Why 2023 Could Be the Year of Behavioral Health Tuck-In Acquisitions

Industry pressures could make the behavioral health industry ripe for consolidation, especially smaller tuck-in deals.

That’s according to Pitchbook’s new report on the J.P. Morgan Conference. Despite the growing demand for behavioral health services, digital mental health companies have seen a steep valuation drop over the last year. 

“Provider shortages, customer acquisition costs, and employer benefit belt-tightening will likely make consolidation among these providers an increasingly attractive option,” PitchBook’s report said. “While we could see a larger category merger similar to Headspace and Ginger’s tie-up from late 2021, current market conditions mean that tuck-in acquisitions are likely to be the name of the game for the near future.”


While this year may produce many digital health tuck-in deals, the large number of “mom and pop” behavioral health providers have made tuck-ins popular across the industry.

“I think the nature of the market is that it’s extremely fragmented,” Gaurav Bhattacharyya, CEO of Geode Health, said at Behavioral Health Business’ INVEST in October.  “And so I think the volume of deals, if anything, might pick up. But they’ll tend to be smaller, kind of true roll-up opportunities as opposed to large platforms.”

This year digital health providers may focus their M&A efforts on expanding their scope of care into a behavioral health specialty.


“In our view, there is potential for M&A by tele-mental health providers in the areas of substance use disorder treatment, group therapy, AI, chatbots, and condition-specific behavioral health services for individuals with OCD, ADHD or PTSD,” PitchBook authors wrote.

Over the last few years, a number of digital behavioral health companies have begun to expand into more niche areas of behavioral health. For example, Lyra Health, a hybrid behavioral health company valued at more than $5 billion, launched a teen-focused offering and an alcohol-use disorder (AUD) program.

Though Lyra took an organic growth approach to expanding its AUD and teen mental health offerings, M&A offers another pathway for other companies looking to expand their scope. Lyra Health did so with the acquisition of ICAS World in January 2022.

Primary care organizations may also be setting their sights on behavioral health expansion, according to Pitchbook.

“The current primary care land grab will bring about a wave of behavioral health investment,” PitchBook authors wrote. “It is clinically undeniable that coordination between behavioral health and primary care providers significantly improves patient outcomes. However, due to the scarcity of behavioral health providers, many of the fastest growing primary care platforms do not provide fully integrated behavioral health services.”

But the stakes in providing integrated care could be rising as the Medicare Advantage space becomes more competitive and The Centers for Medicare & Medicaid Services (CMS) prioritize behavioral health network access in star ratings, according to PitchBook. 

“We believe primary care providers that can manage patients longitudinally alongside behavioral health services will be at a distinct advantage,” the report said.

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