In the world of behavioral health, the second quarter of the year saw a slowdown in deals after a strong start to the year. According to a new report by M&A advisory firm Mertz Taggart, there were 31 behavioral health deals in Q2, down from 48 in Q1. These deals included 26 mergers and acquisitions and five growth equity transactions.
Authors of the report pointed out that Q2 had the fewest deals since the beginning of the COVID-19 pandemic, but also noted that there may be discrepancies between publicly announced deals and deals that actually closed. Kevin Taggart, managing partner at Mertz Taggart, mentioned that there is a trend of fewer deal announcements, possibly due to private equity groups wanting to keep transactions under the radar amidst public and regulatory scrutiny.
Mental health transactions continued to dominate the behavioral health dealmaking landscape, with a total of 21 deals in Q2. These deals spanned across both brick-and-mortar facilities and digital platforms. For example, Teladoc acquired the virtual mental health platform UpLift for $30 million to enhance its therapy platform, BetterHelp.
In the digital space, there were several growth deals in Q2, including Sword Health, Kindbridge Behavioral Health, and Noma Therapy. Deals in the addiction treatment space remained steady from Q1 to Q2, with nine deals each quarter. Despite potential Medicaid cuts impacting the industry in the future, investors have remained active in the sector, with notable deals such as Advantage Behavioral Health’s recapitalization and Oar Health’s $10 million funding for alcohol use disorder treatment.
While deals in the autism category decreased from 12 transactions in Q1 to 7 in Q2, the report highlighted five PE-backed deals in Q2, including Sevita’s acquisition of Shorehaven and Alongside ABA’s purchase of San Diego Applied Behavioral Analysis.
Overall, while Q2 saw a slowdown in behavioral health deals, there is still active interest and investment in the sector. It will be interesting to see how dealmaking evolves in the coming quarters as the industry continues to navigate challenges and opportunities.
