Behavioral Healthcare Services - Coverage Report February 2021

Published on: 02/19/2021

Capstone Headwaters has released its Behavioral Healthcare Services Coverage Report, now available for download below.

Merger and acquisition (M&A) activity moderately increased in 2020, with 111 transactions compared to 103 in 2019.  Notably, while other industries experienced a steep pandemic-driven drop-off in deal activity during Q2, the Behavioral Healthcare Services industry remained relatively stable. The industry is expected to see strong growth in 2021, as COVID-19 has proved not only a physical health crisis, but a mental health crisis as well due to prolonged lockdowns, job losses, and social isolation.  In addition to adults, youth and children have faced unique health challenges. Stay-in-place orders and remote learning environments have caused increased anxiety and depression.  The importance of focusing on the behavioral health needs of adolescents is further discussed in our interview with Dave Bornhoeft, Partner at Cognitive Capital Partners.

Additional report takeaways include:

  • M&A activity in Q4 2020 increased 32% compared to Q4 2019 and has remained strong into Q1 2021. The industry is abundant in acquisition opportunities and continues to heavily consolidate as small regional companies utilize M&A to stimulate inorganic growth.
  • Attracted to the highly fragmented and growing sector, private equity (PE) firms making add-on acquisitions accounted for 40.5% of Behavioral Healthcare Services M&A activity in 2020 while platform acquisitions accounted for 9.9%. 
  • Capstone’s 2020 conversations with our caucus of PE firms have demonstrated strong interest in the space.  Across all industries and subsectors, the Behavioral Healthcare Services industry was the fourth most preferred investment opportunity identified by PE groups.
  • Amid COVID-19, President Biden outlined plans to expand access to behavioral healthcare services in his $1.9 trillion-dollar American Rescue Plan package, calling on Congress to appropriate a $4 billion to support SAMHSA (Substance Abuse and Mental Health Services) and HRSA (Health Resources and Services Administration).
  • Telehealth visits have become more widely adopted during the socially distant and remote period of the pandemic, in part due to the many temporary regulatory changes to telehealth services under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

Contact our industry expert Mark Surowiak to learn more about the report or Capstone’s suite of advisory services.

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