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Despite Many Providers Shifting to De Novo Growth Focus, M&A Activity Continues
Although many behavioral healthcare organizations are beginning to prioritize de novo growth, merger and acquisition activity within the sector continues to churn, according to the latest quarterly report published this week by M&A advisory firm Mertz Taggart.
A total of 33 behavioral healthcare-related transactions were announced in the third quarter, on pace with the 33 announced in Q1 and 35 in Q2, according to Mertz Taggart data. Deals involving providers within the mental healthcare subsector again accounted for the bulk of activity with 24 deals announced.
>> READ the full Mertz Taggart Q3 2023 Behavioral Health M&A Report
“Despite the current interest rate environment, quality, cash-flow positive mental health providers continue to drive premium multiples, albeit not quite the premium that companies were commanding 12 months ago,” Mertz Taggart Managing Partner Kevin Taggart said in the report.
Taggart went on to add that while there are providers still commanding multiples that the firm was seeing at this time last year, “those are the exception [now], not the rule.”
Despite investors showing signs of becoming more cautious, private equity firms continued to facilitate transactions in Q3, with involvement in 13 deals that were announced.
ARC Health, the Beachwood, Ohio-based company backed by the private equity firm the Thurston Group, has remained aggressive. The mental healthcare facility operator made 3 more acquisitions in Q3, bringing its year-to-date total to 19.
Although not technically under the umbrella of mergers and acquisitions, Mertz Taggart made note of several venture capital investments in the mental healthcare subsector that were reported in the 3-month period ending September 30.
Looking ahead, Taggart said that interest rates—currently at a 22-year high—will remain a key factor in M&A activity throughout the behavioral healthcare sector heading into 2024.
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