Private Equity Investors Are Still Laser-Focused on Behavioral Health Care

Behavioral health continues to get significant attention from private equity investors, according to a new survey report.

Over 90% of executives recently surveyed by Berkeley Research Group (BRG) said behavioral health is either a continuing focus or a “growing/likely” focus for the private equity sector where health care is considered in 2025. Behavioral health also remains a highly considered investment thesis and No. 2 investment priority for the coming year.

The report surveyed 127 U.S.-based health care investment professionals that work at 88 private equity funds.

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Competition for quality assets is predicted to be fierce in behavioral health and other high-demand sectors. Other segments of health care that are top of mind for private equity investors include infusion pharmacy, in-home care and outsourced pharmaceutical services. The sector is also expected to be more challenging for platform companies to operate in.

“There’s now more competition for all assets,” one respondent said in the report. “It’s more challenging to support valuation and growth.”

Labor remains the top challenge. It has for the past three years, the report states, although the number of professionals saying it was their No. 1 concern dipped slightly. Other top concerns include Federal Trade Commission activity and scrutiny on billing compliance.

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“Concerns about the election results were a modest priority for diligence in 2024 but expected to increase at least in the initial six months of the new administration,” the report states.

The report shows professionals predict a shift in the types of deals that health care private equity firms will make toward more new platform investments.

The No. 1 most-cited investment thesis going into 2025 was home-based solutions for seniors, specifically dementia care and aging-in-place services. This includes a diversified focus on various types of care, e.g., skilled care, unskilled care, palliative services and technology services.

The No. 2 most-cited thesis was “continued focus on behavioral health programming up and down continuum.” There is specific interest in accessing a huge outpouring of federal grant and opioid crisis settlement dollars that have flowed into state and local governments. Another key consideration is “finding [businesses] (particularly in Medicaid expansion states) that have found a place in one market and then scaling this via [telehealth] and/or payer foundation or state grants.”

The report also captured a more optimistic view of getting deals done in the year to come. Professionals in the deal space have previously told Behavioral Health Business that dealmaking processes in recent years have been much more thorough and time consuming.

“2024 was a difficult year often punctuated by buyers and sellers too far apart on the right value for a company,” the report states. “But more data points are emerging for most healthcare subsectors that should help accelerate deal processes with companies launching at more realistic levels.”

Seventy-three percent of respondents said they are focused on making deals in three spaces, with the top two segments in a virtual tie for respondents’ No. 1 investment priority — staffing businesses that focus on serving home health companies (27%), behavioral health (27%) and infusion pharmacy services (20%).

Very few respondents (6%) said that physician practice management (PPM) organizations were a top priority for investment. More than half say that this is a segment of health care private equity investment that is cooling or “not a focus.”

However, within PPM investment, psychiatric services remain the No. 1 specialty of interest. It has been No. 1 since 2021, with over 80% of respondents saying it was a priority.

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