The Behavioral Health Care sector has gained a lot of attention from private investors in recent years, thanks to the opioid addiction epidemic, in general, and to legislation such as the Mental Health Parity and Addiction Equity Act, in particular. Here is how deal volume looked in the third quarter of 2017, and the preceding four quarters.

Deal activity rose in Q3:17, up 63% compared with the previous quarter, and up 86% compared with the same quarter a year earlier. The quarter’s total of 13 deals represents 29% of the 45 transactions announced in the past 12 months.

The first quarter of 2017 benefitted from the passage of the 21st Century Cures Act in December 2016, which brought additional focus and spending on substance abuse programs, particularly for opioid addiction, and mental health issues. However, the ensuing repeal-and-replace legislative efforts that began in February and dragged into late September dampened deal activity in this sector. All three Republican bills featured drastic cuts in Medicaid spending, set to kick in in 2020.

Inevitably, investors waiting for the dust to settle decided to move back into this market, particularly into substance abuse treatment programs and services. The opioid epidemic has become too real to ignore, even for Congress, and those programs will be funded. Six of the 13 transactions in Q3:17 targeted substance abuse-only companies. One agency dealt with the co-morbidity of mental health and substance abuse, and two targets focused on eating disorders.