5 Private Equity Firms Shaping the Future of Behavioral Health

It’s no secret private equity investment across the board has been sluggish, though that may soon change with 2025 shaping up to be a more bullish period for M&A. While interest in the behavioral health sector remains healthy, high interest rates and other factors had stalled dealmaking. 

As the overall macro-economic landscape improves, many private equity firms are also coming to the end of their typical hold windows for investments. 

And there are plenty of deals that could make sense, from large platform deals between PE investors to small PE-provider backed tuck-in transactions.

With all this in mind, Behavioral Health Business put together a list of five PE firms worth watching over the next year.

Webster Equity Partners

Webster Equity Partners is among the most active private equity players in behavioral health.

Its investments span mental health, addiction treatment and autism. But most interesting about Webster is that several of its behavioral health portfolio companies are reaching the end of the traditional three to five-year hold period for companies.

This means the investor could be looking to ink some deals in the upcoming year. High interest rates and unrest in the Middle East and Eastern Europe have slowed M&A dealmaking in behavioral health.

But the Federal Reserve recently lowered interest rates, which could kick-start dealmaking. This could be good news for Webster, which has a fully stacked portfolio. 

Webster first invested in Discovery Behavioral Health’s predecessor company, Center for Discovery, in 2011. It then reinvested in the entity in 2018, when the Center for Discovery and Cliffside Malibu merged to form Discovery Behavioral Health.

Webster has undoubtedly played the long game regarding Discovery, and has been involved in one capacity or another with the organization for 13 years. During that time, Discovery has matured. It offers integrated outpatient mental health, TMS, residential programs and intermediate care programs. Its areas of expertise include mental health, substance use and eating disorder care. With this much time invested in the company, Webster could look for a substantial payout. 

This isn’t Webster’s only company that could be going to market. Its addiction treatment provider, BayMark Health Services, is also past the typical hold period. Webster first invested in the company in 2015. Since then, BayMark has grown to be one of the largest addiction providers in the country. Under Webster, BayMark has also completed dozens of acquisitions. 

Yet there may have already been some hiccups in the M&A process. BayMark reportedly underwent a bid-sales process at the end of 2019, which did not end in a sale. 

Webster has also invested in the autism space in 2018 by purchasing InBloom. The autism provider has expanded through de novo efforts and operates 24 locations. As the autism industry begins to thaw this could be another area where Webster could start to look for a sale. 

We’ll be closely watching Webster over the next year to see which, if any, of its businesses it plans to sell and what the exit could look like.

HCAP Partners

HCAP Partners is a private equity firm focused on small and medium-sized companies in the U.S. It currently manages over $670 million in capital. 

The California-based firm jumped into the behavioral health field with its investment in AMFM Healthcare. The provider offers intensive mental health treatment in California and the Washington, D.C., metropolitan area. 

In 2021, HCAP Partners reinvested in the provider. At the time, AMFM reported that the new capital would be used to support employee development and engagement as the company expands its operations. Just a year later, HCAP sold the provider, according to Mergr.

But that was just the beginning of the firm’s foray into behavioral health. In March of 2024, the company teamed up with two health care executives to launch an ambitious new behavioral health platform called PAX Health. 

The newly formed company combines Behavioral Medicine Associates (BMA), Workers Compensation Psychological Network (WCPN) and Reservoir Health under the PAX Health name.

The provider offers in-person and telehealth services for mental health conditions and operates in New York and New Jersey. Together the companies offer group therapy, pain management, psychiatry and medication management. It also claims to be one of the largest mental health businesses in the Northeast. 

It’s always interesting to see what a private equity firm is at the ground floor of developing a new platform company. It’s also worth noting that the company was formed during a relatively quiet period for behavioral health mergers.

We’ll be closely watching to see what HCAP has in store for PAX and its growth plans.

Tenex Capital Management

It’s no secret that behavioral health investing has been eerily quiet this year. Still, there was one major deal in the space that made headlines.

In May, New York-based Tenex Capital Management acquired autism provider Behavioral Innovations for a whopping $300 million and commanded a valuation in the high teens, according to Mergermarkets. This also marked Tenex’s debut in the autism space.

Behavioral Innovations has approximately 80 locations across Colorado, Oklahoma and Texas.

Investing in the autism field has been particularly slow due to major public stumbles, including the bankruptcy of large ABA provider CARD, and massive layoffs at 360 Behavioral Health and Elemy.

