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Report: M&A Activity Slows in Q4, but Interest in Autism Remains Strong

January 21, 2020

Merger and acquisition activity for the behavioral healthcare sector in the fourth quarter of 2019 was down compared to both the previous quarter, as well as the same period in 2018, according to a report published this week by Healthcare M&A Report.

For the final quarter of 2019, 15 behavioral health transactions were publicly announced, compared to 19 transactions the previous quarter and 28 deals in the fourth quarter of 2018.

Investor interest in in substance use disorder treatment programs and inpatient psychiatric facilities has waned, but autism-related service providers remain a hot commodity, Healthcare M&A Report said in a news release announcing its findings.

Roger Strode, partner at Foley & Lardner LLP and a member of the firm’s Health Care Industry Team, which provides guidance and regulatory counsel on issues raised in M&A transactions, tells BHE that a lack of staffing and depth in the managerial ranks make the autism sector “an industry ripe for the picking and very attractive to private equity firms.”

Chris Donovan, co-chair of Foley & Lardner’s Health Care Industry Team, says he expects that a significant portion of investment money raised will be used to implement “outcome-producing investments.”

“If you look at it as a three-inning game, with inning one being the acquisition of a platform and inning two being rollups and expansion, I think inning three is going to be more improving on the quality and results of the treatment that a PE platform company can demonstrate,” Donovan says. “In order to demonstrate that, they’re going to have to have the kind of systems that large insurers and provider systems have in place that show they produce a better outcome, greater functionality, better matriculation into the workforce, better normalization of emotional habits and patterns utilizing their therapy compared to other alternatives.”

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