50 million in a Series B funding round led by ACME Capital and Mousse Partners. Mental wellness app Calm acquired health tech company Ripple Health Group, which provides services for older adults and their caregivers. Centene Corp. completed its acquisition of Magellan Health, increasing its members' access to behavioral health services. CloudMD Software & Services closed its acquisition of MindBeacon Health, a provider of digital healthcare services. CM Counsel announced a deal with James Levine & Associates. Discovery Behavioral Health, which operates a network of mental health, substance use, and eating disorder treatment centers, acquired Dan Med TMS Neuro Institute, a provider of transcranial magnetic stimulation (TMS) therapy for depression. Foresight Mental Health acquired Psychiatric Addictive Curative Therapies (PACT), which operates 14 mental health clinics in the Atlanta area. Digital mental health platform Headspace Health acquired Sayana, an AI-driven mental health and wellness company. Brightline, a youth telehealth-based behavioral health company, completed a $105 million Series C funding round led by investment firm KKR. Lightfully Behavioral Health announced a private equity-backed strategic acquisition of Resilience Treatment Center in Los Angeles. MindPath Care Centers made a private-equity backed strategic acquisition of Psychiatric Centers at San Diego. New Directions Behavioral Health acquired Tridiuum, a digital behavioral health company. Novamind, a mental health company that specializes in psychedelic medicine, closed its acquisition of Foundations for Change, an Arizona-based provider of ketamine-assisted psychotherapy. Pacific Clinics and Uplift Family Services announced a merger and plans to operate under the Pacific Clinics name. Comprehensive Behavioral Health and Psych Associates announced a merger to form Bloom Health Centers, a mental health treatment provider organization. The Recovery Ways Family of Programs expanded into Texas with its acquisition of Stuart J. Nathan, PhD, and Associates. Revitalist announced in January that it had executed a purchase agreement to acquire a ketamine clinic in Jacksonville, Florida. Digital eating disorder treatment company Equip Health closed a $58 million Series B funding round led by The Chernin Group, with Tiger Global Management and General Catalyst joining as new investors. Transformations Care Network has partnered with Columbia Associates in Psychiatry and New Directions Counseling Services. Legion Health closed a $150 million Series C investment round that included institutional investors UpHonest Capital and Soma Capital. Autism Services and Intellectual/Developmental Disabilities As with addiction treatment, transactions in the autism services and intellectual/developmental disabilities (I/DD) space were down, with six deals announced in the first quarter compared to eight in the final quarter of 2021. The six deals—all of which were backed by private equity firms—were the fewest in a quarter since the second quarter of 2020, which coincided with the start of the COVID-19 pandemic. The deals announced in the quarter included: Caregiver, a privately held, long-term care services and support provider for those with I/DD, acquired AbleLight, which operates two programs in Indiana, and Compass Residential & Consulting. Hopebridge announced a partnership with Autism in Motion (AIM) Clinics to increase access to pediatric autism services. Florida-based KNR Therapy, backed by Shields Capital, announced a merger with Autism Learning Center in Georgia. Ally Pediatric Therapy received an investment from Spanos Barber Jesse & Co. The Stepping Stones Group, a national provider of therapeutic, behavioral, autism, nursing and educational services, acquired the Southcoast Autism Center, based in Massachusetts. In March, the Chicago-based private equity firm Vistria Group began the process of acquiring I/DD services and housing provider Beacon Specialized Living.
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