Behavioral Healthcare Services M&A Update – October 2023

Continuum of Care Provides Growth Opportunities for Sector Players

Capstone Partners released its October 2023 Behavioral Healthcare Services M&A Update, reporting that a heightened focus on patient outcomes, greater access to high quality and affordable care, and specialized service offerings to treat addiction, substance abuse and co-occurring mental health disorders, has led to increased investment in sector players by private equity firms.

Merger and acquisition (M&A) activity in the sector has risen year-over-year (YOY) to 70 transactions announced or completed to-date, an increase from 65 transactions in year-to-date (YTD) 2022. Despite overall declines in activity in the broader M&A market, the Healthcare industry’s resilience against major economic headwinds has fostered a steady transaction environment in the Behavioral Healthcare Services sector. Additionally, middle market companies in the Healthcare industry and public companies in the Behavioral Healthcare Services space have commanded premium M&A valuations in double digits. Sponsor-backed acquirers have comprised the second highest percentage of total deals in the sector, bolstering a trend seen in recent years. Healthy transaction volume from financial buyers in the space suggests sponsors have viewed the sector as an attractive area to deploy capital and expand their platforms.

Substance use disorders (SUDs) in the U.S. continue to rise at alarming rates with 46.3 million people aged 12 or older having an SUD in 2021, up from 40.3 million the year prior. While the need for SUD treatment services is at an all time high, only 7% of individuals receive care due to a variety of systemic challenges including supply/demand imbalances, lack of coverage, high cost of care, and the persistent social stigma of addiction. Sector players have made strategic investments to enhance access to high quality care while expanding the continuum of care, enhancing patient outcomes, and further addressing the growing need for SUD and mental health services nationwide.

Also included in this report:

• An analysis of private equity platforms in the space and their contribution to increasing access to care.
• How the Substance Abuse Treatment market is forecasted to grow rapidly between 2022 and 2030.
• A breakdown of the growing buyer universe in the Behavioral Healthcare Services space.

Capstone Partners’ Healthcare Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the healthcare services industries. For more information on Behavioral Healthcare Services M&A trends featured in this report or to speak with one of our Healthcare Investment Banking Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.