Increased venture capital activity in the mental health space helped drive deal volume growth in the behavioral health space in 2022, according to the latest report from the health care M&A firm Mertz Taggart.

The firm tracked 177 deals, about 9% more than 2021’s blockbuster year. 2021 saw a year-over-year increase of 46% to 162 deals, the report states.

Nearly all the deals tracked were in the mental health space. All the other sectors tracked in the report — autism and intellectual/developmental disabilities (IDD) and addiction treatment — saw annual decreases.

Heading into 2022, the mental health sector was already hot because of heightened interest in technology-focused firms. The report states that the mental health space lends itself more easily to the use of new or innovative technologies, and venture capital firms seek the kind of scale that technology can bring.

“I don’t see this phenomenon spreading to other areas of behavioral health because those don’t lend themselves to technology quite as easily, which is what VC typically invests in,” Mertz Taggart managing partner Kevin Taggart said in the report. “While venture capital firms arrived in mental health en masse to close out 2022, don’t expect them to stick around.”

In 2022 the mental health space saw deal volume grow by 97% to 116 deals, the largest of the other behavioral health segment Mertz Taggart tracks.

Some of the larger mental health deals included in the report are Consonance Capital Partners’s acquisition of youth-focused Embark Behavioral Health; Newport Healthcare’s, also a youth-focused provider, acquisition of Prairie Care; and ARC Health’s several acquisitions.

The autism and IDD space saw the most significant annual drop in deal volume, down about 44% to 24 deals. Also, addiction treatment deal volume cooled to 50 deals, a 35% decrease.

Looking ahead, Taggart said the M&A market, at least for the first half of 2023, will be influenced by “shaky” debt markets.

“We’ve had several debt providers and private equity groups say they are starting to see some green shoots — signs of recovery — in recent weeks regarding the debt market,” Taggart said.