10 Behavioral Health Companies to Watch for a Potential Sale

Dealmaking in the behavioral health space has been slower in recent years. However, a handful of notable companies could be changing hands in the not-so-distant future.

Based on data from the first quarter, it appears behavioral health dealmaking is stuck at lower volumes than pre-pandemic levels. As we prepare for new batches of M&A data for the first half of the year, several sources in the M&A space told Behavioral Health Business that deal volume is picking up.

On top of BHB’s market intelligence, some economic signals might goad dealmaking along. The inflation rate is calming somewhat in 2024: It was 3% in June. The stock markets — notably the S&P 500 and Nasdaq — have repeatedly hit record highs during the year so far. All this, paired with cooling job numbers and recent congressional testimony by Federal Reserve Board Chairman Jerome Powell, led experts to posit that the Fed may be preparing for interest rate cuts.

Generally, private equity is primed to move in the coming years, too. A report by the investment and financial firm Bain and Co. found that investment dollars deployed and the number of exits in 2023 were down significantly (60% and 66%, respectively) compared to a record-setting 2021. However, fundraising in 2023 was only off the record-setting level of 2021 by 1%. For the same year, 26% of global private equity cash held was raised four or more years ago. That cash is “aching to be deployed,” the report states.

Behavioral Health Business put together a list of potential companies that are poised to sell in the near future based on time since last sale, notable developments and industry scuttlebutt. We’ve reached out to each company and the firms that back them.

Several companies on the list have exceeded or are nearing the end of typical hold periods for private equity-backed assets. For those companies that may be considered overdue, there are any number of company-specific reasons. Some global economic trends shed some light on the situation.

The many economic complications set in motion by the COVID pandemic that created the wait-and-see induced slowdown in dealmaking have led to a historically long average hold period for North American portfolio companies. The average period in 2023 jumped to 7.1 years. Compare that to 5.7 years in 2022, according to a report by S&P Global.

Read on for a list of companies that could be hitting the market soon.

Discovery Behavioral Health

Industry: Diversified

Last deal: 2011, 2018

Owner: Webster Equity Partners

Discovery Behavioral Health is one of the most interesting companies on this list. It offers numerous care specialties to both adults and adolescents at several levels of care intensity. The Irvine, California-based company historically operates residential and facility-based care. Its adolescent business was known for operating in home-like settings. More recently, the company has evolved to focus on more accessible versions of care.

In February 2022, it launched its integrated outpatient mental health offering, DiscoveryMD. On top of expanding its outpatient offerings, it has grown significantly — sometimes through M&A. Later in 2022, it expanded its outpatient mental health footprint with the acquisition of Anew Era TMS & Psychiatry.

The company has slimmed down somewhat as well to become more efficient. Late in 2023, Discovery Behavioral Health shuttered over a dozen locations to further retool the company toward more outpatient services and away from small, home-based residential treatment facilities. This included the shuttering of some residential mental health and eating disorder facilities.

Plus, Discovery Behavioral Health is overdue for a trade. Its private equity backer, Webster Equity Partners, originally invested in one of Discovery Behavioral Health’s predecessor companies back in 2011. Then, in 2018, that predecessor organization, Center for Discovery, acquired Cliffside Malibu to form the platform Discovery Behavioral Health. Depending on how one looks at it, Discovery Behavioral Health is twice overdue for a trade.

Webster Equity Partners declined to comment. Discovery Behavioral Health has not yet responded to specific questions.

Baymark Health Services

Industry: Addiction treatment

Last deal: 2015

Owner: Webster Equity Partners

Readers will notice a lot of Webster Equity Partners in this list. Several of its behavioral health assets are due or overdue based on traditional private equity hold periods. What’s more, there was already a thought on the part of Webster Equity Partners to sell off Lewisville, Texas-based Baymark Health Services in the past.

