Mental Health Rollups Set New Record in Q1 2022

Merger and acquisition activity in the mental health space hit a sequential all-time high in the first quarter of the year.

At least 26 mental health deals closed in the first three months of 2022, nearly doubling the previous record high of 16 set in the fourth quarter of 2021, according to data from the Fort Myers, Florida-based M&A consulting firm Mertz Taggart.

Overall, wider M&A in the behavioral health sector settled into “modest levels” with at least 41 total transactions closing in the first quarter with the mental health space remaining “hot,” according to a blog post from Mertz Taggart.

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

The push in 2021 came from a wave of sellers eager to exit the market, the blog post states.

In 2022, investors appear to be drawing inspiration from large mental health-focused firms that are finding success in aggregating mental health practices all over the country. The post specifically mentions LifeStance Health Group Inc. (Nasdaq: LFST) and Refresh Mental Health.

“Both of those companies have been wildly successful with multiple sales over the last couple of years, including LifeStance going public in 2021,” Mertz Taggart Managing Partner Kevin Taggart said in the post. “Private equity started seeing the success of both of those groups in 2020 and 2021. There is a lag between the time they decide to get into the market and when they start making acquisitions, which I believe was reflected in the Q1 numbers.”

LifeStance Health was founded in 2015 following investment partnerships with Summit Partners and Silversmith Capital Partners. It secured a $1.2 billion investment from TPG Capital in 2020 and went public in June 2021.

Refresh Mental Health was founded in partnership with Lindsay Goldberg & Co. LLC in 2017. Lindsay Goldberg sold its stake in Refresh Mental Health to Kelso & Co. in December 2020 and Kelso sold Refresh just 15 months later to Optum, the health services division of Minnetonka, Minnesota-based UnitedHealth Group (NYSE: UNH).

Private equity drove most of the transaction volume in mental health, accounting for 16 of the 26 deals announced, the post states.

Bankers and buyers are now rebuilding their pipelines. The second half of 2022 should see a strong number of deals barring major macroeconomic developments, Taggart said.

Deals in addiction treatment were similar year-over-year in the first quarter with 14 in 2022 and 13 in 2021 but dropped off compared to the 31 deals that closed in the fourth quarter of 2021, the post states.

Autism services and intellectual/developmental disabilities deals dropped off in the first quarter to six — compared to 11 in 2021 and eight in the fourth quarter of 2021. Deal totals in this space reached a high in the third quarter of 2020 with 16. All of the deals were driven by private equity, the post states.