Pandemic Causes Minor Dip in M&A Activity in Second Quarter

In spite of the coronavirus pandemic, merger and acquisition activity in the behavioral health sector in the second quarter “held up pretty well,” Mertz Taggart managing partner said in the firm’s latest M&A report.

Overall, there were 18 behavioral health transactions in the quarter, many involving addiction treatment organizations, which accounted for 12. The 18 total transactions were the lowest since Q1 of 2019, which saw 17.

“While transactions are down a little from the past six quarters or so, the lull isn’t especially significant,” Taggart said in the report. “We didn’t see any transactions fall apart directly due to COVID-19, but we suspect some deals were quietly pushed back or halted completely amid the chaos in March and April.”

Looking ahead

After a slow start to the quarter, activity picked up in June, which Taggart said signals that investors could be regaining confidence after feeling uncertainty early in the pandemic. That could set the stage for a strong pace in the second half of the year.

Still, if more deals get done, they will come with more scrutiny. Taggart also said that expects investors will now more thoroughly investigate the infrastructures of potential acquisition targets, specifically as it relates to stipulations related to government-provided financial relief and operational impacts created by the pandemic.

The full Mertz Taggart Behavioral Health M&A Report for the second quarter of 2020 is available on the firm’s website.