Behavioral Deals Up 29% Year-Over-Year Thanks to High Demand for Services, Regulatory Changes

Health care dealmaking is off to an unprecedented start for 2021, with behavioral health proving to be one of the hottest sectors of them all, according to a new mid-year dealmaking report from PricewaterhouseCoopers (PwC).

Heightened demand is driving more behavioral transactions, while regulatory changes and private equity are also propelling dealmaking.

In the first quarter of 2021, the health care industry saw its highest quarterly deal volume ever, with at least 426 transactions — beating out the previous record of 352 deals, set just a quarter earlier in Q4 2020.


Meanwhile, for the 12 months ending May 15, 2021, PwC reported a total of at least 1,304 health care deals. Of those, at least 93 were in the behavioral health realm, a 29% year-over-year increase.

“Compared with 2014-2020 annual average volumes, two subsectors saw notable increases: physician groups (likely related to market fragmentation and pandemic-driven financial pressure), and behavioral care (likely related to long-term and pandemic-driven demand),” Nick Donkar, PwC’s U.S. health services deals leader, wrote in the report.

Amid the coronavirus, the number of people with behavioral health needs has increased an estimated 50% compared to pre-pandemic levels, according to a separate behavioral health utilization report from the management consulting firm McKinsey & Company.


At the same time, coronavirus-related flexibilities from state and federal governments have made it easier for behavioral health providers to do business, with stakeholders and lawmakers pushing for several of those changes to be made permanent. 

Additionally, private equity buyers are sitting on a huge pile of dry powder, with fewer viable assets in which to invest. That’s largely due to the fact that the coronavirus hurt many previously attractive industries and investment targets.

“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,” Burk Lindsey, managing director in the health care investment banking group at Raymond James & Associates, previously told Behavioral Health Business. “In essence, you have the same amount of capital chasing a smaller number of opportunities.”

While behavioral volume was up for the 12 month period ending May 15, 2021, value for that period was down, according to the PwC report. Overall, behavioral health’s 93 deals had a combined value of $2.8 billion, a 2% year-over-year decrease. 

Meanwhile, total deal value for all health care sectors is well on its way to record-breaking levels for 2021, hitting $1.4 trillion for January through May of this year alone. That figure is especially impressive when compared to the average annual U.S. deal value for 2016 through 2020, which came in at $1.8 trillion. 

In addition to traditional dealmaking, the PwC report highlighted the fact that 2021 has already seen several health care IPOs driven by special purpose acquisition companies (SPACs). In the behavioral health realm, that includes Talkspace, which officially went public via SPAC on June 23. Meanwhile, Pear Therapeutics, which creates clinician-prescribed software to treat behavioral health conditions, has also announced its plan to go public via SPAC later this year.

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