Mergers and acquisitions (M&A) in the substance use disorder (SUD) treatment space have been relatively slow in recent years. However, with a new “business-friendly” presidential administration taking office and interest rates softening, industry insiders are speculating that 2025 could be the year for increased M&A activity, particularly in the digital health sector.
Rose Bromka, COO of Boulder Care, a virtual outpatient opioid use disorder (OUD) and alcohol use disorder (AUD) provider based in Portland, Oregon, expressed optimism about the potential for more dealmaking in the coming years. The assumption is that the new administration will lower barriers to M&A activity, leading to increased industry consolidation. Boulder Care recently closed a $35 million Series C funding round, highlighting the potential for growth in the SUD care market.
Several macro-environmental factors, such as lower interest rates making capital more affordable, could contribute to a ripe environment for dealmaking in the SUD care industry. Additionally, smaller SUD providers are looking to exit and merge with larger companies or sell their assets entirely, as noted by Rob Marsh, CEO of Bradford Health, during a recent webinar.
Despite the potential for increased dealmaking, challenges may arise in 2025. Marsh highlighted concerns about potential changes to the Affordable Care Act, which could impact access to services for clients and hinder industry growth. Providers will need to closely monitor how the new administration responds to campaign promises related to healthcare.
While traditional addiction treatment providers may see an uptick in M&A activity, some industry experts believe that digital deals will take center stage in 2025. Bob Poznanovich, chief business growth officer at Hazelden Betty Ford Foundation, pointed to the potential for mergers and acquisitions between companies offering virtual, digital health solutions for substance use and behavioral health. This trend could help providers expand their service offerings and reduce acquisition costs for clients.
One example of this service expansion is the acquisition of virtual SUD provider Lion Rock by digital behavioral health startup Brightside. This deal allowed Brightside to enter the addiction treatment space and offer virtual addiction intensive outpatient programs (IOPs). However, Poznanovich noted that digital players face challenges related to the high cost of customer acquisition, which may impact the sustainability of growth and consolidation in the industry.
While some providers, like Boulder Care, rely on word-of-mouth for client acquisition, others may struggle to attract clients without a strong pipeline. Bromka warned that organizations without valuable assets may face challenges and could potentially go out of business rather than be attractive M&A targets. The industry is at a critical juncture, and the coming years will be pivotal in determining the future landscape of SUD treatment.
