Autism Deals Dominate Behavioral Health Sector in Q3 

Autism deals accounted for nearly half of all behavioral health transactions in the third quarter of 2019, according to data from mergers and acquisitions advisory firm Mertz Taggart.

Eight of the quarter’s 19 behavioral health deals can be attributed to autism and applied behavioral analysis (ABA) service providers. Private equity platforms are among the largest players helping to drive M&A activity in the autism space, with their interest greater this year than last.

PE platforms have accounted for eight deals in the autism and ABA subsector year-to-date. Meanwhile, in the first three quarters of 2018, they accounted for only five transactions. 

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Advisors from Mertz Taggart expect that trend to continue going forward, Managing Partner Kevin Taggart said in the firm’s Q3 Behavioral Health M&A Report.

“Multiple secondary transactions should be expected in subsequent quarters as investors look to add scale and build out more comprehensive portfolios,” he said.

Drivers of interests include the fact that the autism industry is dominated by small providers and that demand for services remains high. On top of that, providers of scale are becoming increasingly important as a growing number of managed care organizations are delivering services under Medicaid. 

“Many of the buyers will also be eager to make connections with payers as they operationalize care delivery across wider geographic areas,” Taggart said.

Mental health, substance abuse

Overall, behavioral health deal activity was down month-over-month and year-over-year in Q3 with 19 transactions, according to the report.

In the second quarter of 2019, there were 25 deals. Meanwhile, in Q3 of 2019, there were 23 behavioral health transactions.

With fewer than 60 behavioral health transactions year-to-date, it’s likely that 2019 will see fewer deals in the space than in 2018, when there were nearly 100 behavioral health deals.

The addiction treatment subsector can be largely credited for the decline.

In Q3 2019, there were seven addiction treatment transactions, compared to 17 a year prior. However, “early indicators point to a possible upswing to round out the year,” according to the report.

Meanwhile, mental health deals were up in the third quarter with four deals, compared to three in the same quarter in 2018. This comes after the subsector saw seven deals in Q2 2019.

Despite the overall decline in 2019 deal activity, the behavioral health industry remains an attractive one.

“Behavioral health has been on a sustained wave of M&A activity for the past several years,” Taggart said. “Scale continues to be the primary focus among private equity investors and strategic buyers alike with a goal to increase long-term value.”

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