There’s no question that there is a massive demand for autism services. But it would be a mistake for investors to equate demand with easy profits.

Over the last decade, private equity firms have flocked to invest in applied behavior analysis (ABA) services and other autism-related providers. While some high-profile stumbles have raised questions about the role of private equity in autism services, there is likely still an opportunity for investors to achieve success in the space. Savvy investors must take the time to understand the industry. Additionally, providers looking for an exit should also research and network with private equity firms before selling.

“There is generally a surplus of demand. In a lot of communities, there are long wait lists, and there are people that are looking for access to care,” John Hennegan, founding partner of Shore Capital Partners, said at the Autism Investor Summit. “Again, some investors will mistake that surplus of demand for easy profits. That is not at all the case. I think what people have begun to appreciate, from the investor standpoint, is the scarce resource and the thing that you really have to protect is the BCBAs.”

Shore Capital Partners is a private equity firm. Its portfolio includes autism services companies Behavioral Innovations, Florida Autism Center and The Stepping Stones Group.

And PE investors are evolving over time. Many are beginning to invest in education about the field of autism services.

“There is a real movement that I see from private equity now to really understand the field,” Chryssy Moor, founder of the Florida Autism Center, said at AIS. “I think that the people who want to be in this field aren’t just going, ‘Oh, this seems like a hot investment. Let’s do it.’ They’re really getting to know the field now.”

The Florida Autism Center was founded in 2005 and provides autism services. Shore Capital acquired the provider in 2015 and sold it to national autism provider BlueSprig in 2020.

This additional knowledge has also come to the negotiating table. Investors are now raising the bar on the due diligence process for autism service companies.

“‘I’ve seen a big shift in due diligence. Ten years ago, PE was not doing any clinical diligence,” Ronit Molko, CEO of Alongside, said at AIS. “And when it started to shift, I would literally get a phone call on a Friday saying, ‘We’re closing on Monday. Can you just check the box on the quality of the programs?’ That’s the first thing you should be looking at. Now we’re seeing a lot more focus on clinical diligence and compliance diligence where it didn’t exist.”

Alongside offers autism services in homes, schools and clinics. It is backed by PE firms Fletch Equity and NewSpring Capital.

Part of the reason for a more rigorous due diligence process is more experienced investors. This could even help deal flow in the future. The maturation of the ecosystem gives investors more confidence to be more aggressive in investments in the future, Hennegan said.

Provider education 

As autism service deals become more commonplace, founders must educate themselves on the dealmaking process and working with PE.

“If you’re interested in partnering with private equity, talk to as many groups as possible. There’s so many different flavors,” Hennegan said. “There’s so many different styles, and if they use jargon that you don’t understand, stop and ask what that means. Don’t ever be embarrassed to ask a question. It is your business. It is your baby. You’ve incubated it, you’ve raised it, you’ve built something really spectacular. Those private equity people wouldn’t be chasing you in the first place.” John

Beyond just building a relationship with the buyer, it’s also important for potential sellers to know what they are getting into once the deal is finalized.

“I would say something that I think is really missing in our industry,” Molko said, “[is] sellers need counsel to go through a process, and it’s not just legal and professional counsel, it’s kind of emotional counsel because you’re letting go of your of your business, and now being on the on the other on the buying side, I see how difficult it is for sellers to transition out of control of their business, to lack of control, especially if they roll over equity, and we just don’t have the right support for that transition to help, I think it could be a lot smoother and a lot less traumatic.”