Baymark reportedly underwent a bid-sale process in late 2019 that did not end in a sale. At that time, Baymark was — and still is today — one of the largest addiction treatment providers in North America, with a footprint that extends beyond American borders.

After that, the company went on a spending spree. In 2022 alone, the company acquired seven companies, including Fritz Clinic. In 2021, the company announced 11 acquisitions. Today, the company operates more than 400 locations in the U.S. and Canada.

Most recently, the company announced a new CEO: Marshal Salomon, who succeeded David White and who oversaw the growth of Baymark to titanic levels.

CEO changes are often signals of a new direction. It’s been just under five years since Baymark and Webster Equity Partners pulled back from a sale. Plus, it’s been about 10 years since Webster’s initial 2015 investment.

Baymark has not responded to a request for comment.

Perimeter Healthcare

Industry: Psychiatric facilities

Last deal: September 2016

Owner: Ridgemont Equity Partners

Perimeter Healthcare is one of only a few behavioral health companies that focus on the most intense levels of psychiatric care with residential and hospital facilities and is not Universal Health Services (NYSE: UHS), Acadia Healthcare Co. Inc. (Nasdaq: ACHC), or a nonprofit or government entity. It offers services for adolescent, adult and geriatric patients.

The fundamentals for Perimeter Healthcare’s 12-location footprint are at least somewhat favorable. Its services are concentrated in the Southern United States, an area where adult mental health at the state level ranks near the bottom. On top of that, the South continues to be the fastest growing region in the U.S., according to Census data.

Ridgemont Equity Partners acquired the company in 2016, making the company due for a trade. The company could deepen an existing company’s footprint in a fast-growing region of the U.S. or make for an entry point into the region for companies focused on these types of facilities. Alternatively, companies that don’t offer that level of care seeking to build out a spectrum of services could do so by acquiring Perimeter. Building out a wide range of services continues to be relevant. Early in the year, Summit BHC, which historically focuses on facility-based care, rolled out a dedicated outpatient division called Everest Outpatient Services.

Building the spectrum could go the other way, too. Several companies have launched partial hospitalization programs (PHPs) and intensive outpatient programs (IOPs) to complement inpatient and residential services. Acadia Healthcare, as one example, is looking to beef up its PHP and IOP offerings. The company’s website shows that only a few localities operate either type of program.

Neither Ridgemont nor Perimeter Healthcare have responded to a request for comment.

InBloom Autism Services

Industry: Autism therapy

Last deal: May 2018

Owner: Webster Equity Partners

Autism therapy continues to be an area that sees significant interest on the part of investors. In reporting this story, several M&A experts point to this sector as one to watch as several platform companies were either formed or invested in in the run up to frenzy-high investment multiples in and around 2021.

InBloom Autism is due for a trade. But the M&A sector has not yet reconciled how to handle historically high deal multiples from previous trades, high interest rates and the historic challenges of low payer reimbursement rates and high turnover. This has led to a huge slow down of deals in the sector despite the interest in the space.

Despite the challenges, InBloom Autism is a prime acquisition target. The company has largely expanded through its own de novo efforts. It now operates 24 locations in seven states, according to its website. Its largest state market is Florida, with nine locations, according to its website. Its modest size and deliberate growth suggest that it has focused on sustainable growth. And with a relatively diffused footprint, any platform, no matter how large, is not likely to run afoul of growing scrutiny percolating through the American regulatory apparatus when it comes to consolidation.

“We are not in any exit planning stage at this point and currently have no plans in the near future,” Tim Bohman, CEO of InBloom Autism, told BHB.

Caravel Autism Health

Industry: Autism therapy

Last deal: August 2018

Owner: Frazier Healthcare Partners

Caravel Autism is reportedly working through a sale process to be acquired by the investment firm GTCR. BHB reported this in May. A representative of the company has not confirmed or denied this report and others by separate media organizations. Either way, the company is due for a trade.

