Amid ‘extraordinary’ deal flow, yet another merger and acquisition advisory firm has entered the behavioral health industry.
Called M&A Healthcare Advisors (MAHA), the new boutique M&A firm will focus on sell-side representation, M&A consulting and valuation services for lower-middle market health care clients. Behavioral health will be one of the firm’s main areas of focus, according to Mike Moran, partner and executive advisor at MAHA.
“There’s a large opportunity there,” Moran told Behavioral Health Business. “There’s just a surge of financial buyers — private equity, independent investors and even search funds — that are looking to get their feet wet and acquire a platform within the space.”
In the first half of 2021 alone, the behavioral health industry saw 119 deals, according to the M&A advisory firm The Braff Group. If deal activity continues at that pace for the rest of the year, dealmaking will hit an all time high, surpassing the 179 transactions the industry saw last year.
MAHA is hoping to get in on the action. Moran — who along with his co-founders brings more than 20 years of experience to the new venture — estimates that about 40% of the firm’s business will be in the behavioral health space. Areas of interest include autism treatment, IDD treatment, substance use disorder (SUD) treatment and mental health treatment.
Experts predict behavioral health M&A activity will only continue to accelerate in the months and years to come thanks to sky-high demand for services and Biden’s plan to raise capital gains tax rates. As such, now could prove to be an especially lucrative time for providers to sell their businesses.
From a valuation standpoint, the best time to sell is when the business is growing, Moran said.
Burk Lindsey — managing director in the health care investment banking group at Raymond James & Associates — agrees.
“Most of the businesses that have really attractive growth profiles, that have been successful growing both organically and via acquisitions and de novos and that are consolidating attractive segments within behavioral health are trading at anywhere from … 10x to 12x for platforms,” he said, referring to mature behavioral health subsectors specifically.
Less mature subsectors such as autism treatment can see even higher multiples, he said.
“We’ve seen … companies regularly trade at 15x plus,” Lindsey said of companies in the autism space. “I’ve even seen some businesses trade in the 18x to 20x range.”
Meanwhile, the best way for behavioral health providers to go about the sale process is to have a professional help them through it, Moran said.
“Even if it’s not us, you definitely want some type of representation throughout this process,” Moran said. “We sometimes relate it to going to court without an attorney. It’s just something you wouldn’t do.”
Some other M&A advisories focused on behavioral health include The Braff Group, Stoneridge Partners and Mertz Taggart, among others.