The substance use disorder (SUD) specialty is often the most active submarket in the Behavioral Health Care (BHC) sector, and the first half of 2024 was no exception. According to data captured in the LevinPro HC database, 10 SUD deals were announced during the first six months of 2024, making up about 28% of all BHC deals announced during that time.
1H 2024 activity mirrored the activity witnessed in the first half of 2023, when SUD deals comprised 27% of all BHC deals announced. This consistency reflects sustained investor interest in the SUD treatment space. However, a comparison to the first half of 2022 (36% of BHC deals) and 2021 (34% of BHC deals), when SUD deal totals hit 21 transactions both years, hints at a potential slowdown from the post-COVID-19 surge.
Only one SUD transaction had a disclosed purchase price during the first half of 2024. That was the acquisition of Lakeview Health, a single-tenant drug and alcohol rehabilitation center in Jacksonville, Florida. The rehab center was picked up by an undisclosed buyer for $23.63 million in April. Lakeview Health was previously acquired by Trinity Hunt Partners, a Dallas, Texas-based middle-market private equity firm, in January 2014. Then, just two years later, in December 2016, the center was picked up by The Riverside Company, a global private equity firm based in New York, New York. Marcus & Millichap helped secure the financing for the most recent transaction.
There were two private equity-backed transactions announced during the first six months of 2024. This is a significant decline from the prior year, when seven deals (63% of all SUD transactions) were carried out by private equity firms and/or their portfolio companies.
Stamford, Connecticut-based private equity firm Avesi Partners announced the acquisition of First Steps Recovery (FSR), a behavioral health center serving adults in Clovis, California, in April 2024. The company announced one transaction in 2023: the acquisition of Petaluma, California-based Muir Wood, a provider of therapy services to adolescents between 12 and 17 years old who are experiencing mental health and/or substance use disorders.
“Patients and payors continue to express strong demand for quality addiction treatment services focused on meeting patients where they are to drive outcomes and long-term recovery,” said Pete Tedesco, Managing Director at Avesi. “We see a compelling opportunity to help FSR leverage its track record of success to extend services into additional geographies, care settings and programs.”
The other private equity-backed acquirer that made moves in the SUD industry was Patient Square Capital-backed Summit BHC, which acquired Sobriety Centers of New Hampshire. This transaction marked Summit BHC’s second deal since it was acquired by Menlo Park, California-based Patient Square Capital in September 2021, as well as Summit BHC’s entry into the New England market. Summit BHC previously acquired seven psychiatric hospitals in Iowa, Tennessee and Texas from Memphis, Tennessee-based Strategic Behavioral Health in January 2022.
A decline in private equity activity could signal a cooling off period for the SUD treatment market. However, while private equity firms may be taking a wait-and-see approach, other investor groups, such as established SUD treatment providers or healthcare systems, are looking for accretive acquisitions to expand their market reach or service offerings. That seems to be the case for most of the transactions announced during 1H 2024 (eight of the ten deals).
Acadia Healthcare was one such company, with two major deal-related announcements made during the first half of 2024. Acadia announced in February the completion of its acquisition of Sandy, Utah-based Turning Point Centers, a 76-bed specialty provider of SUD and primary mental health treatment services through its eight locations in Utah.
Acadia followed that up a month later, in March, with news of its acquisition of three North Carolina-based comprehensive treatment centers (CTCs) from Sellati & Co. This acquisition was part of Acadia’s strategy to expand its presence in North Carolina, a state with an “immense need and progressive approach to behavioral healthcare treatment programs,” according to Acadia CEO Chris Hunter. Acadia now operates 10 CTCs in the state and 160 locations in 32 states overall.
While private equity activity dipped in 1H 2024, the SUD treatment market remains active and stable. Established SUD providers like Acadia Healthcare are capitalizing on this shift, suggesting consolidation may continue, but with different (non-private equity) players at the helm.
Explore all 10 of the 1H 2024 transactions announced in the SUD specialty on the LevinPro HC platform:
- Pathways Recovery Centers acquires Serenity Park Recovery Center
- Tulip Hill Recovery merges with Louisville Addiction Center & Lexington Addiction Center
- Lakeview Health acquired by undisclosed acquirer
- Avesi Partners acquires First Steps Recovery
- T&R Recovery Group acquires Origins Behavioral Healthcare’s facilities in Texas
- QuickMD acquires Project Recovery
- Acadia Healthcare Company acquires 3 comprehensive treatment centers in North Carolina