Caravel Autism is among the largest autism therapy companies in the U.S., with its locations concentrated in the Midwest and a handful of locations in the Northwest. However, its 62 locations, according to its website, puts it near the bottom of the top 10 or so largest platforms in the U.S. The company could make a potent foothold in a region with just a few other large competitors. Those include Centria Autism and LEARN Behavioral. Alternatively, a combination with another regional competitor could create a company with the oft-sought-after local scale needed to push back with gusto at the negotiating table with payers.

The company continues to expand via de novo growth in existing markets. In the past, Caravel Autism was focused on adapting technology to better track the impact of care and, in turn, improve it across its footprint.

360 Behavioral Health

Industry: Autism therapy

Last deal: August 2018

Owner: DW Healthcare Partners

The 360 Behavioral Health leadership team has kept its pulse on the M&A market. It has heard several deals to acquire companies, according to previous interviews with 360 Behavioral Health’s leadership team. That puts the company in frequent contact with entities that buy and sell companies, just like 360 Behavioral Health.

While also due for a trade, 360 Behavioral Health is DW Healthcare Partners’ only behavioral health investment. This suggests that the firm — which has not responded to comment — may not be all that eager to hold onto 360 Behavioral Health longer than it has to in the way that Webster has with its several behavioral health platforms. Still, all of the pressures mentioned above with InBloom Autism apply here.

360 Behavioral Health operates nearly exclusively in California. Only two of its 24 locations are based outside of California — in Lincoln and Omaha, Nebraska. The acquisition of 360 Behavioral Health may be tricky for any platform with a sizable footprint in the Golden State. An acquisition by another investor could rework the company’s balance sheet to enable additional de novo or M&A growth. A strategic acquisition could give an existing platform a sizable footprint in California, the largest economy in the U.S.

What’s more, the company’s new CEO, Kate Sheldon Princi, comes to the role with a significant amount of experience leading the company in various executive roles. She joined the company, then known as California Psychcare, in 2012 as a clinician and has worked her way to the top. After more than a decade at the company, Princi could make her final mark on the company by ushering in a new era of growth at a company that was founded in 1997 or by giving it new life through new ownership.

360 Behavioral Health CFO Dan Cross said the company is presently focused on growth and does not have a specific timeline for an exit.

“The timeline for our exit has not and will not be set by a calendar, but more by the time when there is a strategic, tactical and financial alignment between the owners and a potential buyer.” Cross told BHB.

Behavioral Health Group

Industry: Addiction treatment

Last deal: December 2018

Owner: Vistria Group

Behavioral Health Group, also known as BHG Holdings, focuses on one of the most desired-by-investors areas of addiction treatment: medication for opioid use disorder (MOUD).

Addiction treatment is historically one of the hottest areas of dealmaking in behavioral health, often just behind mental health, according to data tracked by the Braff Group, meaning that the significant amount of churn in those buying and selling companies leaves several likely buyers for a company like Behavioral Health Group.

However, the scale of the company — 116 locations in 22 states — may limit the number of strategic buyers and weed out most of the small- and mid-market private equity firms that focus on this space.

The growth perspective for Behavioral Health Group could include greater investment in PHPs and IOPs. These types have been a top priority over the last few years. They were a defining feature of deals that got done in 2023 and are seen as a cost-effective middle ground for investing in more intensive services short of residential and inpatient facilities.

Professionals with Behavioral Health Group’s owner, Vistria Group, see the M&A space becoming more approachable with valuations coming down, less competition for deals and several behavioral health organizations finding themselves “upside down” with their balance sheets. While that may position Behavioral Health Group as an acquirer, it may stand out in that environment as a more desirable acquisition target relative to struggling peers.

Neither Vistria Group nor Behavioral Health Group responded to a request for comment.

Odyssey Behavioral Healthcare

Industry: Diversified

Last deal: December 2018

Owner: Carlyle Group

Odyssey Behavioral Healthcare has continued to grow despite having to readjust its approach to eating disorders. It closed two locations that operated under the Shoreline Center for Eating Disorder Treatment brand at the end of last year.

