Behavioral Health Private Equity - Physician Growth Partners

Behavioral Health Private Equity – Market Update

Fall 2023


Traditionally, PE investment in healthcare services has focused on consolidating medical specialties such as dentistry, dermatology, and eye care, with returns driven primarily by multiple arbitrage, the development of ancillary service lines, and operational improvements.

Behavioral health on the other hand, is a newer darling to private equity investors, offering opportunities to finance de novo expansion and scale geographically through the acquisition of more practitioners, as well as virtually with the advent and proliferation of telehealth services, accelerated by the Covid-19 pandemic.

Within the space, the range of services offered is exceptionally wide, including brain injury, at risk youth, intellectual and development disabilities (IDD), outpatient mental health care, substance use disorders (SUD), autism services, individual counseling, etc. Given this diversity, the level of consolidation in the behavioral health sector varies depending on the subsector being examined, ranging from highly consolidated to in its infancy.

Investment Drivers:

  • Rising Autism Rates: Rates of autism diagnosis among US children have increase steadily from about 1 in 150 in 2000 to about 1 in 26 in 2020.1
  • Mental health and SUD rates: The medical field has moved toward a more holistic approach to patient care including treatment of behavioral comorbidities alongside physical ailments. The COVID-19 pandemic exacerbated challenges people had coping with lockdowns, economic instability, social isolation, etc. resulting in elevated rates of depression, anxiety, and SUD, including among children and young adults.
  • Medicare Expansion: Beginning in 2024, CMS will greatly expand the range of providers who are eligible to enroll in and bill services to Medicare, as well as expand coverage to intensive outpatient (IOP) services. This will drive a material increase in behavioral healthcare access nationwide.

In the U.S., the behavioral health market remains highly fragmented and is just beginning to experience the early stages of consolidation through private equity partnerships.

However, the macroeconomic headwinds impacting overall M&A activity in 2023, have had a significant impact on behavioral health investment. In general, deal activity and transaction multiples have decreased from their record highs in 2021 and 2022. Additionally, investors have become wary of regulatory risk surrounding telehealth services following the expiration of the COVID-19 Public Health Emergency.

Although deal activity has seen a dip, investor interest in behavioral health remains strong, particularly in SUD and mental health – it is likely that deal activity will see a material reinvigoration in 2024.

There are many benefits to partnering with a private equity firm or a PE-backed platform, and it is crucial to work with an advisor that has experience representing diverse behavioral health practices in these partnerships to ensure clinical autonomy is maintained, a local governance structure is formed, and the economics make sense.

1:“Data & Statistics on Autism Spectrum Disorder,” Centers for Disease Control and Prevention, April 4, 2023

Interested in how private equity can help your Behavioral Health practice?

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Recent Behavioral Health Transactions

Date TargetPE SponsorPlatformState
August 2023Dayspring Behavioral HealthThurston GroupARC HealthWA
August 2023Dallas Counseling and Treatment Center ManagementHavencrest Capital ManagementDeep Eddy Psychotherapy ManagementTX
August 2023Specialized Youth Services of VirginiaPalladium Equity PartnersHealth Connect AmericaVA
July 2023Turning Point CentersPublicAcadia Healthcare CompanyUT
June 2023Your Behavioral HealthComvest PartnersYour Behavioral HealthCA
June 2023First Stop HealthSverica Capital ManagementFirst Stop HealthIL
June 2023Banyan Treatment CentersTPGThe Rise FundFL
May 2023Silver Lake Psychology*Thurston GroupARC HealthCA
May 2023Denver Wellness AssociatesThurston GroupThurston GroupCO
May 2023Texas Recovery CenterN/ARegard RecoveryTX
May 2023Swift RiverN/ARegard RecoveryMA
May 2023The BluffsN/ARegard RecoveryOH
May 2023Quince Orchard PsychotherapyGraham Family OfficeQuince Orchard PsychotherapyMD
May 2023Positive Change Counseling CenterThurston GroupARC HealthCA
*Advised by Physician Growth Partners

About Our Firm

Physician Growth Partners (PGP) Physician Growth Partners (PGP) is an advisory firm working exclusively with independent physician groups in transactions with private equity.

PGP has completed 15+ transactions in the last 12 months. Our firm is differentiated by:

  • Senior partner involvement at every stage of the process
  • Extensive physician practice transaction experience
  • Unmatched relationships with all key private equity and strategic buyers interested in Behavioral Health
  • Educational approach focused on partnership and cultural fit + achieving a market-clearing valuation

Relevant Physician Practice Transaction Expertise

Learn More About Behavioral Health Private Equity