The merger of the Pennsylvania-based nonprofits Merakey and Elwyn — which would have created a $1 billion-revenue organization — has been called off.
While the two nonprofits declined to answer questions about why the tie-up didn’t materialize, a C-suite executive of Merakey told Behavioral Health Business that “both organizations mutually agreed to walk away from the affiliation.”
In March 2023, the organizations announced a non-binding agreement to bring the two organizations together. Together, the fused organizations would operate a 12,000-strong workforce in 16 states and care for 55,000 people.
Merakey offers behavioral health, education and IDD services in 12 states. Elwyn offers similar services and was founded in 1852, making one of the oldest human services organizations in the U.S. It operates in eight states.
The due diligence process was slated to continue for “several months” after the announcement, with the prospect of a definitive agreement by mid-summer 2023, according to the organizations.
However, no deal materialized, and no notice was given to the public that the deal was off.
In a notice to bondholders released at the time of the deal announcement, Elwyn said the merger would bring an array of services together that could “whole person care” for those with behavioral health conditions and intellectual/developmental disabilities (IDDs). It was also the basis from which new services could be developed, the notice continued.
Merakey is headquartered in Lafayette Hill, while Elwyn is headquartered in Media. The latest public financial report from each organization shows that total revenues for their respective fiscal years totaled $407 million for Elwyn and $634 million for Merakey.
In 2021, Elwyn secured a $45 million refinancing package from the investment and wealth management bank HJ Sims.
The nonprofit behavioral health and IDD services world is vast in terms of number of providers, widely fragmented, and under incredible pressure.
These pressures are common among behavioral health providers: staffing challenges, complicated care and low reimbursement rates. What further complicates the IDD and behavioral health spaces near them is a near-total reliance on outdated government payer programs and state officials that are stereotypically hesitant to tack on additional expenses to state budgets.
Data released near the end of 2023 show that 60% of IDD organizations are considering ending programs due to staffing issues.
The enormous number of organizations and the complexity of these industries have created a robust merger and acquisition market where nonprofit leaders and even for-profit investors are tantalized by the prospect of beating the odds establishing valuable enterprises.
Still, all the complexities of the IDD and adjacent behavioral health industries leave many wondering if the proverbial “juice is worth the squeeze.”
