M&A Advisor Remains ‘Very Optimistic’ About Behavioral Deal Landscape Despite COVID-19

While the coronavirus and its economic fallout will likely slow merger and acquisition activity across all industries, behavioral health remains in a relatively good place, Kevin Taggart, managing partner at M&A advisory firm Mertz Taggart, told Behavioral Health Business.

“Longer term, as the economy begins to recover, and the banks regain some of their footing, it’s probably not surprising that we remain very optimistic about behavioral health M&A,” he said. “From an investment perspective, the demand for behavioral health services is only expected to grow.”

Right now, health care transactions are still closing, but Taggart expects to see activity slow down soon.


“In the mid-term, I expect we’ll still see transaction activity, but it will be slower,” he said. “How much slower will depend on how soon we can get the economic engine moving back in the right direction, or at least how quickly we can slow the halt.”

Taggart’s firm is hearing mixed reactions from behavioral buyers.

Generally, though, private equity groups, who fund the majority of behavioral transactions, have been less optimistic than strategic buyers, he said. That’s because PE firms often have investments across multiple industries and will likely also see activity slowed by other factors such as fewer targets being available and external diligence drag.


But providers are still putting up good numbers.

“We’ve talked to a number of SUD and mental health providers around the country from California, Texas, Florida and a number of national providers, and they are telling us that demand for their services is strong,” Taggart said. “We had one national provider tell us that they hit an all-time high for census earlier this week.”

Finally, health care in general — including behavioral health — is somewhat insulated from the economic uncertainty of a pandemic, as these services remain essential and increasingly important.

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