2022 Could Be the Second-Best Year for Behavioral Health Dealmaking – Ever

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Private equity investors continued to flock to behavioral health in Q3. PE acquisitions made up more than 60% of all behavioral health transactions in the first three quarters of 2022, according to a new report from The Braff Group.

While deals are down from 2021’s outlier year, behavioral health deals in 2022 are expected to surpass 2020. In the first three quarters of the year for behavioral health, there were a total of 151 transactions. 

“With Q3 producing few surprises, our outlook for behavioral health M&A for the rest of 2022 remains unchanged from our mid-year report,” The Braff Group wrote in the report. “Not as strong as [2021], but continuing what is now a decade-long arc of increasing interest – and investment – in the space.”

Photo credit: The Braff Group

If the first three quarters of 2022 are compared to 2020, instead of 2021’s banner year, then deal volumes are up roughly 5%, according to The Braff Group. Additionally, substance use disorder (SUD) deals are up by 9% from 2020, mental health transactions are up by 14% and non-autism IDD acquisitions have increased by 33%.

Investment in medication assisted treatment (MAT) is actually on track to reach 29 deals this year – which would tie it with 2021.

Private equity investors are still very active in the behavioral health space. The Braff Group identified 11 market-entry platform PE investments in the IDD space in 2022, which already surpasses 2021.

There is also an uptick in private equity follow-on investment. Less than a quarter of private equity deals were platforms, with the rest being follow-on investments.

Photo credit: The Braff Group

Overall, the market has begun to cool since last year. In 2021, The Braff Group reported 256 deals, which was a 35% year-over-year increase.

“COVID made us all insane,” Dexter Braff, president of The Braff Group, said during Behavioral Health Business’ INVEST about 2021’s boom. “The expectations of the investment community, when COVID really put its hooks into the market, made them say, ‘We really need to get into this market; we knew it was good before.’”

Q3 had a number of notable acquisitions.

For example, PE-backed ARC Health’s acquisitions of Focus Forward Counseling & Consulting and Sasco River Center LLC. Additionally, PE firm Lee Equity Partners acquired substance use disorder provider Bradford Health in October.

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