Children’s Behavioral Health Provider Stepping Stones Reportedly Set for Sale

Stepping Stones Group, which is a multi-state provider of services to children with autism and other behavioral needs, is reportedly up for sale.

PE Hub reported Thursday that the organization’s parent company, Five Arrows Capital Partners, has recently initiated a competitive sale process for the provider that is aimed exclusively at private equity buyers.

Investment bank Moelis has been tapped to provide sell-side advice for Stepping Stones, sources told PE Hub. A first round of bids for the provider reportedly began earlier this month.

Stepping Stones was founded in 2014. The children’s provider operates across 42 states, with a staff of more than 6,000 serving over 900 clients and 200,000 children.

Five Arrows purchased the company in 2017. The private equity firm is a middle market investment subsidiary of global investment bank Rothschild & Co.

Stepping Stones provides therapeutic, behavioral, autism, nursing and education services in school, home, community and virtual settings. In May, Stepping Stones expanded its footprint with the purchase of Springfield, Massachusetts-based children’s behavioral health provider Futures Health Group.

According to PE Hub, Stepping Stones is projecting approximately $65 million in EBITDA for the 12-month period ending June 30, 2022. That figure is up from approximately $9 million in anticipated EBITDA in the 12-month period that ended June 30, 2018, which came months after Five Arrows’ purchase.

Sources told PE Hub that Stepping Stones has been recording double-digit organic growth, a trend expected to continue, even as the company pursues mergers and acquisitions (M&A).

The market for behavioral health providers focusing on the adolescent population has been active with companies like Cerberus Capital Management purchasing Lighthouse Autism Center in August, reportedly for more than $400 million.

Onex Partners also invested in Newport Healthcare in July at a $1.3 billion valuation and the Ontario Teachers’ Pension Plan Board acquired Acorn Health a month later.

Through the third quarter of 2021, 26 deals had been logged among providers in the autism care and intellectual/developmental disabilities (I/DD) sector, according to M&A advisory firm Mertz Taggart. The number is down from 31 that occurred through Q3 of 2020.