Mental Health M&A Activity Remains Hot in Q1

After a flurry of activity to close out 2021, merger and acquisition (M&A) activity across nearly all sectors settled back to more modest levels in the first quarter of 2022 with 1 notable exception. The mental health sector has remained hot, according to a quarterly M&A report published recently by the advisory firm Mertz Taggart.

A total of 41 deals were announced across all behavioral health in the first quarter of 2022, down from 51 the prior quarter. However, a record 26 transactions were announced in the mental health subcategory, surpassing the previous high in a quarter of 16, which was set in the fourth quarter of 2021.

READ the Mertz Taggart Q1 2022 Behavioral Health M&A Update

Mertz Taggart Managing Partner Kevin Taggart, CM&AP, pointed recent success of provider organizations LifeStance and Refresh Mental Health piquing buyers’ interest and driving activity in the mental health space.

“Private equity started seeing the success of both of those groups in 2020 and 2021,” Taggart said in the report. “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 was also the target of the quarter’s most notable acquisition in the mental health subsector, as the company was sold to Optum, the UnitedHealth Group subsidiary, from private equity firm Kelso & Co.

Meanwhile, the subsector of addiction treatment saw 14 deals announced in Q1—on par with most quarters, but down significantly from the record-setting 31 in Q4 2021. Backed by private equity firm Webster Capital, BayMark Health Services was particularly active, completing 3 deals in the quarter. Acadia, which had completed just 3 transactions in the nearly 6 years prior, announced 2 addiction treatment/mental health deals in Q1, acquiring Centerpointe Behavioral Health Kansas City and Orlando Health.

Just 6 deals were announced in autism services and intellectual/developmental disabilities, all of which were backed by private equity firms. The 6 deals were the fewest announced in a quarter since Q2 2020, which coincided with the start of the COVID-19 pandemic.

With bankers and buyers now rebuilding their pipelines, Taggart said he expects a healthy volume of transactions in the latter half of 2022, barring unexpected developments at the macroeconomic level.

“There is a strong demand for mental health companies,” Taggart said. “The rest of behavioral healthcare will also be attractive, although perhaps not quite to the same level.”

Reference

Q1 2022 behavioral health M&A update. Mertz Taggart. May 5, 2022. Accessed May 9, 2022.