Deal activity in the Behavioral Health Care sector plummeted in Q2:17, down 50% compared with the previous quarter, and down 53% compared with the same quarter a year earlier. The quarter’s total of eight deals represents 21% of the 39 transactions announced in the past 12 months. In fact, those two quarters—Q1:17 and Q2:16—had the highest number of deals in the preceding 12 months, so the news is not quite as dire as it appears. The second quarter’s deal volume is equal to that of Q4:16 and Q3:16.
The passage of the 21st Century Cures Act in December 2016 brought additional focus and spending on substance abuse programs, particularly for opioid addiction, and mental health issues. However, the Republicans’ repeal-and-replace legislation features drastic cuts in Medicaid spending across the board, and the uncertainty attendant with the bill’s on-again, off-again progress through the Senate in recent months has many private equity investors in the this sector keeping their powder dry.
Source: HealthCareMandA.com, July 2017
Only one deal announced in the second quarter disclosed a price. The total of $380 million accounted for 27% of the $1.4 billion spent in the previous 12 months, and represents an increase of 154% over the previous quarter’s nearly $150 million. Compared with the same quarter in 2016, Q2:17’s spending is 26% greater than the $302.4 million logged then.
Dollars Spent on Behavioral Health Care Mergers & Acquisitions, by Quarter
| Q2:16 | Q3:16 | Q4:16 | Q1:17 | Q2:17 |
| $302,428,000 | $0 | $874,000,000 | $149,595,000 | $380,000,000 |
The single deal to disclose a price was announced by Care Capital Properties, a healthcare REIT that was spun out from Ventas in 2015. The company agreed to pay $380 million for the real estate assets of six behavioral health care hospitals owned by Signature Healthcare Services, LLC, which is doing business as Aurora Behavioral Health. The properties are located in Arizona, California and Illinois. Each has been expanded or are being expanded to increase bed capacity. Signature still owns eight acute care psychiatric hospitals.
