With Equal Capital Chasing Fewer Viable Targets, M&A Experts Predict Sizzling 2021

After months of coronavirus-related deal delays, mergers and acquisitions have finally started to pick back up in the behavioral health industry. 

In fact, Q3 was marked by 26 deals, two more than the industry saw a year earlier in Q3 2019, according to the M&A firm Mertz Taggart. And things will only continue to go up from here, M&A experts predict.

Specifically, they anticipate 2021 will start strong and stay that way, buoyed by demand for behavioral health organizations of all shapes and sizes.


“There was a flurry of M&A deal launches after Labor Day, so I would expect to see most of those start to bear out in late Q4 and into Q1.” Scott Kremeier — director of the healthcare group at Houlihan Lokey, a global investment bank and financial services company — told Behavioral Health Business. “I don’t think [Q4] will be in line with what we saw in Q4 of last year, but in Q1 2021 you will probably see a higher than normal number of deals as ones from Q4 push into Q1.”

In behavioral health, normal M&A numbers are already pretty high. In 2019, the industry saw a total of 85 deals, and there were 97 the year before that.

In many ways, the coronavirus is to thank for the increased activity Kremeier and other experts predict. While the virus delayed deals for a short period of time, it also increased investors’ already high interest in behavioral health.


Amid the pandemic, the need to address the nation’s mental health issues and substance use disorders (SUDs) have become clear. Nearly 41% of U.S. adults reported struggling with their mental health or substance use in late June, according to a study from the Centers for Disease Control and Prevention (CDC). 

On top of that, the coronavirus has made some health care sectors less viable from a deal standpoint. As a result, those that have successfully weathered COVID-19 could see increased attention, according to Burk Lindsey, managing director in the health care investment banking group at Raymond James & Associates

“Although we’re seeing steady recovery in a number of the elective- and procedure-based provider sectors, many of those segments haven’t yet seen volumes and financial performance return and stabilize at pre-COVID levels,” Lindsey said. “As a result, companies in segments that were relatively unaffected by COIVID — like home health and hospice — and those one could argue perhaps benefitted from COVID — like the vet space and behavioral health — are attracting greater interest than they otherwise might have. In essence, you have the same amount of capital chasing a smaller number of opportunities.”

Amid the coronavirus, behavioral health providers have pivoted to virtual care among the most successfully of any organization in health care. That, coupled with increased demand for services, continues to make the industry especially attractive, according to Mertz Taggart Managing Partner Kevin Taggart.

“We anticipate strong demand for behavioral health organizations of all types over the next 12 months,” he said. “The strong demand for specialty care, coupled with the providers’ smart pivot toward telehealth services, creates an attractive landscape for investments and follow-on deals.”

Q3 M&A data suggests a couple subsectors within behavioral continue to look especially attractive to buyers. Chiefly among them is autism treatment, as half of all the deals closed in the Q3 fell into that category.

Interest in outpatient mental health also remains strong according to Mike Moran, principal at the nationwide M&A advisory firm American HealthCare Capital.

“The buyer interest is tremendous,” Moran said. “That’s certainly not new. You’re just far more profitable in that outpatient environment.”

Moran doesn’t anticipate that will change in 2021. Another prediction he’s fairly confident to make? That the behavioral health industry will remain as hot as years past in the years to come.

“I can’t see into the future,” he said. “But logically, I don’t see how the momentum changes at all in 2021.”

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