After a slump in the first quarter of 2019, the Behavioral Health Care sector rebounded in the second quarter. Twenty-three deals were announced in the second quarter of 2019, a 64% increase over the 14 deals in the first quarter, and a slight 10% increase compared with the same quarter last year. And much like the previous quarter and Q2:18, none of the deals disclosed financial terms.
However, if prices had been disclosed, the largest would likely have been Anthem Inc.’s (NYSE: ANTM) acquisition of Beacon Health Options from Bain Capital Private Equity and Diamond Castle Holdings. Beacon offers clinical mental health and substance use disorder management, a comprehensive employee assistance program, work/life support, specialty programs for autism and depression, and analytics to more than 36 million individuals nationwide. The combination will create one of the most comprehensive behavioral health networks nationwide.
Private equity firms and their portfolio companies dominated as buyers in the behavioral health care sector this quarter, accounting for 65% of the announced transactions. Eleven companies announced 15 deals, meaning that there was plenty of consolidation and platform add-ons this sector. A new player in the sector, Kadiant, announced four deals alone. The company launched in February 2019 from a partnership between TPG Capital and Vida Ventures. Kadiant’s acquisitions are meant to build a platform focusing on Applied Behavior Analysis therapy and related critical services to individuals diagnosed with an autism spectrum disorder. Three of the target companies were located in California and one was in Georgia.
Blue Sprig Pediatrics, launched by KKR in January 2018, announced two deals as well. It is the largest autism services provider in Texas and has locations in Ohio, Oklahoma, Oregon, South Carolina, and Washington state. Blue Sprig purchased the West Texas Autism Center in Abilene and San Angelo and Verbal Behavior Consulting in Lexington, Kentucky. Ridgemont Equity Partners and Webster Capital also reported two deals each this quarter in the sector, rather directly or through a portfolio company.
The PE firms and their portfolio companies primarily focused on substance abuse disorders, with 11 transactions focused on companies in that specialty. Nine targets worked with autistic or developmentally challenged children and adults. One operated an inpatient psychiatric hospital and one worked with at-risk youth.
More information on the Behavioral Health Care sector and other healthcare M&A activity can be found in our recently published The Health Care M&A Report, 2nd Quarter 2019, a supplement to HealthCareMandA.com.