Non-Publicized Deals Boost Q4 Behavioral Health M&A Stats

The behavioral health industry may have seen more transactions in the fourth quarter of 2019 than previously believed, according to new data from M&A advisory firm Mertz Taggart.

Data recently released by Irving Levin Associates suggested that the market saw a slow down in M&A activity in Q4. However, Mertz Taggart’s analysis found that behavioral health transactions remained steady in Q4 — with 21 deals overall, the same number the firm recorded in Q3.

The discrepancy is due to the fact that Irving Levin’s data only included publicly announced transactions, while Mertz Taggart included a number of deals that were not publicly announced.

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Still, M&A activity was down on a year-over-year basis. There were about 40% fewer transactions in Q4 2019 than in Q4 2018, according to Mertz Taggart. And overall, 2019 saw 85 behavioral health deals, down slightly from 97 total transactions 2018.

The slow down isn’t entirely surprising, however, due to the high number of transactions the industry has seen in recent years.

While interest in addiction treatment facilities dwindled in 2019 after years of growth in the sector, autism providers continue to be popular M&A targets, with private equity platforms taking special interest in the sector, as BHB previously reported.

“In 2019, there were 10 private equity platform transactions in autism services, including two in Q4 alone,” Managing Partner Kevin Taggart said in a report detailing the firm’s Q4 findings. “This is a clear indication of the interest level from private equity, but it also signals the potential for more add-on transactions to be announced over the next three [to] five years.”

In the year ahead, experts at Mertz Taggart believe the industry will continue to see a steady stream of deals.

“The market remains energetic, and we anticipate a steady pace of transactions to continue through 2020,” Taggart said. “There are significant opportunities for buyers who are focused on building regional and national networks of service providers as well as those looking to operationalize a continuum of care.”

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