‘Extraordinary’ Mid-Year Behavioral Deal Numbers Poised to Break Multiple Records

The behavioral health industry seems to be making good on predictions that 2021 would be a record year for dealmaking.

“The behavioral health M&A numbers are in, and in a word, they are extraordinary,” Dexter Braff, president of the M&A advisory firm The Braff Group, said in a mid-year deal report shared with Behavioral Health Business.

In the first half of 2021, there were a total of 119 deals in the aggregate behavioral health market, according to the firm. The numbers suggest 2021 behavioral health M&A activity is on track to surpass 2020, which saw 179 deals — the highest number ever logged by The Braff Group, whose records go back to 2012.


“[W]ith the pandemic and its onslaught on our collective mental health – and expectations for a prolonged period of increased utilization – the Wall Street Wunderkinds (and anyone else with spare tea leaves to read) anticipated an even greater focus on the space in 2021 and beyond,” Braff said in the M&A report.

Most of the gains so far in 2021 have been in the SUD treatment and mental health spaces, which comprise over 60% of the deals transacted in the space. Meanwhile, at-risk youth, autism and intellectual and developmental disabilities (I/DD) deals constituted a smaller number of behavioral health transactions through Q2 2021.

Additionally, so far this year, M&A activity in the SUD space has nearly matched the number of deals the subsector saw in all of 2020.


Through Q2 2021 alone, there were 47 SUD treatment deals. That includes providers offering residential and non-residential services, in addition to others providing medication-assisted treatment (MAT). That number is just six shy of the total number of SUD deals that occurred in all of 2020. If the current pace holds steady, over 90 SUD treatment deals will take place by the end of this year.

In the mental health space, 31 M&A deals have occurred through the first half of 2021. More than 60 deals are projected to take place within the subsector by year’s end, if current levels hold steady, surpassing 2020’s total of 52 transactions.

Both the mental health and SUD treatment sectors are on pace to register the highest number of M&A transactions they’ve ever recorded.

The Braff Group noted that SUD treatment and mental health providers are still receiving strong attention from private equity firms through platform investments. However, future platform deals might be more directed toward mental health providers than those in the SUD space.

“While there have been more platform deals in SUD over the past 10 years, such activity peaked in 2018,” Braff said. “Alternatively, market entry deals in mental health are trending upwards and have outpaced SUD over the past 18 months. As such, while mental health may not eclipse addiction treatment in total numbers over the near term, it may very well post stronger growth.”

Dealmaking has also been active within the autism subsector, with 22 deals logged through Q2 2021. As such, this year’s autism M&A activity is on pace to challenge 2019’s record number of 45 deals, which would be a rebound from last year’s dip to 37 transactions. The Braff Group attributed last year’s decrease, in large part, to reduced clinic census counts as a result of the pandemic.

Along with more private equity interest in behavioral health, The Braff Group said this year’s M&A activity could be aided by the Biden administration’s plans to raise capital gains tax rates, which could compel some providers to sell off assets earlier than previously anticipated.

Those tax hikes could take effect in early 2022, if passed by Congress.

“It remains to be seen how the rest of the year plays out,” Braff said. “But the tailwinds behind health care M&A in general, and behavioral health in particular, combined with tax incentives to avoid a potentially substantial increase in capital gains tax in 2022, suggest that many records may fall in 2021.”

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