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Mental Healthcare Demand Drives Surge in M&A Activity
Despite a series of adverse economic factors, merger and acquisition activity in the behavioral healthcare sector accelerated in the third quarter, and industry analysts said they expect a busy finish to 2022.
“We are expecting a strong finish to 2022 and good start to 2023 based on our current deal pipeline and client activity,” Mertz Taggart Managing Partner Kevin Taggart said in the firm’s latest quarterly M&A report. “We are still very bullish on the lower middle market for behavioral health, with outpatient mental health leading the way.”
>> READ the Mertz Taggart Q3 Behavioral Healthcare M&A Update
A record 36 transactions were completed in the mental health subsector in the third quarter, buoyed by 13 platform transactions. Overall, 48 behavioral health deals were announced, a 50% increase over the prior quarter that Taggart described as “significant, as each platform transaction tends to portend several add-on transactions over the ensuing 3 to 7 years.”
“The demand for mental health services merger and acquisition opportunities is unprecedented, at least in my experience,” he said. “There is not a more sought-after industry in healthcare services than mental health.”
Activity in the mental health category was also highlighted by Irwin Naturals, a publicly traded operator of ketamine treatment facilities. The company expanded into New England by acquiring Preventive Medicine in Vermont and New England Ketamine PLLC, while also acquiring 2 ketamine clinics in George and reaching an agreement to purchase Ketamine Media, a growth platform for clinics offering ketamine-assisted therapy.
In the addiction treatment space, meanwhile, activity rebounded. A total of 14 deals involving addiction treatment providers were announced, on par with the average 15 per quarter reported since the beginning of 2020.
Interest in autism services and intellectual/developmental disabilities cooled somewhat, with just 4 deals announced. One of those transactions, however, saw Charlesbank Capital Partners acquire applied behavior analysis therapy provider Action Behavior Centers at a valuation of $840 million, an eye-opening figure for the Austin, Texas-based provider, which has $60 million in projected annual adjusted earnings.
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