Q2 Sees PE-Backed Strategic Firms Lead Behavioral M&A, As Autism Dealmaking Slows

The behavioral health industry remains on track to close a record-breaking number of deals this year, second-quarter transactions data shows.

In Q2, the healthcare mergers & acquisitions firm Mertz Taggart logged 26 deals, bringing the total count for the first half of 2021 up to 57. Much like in the first quarter of the year, private equity buyers accounted for the majority of those.

In fact, 20 of the quarter’s 26 deals involved PE buyers. Within that group, PE-backed strategic firms were the most common dealmakers, accounting for 18 transactions, with frequent buyers including Chicago Pacific Founders’ Recovery Ways, which made four transactions in Q2, and Shore Capital-backed Brightview, which made two.


Mertz Taggart’s findings suggest the behavioral health industry is on pace to beat its annual dealmaking record of 107, which was set in 2020.

“We expect transaction volume will likely accelerate over the second half of the year as sellers, burned out from the pandemic, are looking to get something closed in 2021 due to the anticipated increase in the capital gains tax rate,” the firm’s managing partner Kevin Taggart said in a press release.

The capital gains tax rate is set to nearly double if the Biden administration’s new tax bill passes. The change would take effect on Jan. 1, 2022 — likely compelling more providers to sell their businesses this year before taxes increase.


Still, roadblocks exist. For example, a shortage of M&A advisors could cause delays in 2021 dealmaking.

“Many won’t have the bandwidth to handle the volume for those that aren’t already progressing down the path,” Taggart said. “We’ve talked to a number of accounting firms, buyers and legal firms that are concerned they won’t be able to handle the demand for those that aren’t already engaged in the process.”

Autism deals down, other subsectors hold steady

Substance use disorder (SUD) and mental health treatment deal numbers held steady in Q2, with 14 and 10, respectively. Those numbers are similar to what each subsector saw in Q1, when there were 12 SUD deals and 11 mental health deals.

Meanwhile, autism deals dipped in Q2. While there were 11 autism deals in Q1, there were just six in the second quarter of the year. Taggart attributed the drop to cost efficiency.

“Many private equity groups that have a platform company have decided to go the de novo route rather than to acquire a small provider for what have been high multiples,” Taggart said. “They can do it more cost effectively and have a waiting list shortly after they open.”

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