November 2021 M&A activity consisted of several compelling themes:
- Consolidation in the outpatient physical therapy and rehabilitation industry. Over the past few years, the outpatient physical therapy and rehabilitation industry has been the recipient of significant private equity investment as healthcare investors see strong market tailwinds driving favorable conditions and increased demand. The industry today remains highly fragmented and dominated by local providers. However, with patients returning to outpatient physical therapy facilities in a “post-COVID-19” environment, regional businesses are looking to deploy capital and strategically expand their footprint to drive more volume. Furthermore, the demand for physical therapy continues to grow, augmented by favorable demographics and physical therapy increasingly being the first recommended line of treatment. Physical therapy promotes preventative care and wellness, helping patients avoid unnecessary procedures and tests and ultimately reducing cost of care for payers. These market trends will continue to be reflected in M&A activity through 2022.
- Continued growth in the coordination and delivery of behavioral health treatment. The U.S. Surgeon General recently published a public advisory report which stresses the importance of protecting the mental health of the youth population. The report touches on the extensive impact the COVID-19 pandemic has had on this population’s mental wellbeing and discusses how it has created issues such as social withdrawal, problems at school, and challenging behaviors at home. While the United States attempts to move towards a world without COVID-19, the rise of variants is creating a second wave of anxiety and stress, not just amongst the youth, but among the entire population. By pairing the already growing awareness of mental health issues with the worsening behavioral conditions from the pandemic, the demand for health services that combat these challenges has increased tremendously. Mental health services were not the only form of behavioral health impacted by COVID-19, as other subsectors including addiction treatment, autism therapy, and intellectual/developmental disability (IDD) treatment experienced high levels of demand coming out of the pandemic. This is, in part, because these services are best performed in-person, and that avenue of treatment has been restricted in the past 18 months. With practices gradually accepting more in-person appointments, demand is rising drastically as patients seek to make up for progress lost during the pandemic. With this trend in mind, strategic acquirers and financial sponsors alike are seeing a vast opportunity to service this unmet demand by increasing access to coordinated, quality care. By the end of Q3, there were 93 behavioral health transactions for the year, indicating that 2021 is on track to be a record-breaking year for behavioral health M&A.
Several transactions in November aligned with these themes:
- Spine & Sport Physical Therapy, a leading provider of physical therapy across 36 locations in California, acquired Advanced Physical Therapy & Sports Medicine. This transaction adds a location to the Ventura, CA market, expanding Spine & Sports footprint to four in the area.
- Golden Bear Therapy Partners, an extensive network of physical therapy brands, acquired leading physical therapy group Pair and Marotta. Golden Bear will act as a therapy partner for the Bakersfield, CA-based clinics, working toward brand growth and supporting them in providing the best out-patient rehabilitation and sports training for the community.
- Concentra, the nation’s leader in occupational medicine, announced the acquisition of Nevada Occupational Health & Injury Care Center. Concentra has long been known as the premier provider of occupational health services through an extensive network of nearly 520 locations nationwide, and this acquisition will enable them to provide Nevada employers with additional access to care such as work injury care and physical therapy.
- CareSource, a nationally recognized nonprofit managed care organization, acquired The Columbus Organization, a leading provider of services for individuals with intellectual/development disabilities (IDD) and behavioral health challenges. Columbus has three business lines: Care Coordination, Professional Clinical Staffing, and Quality Improvement Services and serves over 100,000 individuals across 13 states. TripleTree acted as the financial advisor to The Columbus Organization for this transaction.
- CloudMD Software & Services and MindBeacon Holdings jointly announced they have entered into a definitive agreement under which CloudMD will acquire all MindBeacon’s issued and outstanding common shares valued at approximately $116M. MindBeacon is a leading digital mental healthcare platform that focuses on effective therapy provided through computer or mobile device.
- Frazier Healthcare Partners, a Seattle-based healthcare private equity firm, completed a growth investment in Effective School Solutions (“ESS”), a leading provider of school-based mental health solutions that help school districts improve the mental health of K-12 students. TripleTree acted as the financial advisor to ESS for this transaction.
- In response to the continued public health crisis of opioid addiction in the United States, Behavioral Health Group (BHG), announced they are expanding their footprint in Virginia with the acquisition of Staunton Treatment Center. BHG is the largest network of Joint Commission-accredited outpatient opioid treatment and recovery centers in the U.S., and this acquisition brings the number of BHG locations in Virginia to eight.
TripleTree continuously monitors the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and, as always, let us know what you think!