In 2018, Nautic Partners sold it to the Carlyle Group. Since then, the Brentwood, Tennessee-based company has opened a number of facilities. It now lists 43 locations in 10 states on its website. It offers eating disorder treatment, mental health, process addiction and substance use disorder (SUD) services. It also cares for patients aged 10 and up across its footprint. Its services are also diversified in terms of intensity. It offers outpatient, IOP, PHP, residential and inpatient care settings.

After working through at least one headache in 2023, the company has announced the opening of 11 facilities in the last year alone. The company was founded in 2015.

The company presents a generalist firm that could go in so many different directions and would be a company that doesn’t present antitrust concerns. Its footprint is fairly diffused, with California (6) and Florida (7) being its largest markets by location count. Some may find the “veteran ready” status assigned by the veteran care training nonprofit PsychArmor attractive as a way of doing well by doing good and providing specialized care to a high-need population.

Center for Social Dynamics

Industry: Autism therapy

Last deal: December 2019

Owner: NMS Capital

The Center for Social Dynamics has followed a pretty typical private equity playbook — get a platform investment, acquire a handful of companies, and then digest and make something more than the sum-of-parts out of those acquisitions. Its last two deals closed in 2021: JF Autism Services and South Sound Behavioral Therapy. It operates in six states with most of its footprint concentrated in California.

The company provides autism therapy via center-based, in-home, school and virtual settings and has maintained that plurality of delivery modes despite some of the largest players in the space whittling down services. For example, Invo Healthcare shuttered its in-home and center-based business about a year ago. New financial or strategic owners could take the lessons learned and reiterate them in de novo centers or existing ones.

Neither NMS Capital nor Center for Social Dynamics have responded to requests for comment.

Crossroads

Industry: Addiction treatment

Last deal: January 2022

Owner: Revelstoke Capital Partners, Caisse de dépôt et placement du Québec (CDPQ)

Revelstoke Capital Partners has apparently hit some snags growing some of its behavioral health assets. The private equity firm laid off over 100 staff earlier in the year from its eating disorder treatment platform, Monte Nido & Affiliates, because certain regions were underperforming.

And it appears that its addiction treatment platform, Crossroads Treatment Centers, has also downsized. Crossroads’ current website lists 101 locations in nine states. An archived version of its website from July 6, 2023 — just a few months after Revelstoke Capital Partners and CDPQ acquired the company — shows the company previously operated 129 locations in 10 states. It no longer operates in Colorado, where it previously listed just one location. In total, it’s footprint is now 21% smaller.

The company operates outpatient medication-assisted treatment for SUD clinics. The shrinkage is a stark contrast to the general narrative of the space, where several operators have been able to grow by increasing the ease of access to treatment. This slimming down could be an attempt to drop clinics that drag down the company’s bottom line, making it a more viable option for acquisition and a turnaround.

It would not be unusual for Crossroads to be working toward a sale at this point. Historic and typical hold periods for private equity-backed companies of all sorts range from three to five years. Experts have told BHB that it takes longer for behavioral health deals to come together than in the past as investors become more savvy and skeptical of companies in the space. More recently, BHB learned that an increasing number of state and federal regulators are interested in regulating health care deal activity.

The company is concentrated in Virginia and Pennsylvania. There are several similar companies that could merge with it to deepen their regional footprint in the Eastern and Southern U.S. Alternatively, a new investor, maybe one that previously invested in a comparable company, could get Crossroad back onto its previous path to scale.

The company has also trimmed its name. It goes simply by Crossroads now.

No party above has responded to a request for comment. Representatives of Crossroads have also not responded to previous requests for comment about its apparent downsizing.

Editor’s Note: This story originally reported that Crossroad’s website listed 53 sites of service. The company’s website has been updated to show 101.