Private Equity Hungry for Autism Providers, Consolidation Will Accelerate

Private equity’s interest in autism has boomed in recent years, and in 2020, providers can expect to see more of the same.

Armed with record levels of capital, private equity firms such as Blackstone Group, Inc. and Carlyle Group LP have amassed almost $1.5 trillion in unspent capital, the highest year-end total on record, according to data compiled by Preqin and first reported by Bloomberg News.

With so much capital sitting on the sidelines from larger and middle-market funds, experts predict autism consolidation will happen at a faster rate than ever before in the months to come, with firms and their platform companies hungry for providers of all shapes and sizes.


“We’re in a period now where a lot of private equity [firms have] made their initial investments,” Eugene Goldenberg, managing director at health care-focused investment bank Edgemont Partners, told Behavioral Health Business. “Now they’re going to be looking to bolt on numerous acquisitions to buy down their multiple.”

That’s good news for smaller providers interested in being added on to existing platforms. And there is still plenty of appetite for larger autism providers, too, according to Roger Strode, a transactional health care lawyer and partner at Milwaukee-based national law firm Foley & Lardner LLP.

“There are a number of larger private equity sponsors out there that don’t have [autism] platforms yet,” Strode told BHB, describing platforms as larger, geographically diverse organizations with sophisticated management and systems.


“If you’re an autism platform, this is a good time to look for an equity partner,” he said.

In 2020, many expect private equity firms and their platform companies to take special interest in autism providers that are adding more sophisticated offerings, as well as those pursuing technology that allows them to demonstrate successful outcomes.

The vertical integration of autism services

About 1 in 59 children have been diagnosed with some degree of autism spectrum disorder, according to data last released by the Centers for Disease Control and Prevention (CDC) in 2018.

But despite those striking statistics, a quarter of all children with autism go undiagnosed, a new Rutgers University study in the journal Autism Research revealed last month.

This presents a huge opportunity to providers to help grow a market where there is a clear, unmet need for its services.

As such, a growing number of autism providers are adding diagnostics and looking to vertically integrate to offer a more comprehensive suite of services, said Chris Donovan, a transactional health care lawyer and partner at Foley.

“Right now the bottleneck in a lot of autism services is the diagnosis,” Donovan told BHB. “It’s interesting to see some of the … platforms now establishing a clinician arm tasked with actually doing the diagnosis, in addition to providing therapy.”

Beyond diagnostics, investors are also interested in autism providers that are pursuing other types of vertical integration, Donovan said.

For example, he believes investors will look favorably on providers who can serve a variety of patients in a variety of settings. Currently, most providers either specialize in home-based, school-based or center-based autism offerings — but expanding one’s offerings to serve clients in multiple settings could win providers market share and investor interest, Donovan said.

Goldenberg agrees.

“Once a child with autism enters the school system, their needs change pretty significantly, so to the extent you do not provide services in a school-based setting, that is a potential opportunity loss,” he said. “I expect some providers to stay more pure play and others to continue to broaden their service offerings and become a one-stop shop.”

Investing in infrastructure to play in value-based care

Private equity firms also plan to invest in technology and infrastructure in the year ahead, according to the conversations Goldenberg has had with clients.

Some examples include data management and financial management. The goal is to capture data that illustrates superior outcomes, “primarily with a view toward managed care and value-based care,” he said.

Like in the rest of behavioral health care, the definition of a satisfactory autism outcome is still up for debate. Regardless, investors will be trying to make their case in the year ahead — and they’ll be on the lookout for potential investment targets that are doing the same.

“You’re going to see investment in systems, people, hardware and software to capture, analyze and deliver data that shows, ‘Yes, we have a system here, we have therapists here and we get people to conduct normal lives,’” Donovan said.

Overall, the biggest takeaway the experts share is that there’s no time like the present to try to appeal to private equity investors.

“Multiples in healthcare, and particularly in autism, are at an all-time high,” Goldenberg said. “So if there is any doubt about your ability to grow your business or potentially bring in a new partner to help you take it to the next level, this would be the time to make moves.”

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