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M&A Firm to Stay Bullish on Behavioral Health for Remainder of 2022
Although demand for larger mergers and acquisitions appears to be cooling, analysts at Mertz Taggart are expecting a strong seller’s market in the lower middle market for the rest of the year, according to the M&A advisory firm’s latest quarterly report.
“Even though transaction volume is down, Mertz Taggart is still very bullish on behavioral health and expects multiples and demand for quality companies to remain strong through the remainder of 2022,” Managing Partner Kevin Taggart said in the report.
>> READ the full Mertz Taggart Q2 2022 Behavioral Health M&A Update
Total behavioral healthcare transaction volume declined in the second quarter, with 30 deals announced compared to 44 in the first 3 months of the year. Taggart said the decline has not necessarily been the result of surging interest rates and the equity market.
“There has been a lot of talk about financial markets and their impact on mergers and acquisitions,” Taggart said. “While I agree a few additional points in interest rates can have a huge impact on a large transaction, we’ve been somewhat insulated both in the behavioral health industry and lower middle market.”
Other key findings in the Mertz Taggart report included:
- The addiction treatment subsector saw just 8 deals announced, the lowest number of addiction treatment transactions in a quarter since mid-2018. Two provider organizations—Bicycle Health ($50 million in series B funding) and Boulder Care ($35.73 million in series B1 and B2 venture funding) announced large, venture capital-backed funding rounds.
- Although not matching the record-setting 27 deals announced in the first quarter, activity in the mental health space remained strong with 17 transactions. Venture capital and private equity accounted for all but 3 deals in the mental health subsector.
- Seven deals were announced in the autism services and intellectual/developmental disabilities category, up from 6 the prior quarter, but still a below-average figure. With the exception of Constellations Behavioral Services being sold to its 150 employees and restructuring as an employee stock ownership plan, all remaining deals in the category involved private equity firms.
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