Behavioral Health M&A Hits Record Level in 2021, Demand Remains “Sky-High”

Behavioral health business activity was on fire for another year in 2021, helped largely by a high demand for services among the public that shows no signs of abating any time soon.

Transactions for behavioral health providers kicked off the year strong, with 35 deals registered in the first quarter (Q1) of 2021, according to a new report published by health care M&A advisory firm Mertz Taggart. That was more than the number of deals logged in each of the four quarters of 2020.

In between, no less than 30 deals occurred each in Q2 and Q3 2021 before ending the year with a record-high 49 transactions in Q4.


Overall, 149 behavioral health transactions took place in 2021, marking a 34% increase from 2020, which was also a record year in spite of the pandemic briefly slowing down the pace of dealmaking.

Source: Mertz Taggart

No more was the spate of deals evident than it was in the addiction treatment segment, where 74 merger and acquisition deals occurred, almost double the number that took place in 2020.

In Q4 2021 alone, 30 M&A deals for addiction treatment providers were made. BayMark Health Services and Behavioral Health Group were two providers singled out by Mertz Taggart as having been a major contributor to the segment’s M&A action, as both accounted for over a third of addiction treatment dealmaking last year.

Source: Mertz Taggart

Other noteworthy transactions in the addiction treatment space included Promises Behavioral Health buying Assured Healthcare Partners LLC. Additionally, Mindpath Health closed out the year by purchasing four clinics in Ohio from Vertava Health.

Dealmaking in the mental health space was likewise active in 2021, as the sector logged 52 deals, almost double from the prior year. In Q4 2021, 16 deals in the space were made, eclipsing by one the quarterly record high reached in Q4 2020.

Highlights among mental health providers included the merger of Headspace and Ginger to form Headspace Health, the acquisition of Eating Recovery Center by Apax Partners and Oak HC/FT, Mindpath Health buying Metropolitan Neuro Behavioral Institute and Delic Holdings Corp. paying for Ketamine Wellness Centers.

Dealmaking for providers of those with autism and individuals with intellectual and developmental disabilities (I/DD) brought up the rear among the segments, with 40 deals having transpired in 2021 — two more than in 2020. Among deals that stood out in the sector, according to the firm, were H2 Health purchasing Great Stride Rehabilitation and the Stepping Stones Group – which reportedly is up for salebuying Futures Health Group.

“The data reflects what we are seeing with our clients,” Mertz Taggart Managing Partner Kevin Taggart said in the report. “Demand for quality mental health and addiction treatment services remains sky-high, with the pandemic adding fuel to a marketplace that already was strong. This has resulted in record valuations for these providers.”

The firm added that the dealmaking has also been spurred by what it describes as “pandemic-induced burnout” as well as providers looking to exit the behavioral health market due to a possible capital gains tax hike that has been bandied about since President Biden was sworn into office, but has yet to happen.

The report additionally issued a warning about the valuations of providers amidst the possibility of hikes in interest rates throughout the year.

It is expected that the Federal Reserve will raise rates three times in 2022, according to a group of economists polled by Reuters. 

“Demand will remain strong,” Taggart said, “but valuations could be tempered by rising interest rates, which the Federal Reserve has recently signaled may begin as early as the second quarter.”

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