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Increased Mental Health Services Drives Behavioral Health M&A Needs


Deals double as healthcare organizations expand reach.

In 2020, more than a fifth of American adults—that’s 52.9 million people—had a mental health issue (ranging from mild anxiety and/or depression to schizophrenia to life-threatening addiction), according to the National Institute of Mental Health. Fewer than half of those people received mental health services. And among 18-25-year-olds with mental health issues, even fewer—just 42%—received help.

More than two years into the COVID-19 pandemic, the mental health picture in the United States has only darkened. Fentanyl and methamphetamine overdose deaths spiked by 30% in 2020, according to the National Institute on Drug Abuse. That figure rose by another 15% in 2021, for a total of more than 250,000 deaths since the start of the pandemic.

These grim statistics show that the need for mental health and addiction services has surged. The National Council for Mental Wellbeing reports that more than 65% of behavioral healthcare organizations have had to cancel, reschedule or turn away patients since 2020 due to increased demand.

Private equity firms have taken notice of this growing need and are investing substantially in the field. "There’s a large population that needs to be served and an under-provision of the services that the population needs," said Steve Aguiar, Managing Director, Healthcare Investment Banking for Fifth Third Securities. "Any demand-supply imbalance creates opportunity."

Increased Behavioral Health Mergers and Acquisitions

The opportunities have translated into a record number of M&A deals in the space. In fact, more behavioral healthcare M&A deals were accomplished in 2020, the last year for which statistics are available, than ever before, according to data service firm PitchBook. The $1.25 billion value of those deals was more than double the amount reported in 2019.

"Multiple constituencies benefit," Aguiar said of the deals. Healthcare organizations can expand their reach, he says, and thus help more people. "When you get institutional capital on board, your capabilities—everything from recruiting, onboarding, billing, on-site testing, outreach and more—can significantly expand." Clinicians can focus on helping people rather than managing and growing their business. And the buyers are seeing strong returns on their investments.

In one prominent example, Summit BHC, a behavioral health and addiction treatment provider based in Tennessee, was acquired by Patient Square Capital in September 2021. "The pandemic has illustrated in many dimensions how important it is to expand access to behavioral health treatment, and we are proud that Summit is leading the way," said Mark Gormley, a partner at Lee Equity Partners, one of the two PE companies that had held the majority stake in Summit. Summit BHC has since acquired seven psychiatric hospitals in six states from Strategic Behavioral Health.

"Private equity has been able to help behavioral healthcare organizations adapt more quickly to the current demands for telehealth and app-based services," Aguiar said.

What's Next for Behavioral Health M&A?

Is the M&A trend coming to an end now that COVID-19 is approaching endemic classification? It hasn’t so far, according to Aguiar. A study published in the American Psychological Association’s medical journal, American Psychologist, found that people around the world experienced an increase in loneliness during the COVID-19 pandemic, which could have long-term implications for mental and physical health—as well as drug addiction. So the essential need for behavioral health services will most likely grow for years to come.

Even the recent steep increase in interest rates by the Federal Reserve probably will not halt activity in the sector by PE firms, said Aguiar, adding that he doesn’t believe sellers should let macroeconomic conditions dictate when to sell their companies. "Unfortunately, we’re not seeing the need for mental health and addiction treatment slowing down anytime soon," he said, "which is why M&A deals are still appealing for both buyers, sellers and, most importantly, the patients who get increased access to quality care."

Interested in finding out more about M&A in this sector? Learn more about Fifth Third's investment banking expertise, or contact

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