But this deal reflects a move towards an uptick in the space. It’s a trend that experts in the field have been quick to comment on. 

“Now deal flow is back on the way up for autism and likely to stay that way,” Dexter Braff, president of The Braff Group, recently said. “The lull in that space will turn out to be one of the shortest lulls we’ve seen in the sector when it experiences a downturn.”

While this was perhaps the most notable deal in the autism market this year, another noteworthy deal is GTCR’s reported acquisition of Caravel Autism Health. Together these deals could signal a rise in autism investing.

“Both Caravel Autism Health (“Caravel”) and Behavioral Innovations (“BI”) moved on to their next round of private equity investment, signaling strong investor sentiment and suggesting an active next 12-18 months from an M&A perspective,” Provident wrote in a recent report. “More specifically, GTCR acquired Caravel from Frazier Healthcare Partners, who invested initially back in 2018, and Tenex Capital Management acquired BI from Shore Capital Partners, who initially invested in 2017. Despite stagnant reimbursement and ongoing labor challenges, both deals demonstrate investor confidence in a sector that saw a bottleneck in transaction activity over the past 12-18 months.”

We’ll be closely watching Tenex to see how it plans to grow its newly acquired autism business amid this industry slowdown and perhaps revival.

Avesi Partners

Avesi Partners is a veteran in the behavioral health investing world. It’s been particularly active in the youth behavioral health sector. Its portfolio includes adolescent behavioral health providers Muir Wood Capital and Point Quest, an adolescent behavioral health and special education service provider.

Recently, the investing firm has made the leap into addiction treatment care. In April, Avesi acquired Fesco, California-based First Steps Recovery.

The provider offers care for adults with substance use disorders, including alcohol, opioid, cocaine and meth use disorders. It is also able to treat a number of mental health conditions, such as anxiety, depression, bipolar disorder, and eating disorders. 

First Steps Recovery offers medical detox, residential treatment, partial hospitalization (PHP), intensive outpatient programs (IOPs) and virtual care.

Overall, deals in the SUD space continue to dip since the highs of 2021 and 2022. Last year, there were 29 deals in the SUD sector, compared to 52 in 2022, according to a report by M&A advisory firm Mertz Taggart.

The demand for SUD services continues to rise and Avesi sees this as an opportunity to fill the gaps in care. 

“Patients and payers continue to express strong demand for quality addiction treatment services focused on meeting patients where they are able to drive outcomes and long-term recovery,” Pete Tedesco, managing director at Avesi, said in a statement. “We see a compelling opportunity to help FSR leverage its track record of success to extend services into additional geographies, care settings and programs.”

We’ll be closely watching Avesi Partners to see what this leap into addiction treatment care means for them.

Leonard Green and Partners

This Los Angeles-based private equity firm has somewhat flown under the radar. However, the firm, which manages approximately $75 billion of assets, has two major behavioral health investments worth closely watching.

One of its portfolio companies is Boston-based Stepping Stones, an autism and developmental disabilities service provider. Stepping Stones is one of the largest and most ambitious autism providers in the country.

The company offers clinic and school-based services. Its offerings include speech therapy, occupational therapy, physical therapy, ABA care and several behavioral interventions.

Over the past few years it has made a slew of acquisitions. These include Catalyst Speech Language Pathology in January 2023, HM Therapy in June of 2022 and The Center for Behavioral, Educational and Social Therapies in June 2022.

The Stepping Stones Group is also one of the fastest-growing behavioral health companies. It made the Inc. 5000’s list of America’s fastest-growing companies for two years in a row.

We’re interested in the PE company behind a provider that has been able to keep up with sustained growth over the past few years. Is there a secret sauce that Leonard Green and Partners could bring to other parts of behavioral health?

In addition to the Stepping Stones Group, Mindpath Health is also part of Leonard Green and Partners’ portfolio.

The provider offers psychiatry, psychotherapy, psychological testing and transcranial magnetic stimulation (TMS) services.

Last year Mindpath went through a new leadership transition. Under new CEO Stephen Farber, the company is prioritizing organizational integration. Farber previously told BHB the company’s previous acquisitions put it in a prime position to improve its reach and potentially pursue more expansion opportunities.

We’ll closely be watching Leonard Green and Partners to see how they continue to grow Stepping Stones at such a rapid pace and how the organizational integration moves the Minpath narrative forward.