The Health Care M&A Monthly: Behavioral Health Care -

The Sector Gears Up for Growth in 2013

Dealmaking in the behavioral health care sector has picked up in recent years, thanks to a number of factors and despite a few others. Last year, we recorded 17 transactions, up slightly from 15 deals announced in 2011. Four deals have already been announced in 2013, perhaps a signal of growing interest from the private equity community and the realization of the opportunities to be had.

In fact, many acquisitions may go unannounced because there are so many small private players in this sector. “There are a lot of mom-and-pop facilities out there, whether they’re family-owned hospitals or a variety of settings,” says Jim Shaheen, president of Strategic Behavioral Health (SBH) in Memphis, Tennessee, a portfolio company of Dobbs Management Service. “We think there’s great opportunity this next year. There’s so much upside.”

Other factors that could make 2013 a break-out year in behavioral health care M&A are:

-Demand far exceeds supply, as most everyone from public companies to private equity investors agrees. That fact is fueling acquisitions as well as organic growth, as beds are added to existing hospitals and even small companies are rushing to build new facilities around the country.

-The Mental Health Parity Act of 2008 raised mental health coverage to the level of physical health coverage. Now that mental illness is part of the national conversation in 2013, more positive attention is being paid to behavioral health care programs and facilities.

-The Affordable Care Act is expected to bring many new patients into the system, along with more Medicaid funding. Some governors have made noises about the deficiencies in state-run mental health systems, but few states are ready to spend their own money. Most are looking to Medicaid expansion to help restore some of the $1.8 billion in cuts that the National Alliance on Mental Illness says were made during the recent recession........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today