Fears of a sluggish year in the behavioral health mergers and acquisitions (M&A) market in 2023 may have been overstated. While deal sizes have generally shrunk compared to the peak years of activity, transactions continue at a healthy pace—especially in the lower middle market and among strategic buyers still hungry for growth. According to experts at Behavioral Health Business’ 2023 INVEST conference, Behavioral Health M&A Trends 2023 reveal a more nuanced picture than initially expected.
One major theme driving Behavioral Health M&A Trends 2023 is the availability of capital—or lack thereof. Kevin Taggart, managing partner at Mertz Taggart, noted that rising interest rates have weighed heavily on deal volume, particularly in the substance use disorder (SUD) treatment space. “A lot of these strategic buyers borrow a lot of money to buy these companies,” Taggart said. “Their interest payments have gone up quite a bit over the last couple of years. That’s affecting some deal volume.”
Even so, deals are still getting done—some at surprisingly strong multiples. Taggart cited a recent transaction his firm closed at a “very high multiple, given the market,” illustrating that well-positioned behavioral health companies remain attractive targets for investment. This underscores an important aspect of Behavioral Health M&A Trends 2023: high-quality assets with strong payer mix, diversified referrals, and robust leadership teams can still command premium valuations.
Positive Outlook from McDonald Hopkins
Christal Contini, chair of mergers and acquisitions at McDonald Hopkins LLC, echoed that sentiment. Despite early-year concerns, the firm has remained busy throughout 2023. “In the lower middle market, we continued to do deals and continue to be busy,” she said. “[2023] was better than I expected.” Her perspective adds another layer to understanding Behavioral Health M&A Trends 2023—not only are deals happening, but many are being driven by strategic fits and long-term potential rather than just short-term financials.
A Shift to Organic Growth
A different M&A approach is emerging among de novo-focused providers like Community Medical Services (CMS), which operates more than 40 clinics across nine states. CEO Nick Stavros said that although M&A has been affected by capital constraints, CMS is doubling down on organic growth. “Our goal is actually to open 30 new de novos in the next 18 months,” Stavros shared. That’s an ambitious plan, especially given the many regulatory hurdles in the opioid treatment program (OTP) space. Still, it reflects another component of Behavioral Health M&A Trends 2023: some providers are bypassing M&A altogether in favor of organic expansion, especially when aligned with new private equity partners who share their values.
Private Equity and Add-On Deals
Indeed, the private equity landscape remains a major influence. Behavioral Health M&A Trends 2023 show a tilt toward add-on acquisitions rather than platform deals. Add-ons allow private equity firms to grow existing portfolio companies without the higher risk and cost associated with launching a new platform. According to Contini, this trend has impacted seller strategies. Platform sellers typically have more negotiating power—including equity rollovers and termination rights—while add-on sellers may have to settle for less favorable terms.
Taggart emphasized the importance of cultural alignment between buyers and sellers. “Especially if you’re gonna roll equity, you’re going to have to live with them. It’s almost like a marriage,” he said. To ensure a successful post-sale partnership, Contini advised sellers to speak with providers who’ve previously sold to the same investors. “It is amazing how honest providers are in terms of talking to their peers,” she said, noting that peer feedback often gives clearer insight than conversations with the investors themselves.
Deal Multiples and Market Dynamics
Another highlight of Behavioral Health M&A Trends 2023 is the continued variability in deal multiples. While outpatient mental health practices with strong EBITDA still command double-digit multiples, Taggart expects those figures to drop slightly before year’s end. Multiples continue to depend heavily on payer sources, clinical outcomes, geographic footprint, and strength of leadership—factors that are increasingly scrutinized as the market matures.
Conclusion: Behavioral Health M&A Trends 2023 and the Path Forward
Ultimately, Behavioral Health M&A Trends 2023 reflect a shift from the hyper-growth period of years past toward a more measured, quality-over-quantity environment. Deals are still happening—many are aggressive, strategic, and tightly aligned with long-term visions—but access to capital, interest rates, and market caution are reshaping how those deals get done.
For providers, investors, and advisors alike, the Behavioral Health M&A Trends 2023 underscore the importance of staying nimble, understanding buyer motivations, and preparing for evolving market dynamics. Whether pursuing a platform deal, becoming an add-on, or going the de novo route, success in 2023 has come to those who remained proactive, strategic, and mission-focused.
