As healthcare M&A deal volume drops, particularly in the services sectors, behavioral health targets are still in hot demand, especially for private equity firms. Roughly 18% of deals announced by a PE buyer in the second quarter have targeted companies in the Behavioral Health Care sector, the highest concentration for any of the healthcare sectors. That statistic certainly correlates with the spike in demand for mental health services triggered by the anxiety surrounding COVID-19, as outlined in this article from The Chartis Group, an advisory and analytics services firm focused on the healthcare industry.

Additionally, in early March, the U.S Centers for Medicare & Medicaid Services waived certain Medicare telehealth payment requirements to enable telehealth services to be provided in all settings, including a patient’s home. The Health & Human Services’ Office for Civil Rights also announced it would waive penalties for HIPAA violations against healthcare providers that serve patients through widely available communication apps. So instead of providers having to pay for a dedicated and approved telehealth platform, they can use free options such as Skype or Facetime, cutting even more costs.

The regulatory changes and demand have kept the deals flowing from private equity. The sector’s largest deal of the quarter (so far) was TPG Capital‘s purchase of LifeStance Health, Inc. in April. According to PE Hub, the deal was valued at roughly $1.2 billion for a majority stake in the company. LifeStance Health provides outpatient behavioral health services, delivered in-person, and through telemedicine. It was founded in 2017 and backed by Summit Partners and Silversmith Capital Partners.

In mid-May, AppleGate Recovery, a BayMark Health Services company that specializes in outpatient medication-assisted treatment, added Medication Assisted Recovery Centers to its network, an office-based opioid treatment (OBOT) program with two locations in Metairie and Slidell, Louisiana. With this acquisition, AppleGate now operates eight clinics serving the residents of Louisiana. AppleGate will add telehealth services to all patients in all its locations, including Metairie and Slidell. BayMark Health Services is a portfolio company of the private equity firm Webster Capital, and as we’ve reported before, that partnership has resulted in a marathon of deals.

Bain Capital Double Impact Fund, L.P. also announced a deal in May, acquiring Broadstep Behavioral Health for an undisclosed sum. Broadstep Behavioral Health, fka Phoenix Care Systems, provides programs and services to individuals with intellectual, developmental, or behavioral disabilities. Bain Capital’s significant growth investment will help Broadstep expand its services into new markets.