M&A in the substance use disorder (SUD) treatment space has been slow over the last few years.

However, that could change as a new “business-friendly” presidential administration takes over and interest rates soften. And some industry insiders speculate that digital could be the place to look for M&A activity in 2025.

“I imagine we will see more dealmaking,” Rose Bromka, COO of Boulder Care, said during a recent Addiction Treatment Business webinar. “I think the assumption is that this is going to be a business-friendly administration with lower barriers to that dealmaking. I would not be surprised if we see more and more activity over the next four years, which has been relatively quiet over the last 12 months.”

Portland, Oregon-based Boulder Care is a virtual outpatient opioid use disorder (OUD) and alcohol use disorder (AUD) provider. Its services include prescriptions for medications for addiction treatment (MAT). Earlier this year, the provider closed a $35 million Series C funding round, bringing its total raise to $85 million.

Macro-environmental factors, including lowering interest rates making capital cheaper, could help ripen dealmaking in SUD care.

Additionally, several smaller SUD providers are looking to exit and merge with large companies or sell out altogether, Rob Marsh, CEO of Bradford Health, said on the webinar.

Still, dealmaking in 2025 will likely have its challenges.

“There are some potential headwinds, even with the turn in the administration,” Marsh said. “The Affordable Care Act increases access to our services for so many of our clients. Any changes to the Affordable Care Act and the accessibility of those plans on the marketplace would potentially hamper growth and development within the industry. So we’ll be like all providers, paying close attention to how the new administration responds to some campaign promises.”

Bradford Health Services is an addiction treatment provider with a coordinated network of 40 facilities. It is backed by private equity firm Lee Equity Partners and offers early intervention, crisis response, intensive outpatient programs, partial hospitalization programs and outpatient services.

While dealmaking will likely increase at traditional addiction treatment providers, some see 2025 as the year where digital deals will take flight.

“I think we’ll see more mergers or acquisitions of [companies] providing virtual, digital health solutions for substance use in those providing behavior health in order to extend their service lines, to do both and to reduce their acquisition costs of clients,” Bob Poznanovich, chief business growth officer at Hazelden Betty Ford Foundation, said on the webinar.

Hazelden Betty Ford Foundation was founded in 2024 with the merger of the Hazelden Foundation and the Betty Ford Center. It is one of the country’s largest nonprofit addiction treatment providers. Headquartered in Center City, Minnesota, the addiction and mental health provider has 17 treatment centers.

Poznanovich noted that one example of this service expansion is digital behavioral health startup Brightside’s acquisition of virtual SUD provider Lion Rock. This deal gave Brightside a new foothold in the addiction treatment space; in particular, the provider is now able to offer virtual addiction intensive outpatient programs (IOPs).

Still, Poznanovich noted that one of the challenges that digital players, in particular, face is the cost of customer acquisition.

“I had a lot of my experience in the internet startup days, and I remember there was a land grab for subscribers at any cost, and there was no emphasis on profitability,” Poznanovich said. “I see a little bit of that as I talk to some of these providers about how they’re growing, and they tell me what their acquisition cost is for patients. It’s not sustainable. So I could see where some of the potential investment is lowering, or some of the consolidation is slowing because the math probably just isn’t there on the cost of acquisition.”

Some, like Boulder Care, rely mainly on word-of-mouth for client acquisition. But others that don’t have that pipeline may need help and would likely not be an M&A target, according to Bromka.

“We are at the precipice of seeing more of the organizations that were funded going out of business, and I say that over mergers and acquisitions because to acquire a company, there have to be some assets,” Bromka said. “So I think we’re at the beginning of a real reckoning and an important one.”