In 2020, the autism treatment market stood on the edge of a major transformation. While representing one of the smallest sub-sectors in behavioral health at an estimated $7 billion, autism services commanded some of the highest valuations in the industry. With private equity (PE) firms poised to accelerate investments, providers were preparing for a potentially lucrative year. However, while the opportunities are promising, they come with caveats that only well-positioned providers will be able to navigate successfully.
A Hot Market: Skyrocketing Valuations in Autism Care
Autism services have seen valuations soar well beyond standard expectations. According to Dan Davidson, managing director at Coker Capital Advisors, multiples in the autism space can reach upward of 20 times EBITDA. Even smaller providers with just $1 million in earnings are receiving offers over 10 times their EBITDA, sometimes significantly more.
“That truly is an out-of-control marketplace,” Davidson commented during a Polsinelli webinar, reflecting on the frenzy of investor interest.
These sky-high valuations make autism care a tantalizing prospect for PE firms looking for fast growth and high returns. Yet, not all autism service providers are created equal in the eyes of investors. Certain operational and structural factors can greatly influence whether a provider will be viewed as a worthy acquisition target.
Workforce Stability: A Universal Metric of Value
Regardless of size, all autism providers face one shared obstacle: workforce shortages. The industry is suffering from a nationwide lack of certified applied behavior analysis (ABA) therapists, making staff retention one of the most important metrics for potential investors.
“You want to have a workforce that’s not constantly in turn and that has some stickiness to it,” explained Chris Donovan, a transactional healthcare lawyer and partner at Foley & Lardner LLP. “Being able to retain a qualified body of therapists is important.”
Turnover can cripple an organization’s ability to provide consistent care, impacting everything from client satisfaction to scalability. Low turnover not only signals operational stability but also suggests that a provider is likely to maintain high-quality outcomes—a key consideration for PE investors.
Referral Consistency and Client Retention
Another critical aspect that PE firms scrutinize is the consistency of a provider’s client base, particularly how referrals are generated and sustained. Investors look closely at:
- The frequency of referrals
- The sources (e.g., school systems, pediatricians, hospitals)
- Geographic concentration
- Retention rates of clients and families
Strong, diversified referral networks are often indicative of market leadership and brand trust, both of which bolster a provider’s valuation.
Aligning with Market Trends: Sophistication in Services
In 2020, PE investors showed growing interest in providers that not only delivered strong outcomes but also offered a diverse array of services. According to Donovan, this year marked the beginning of a “stage-two” development phase in autism care.
PE-backed platforms were expected to become more sophisticated, expanding beyond basic ABA services to include:
- Diagnostic capabilities
- Multi-disciplinary treatment approaches
- Data-driven outcome tracking
- Holistic support services (e.g., speech therapy, occupational therapy)
Investors were also beginning to place a premium on providers with robust infrastructure in place. This includes financial management systems, electronic health records, and analytics capabilities that can demonstrate superior patient outcomes.
Size Matters: What Small and Large Providers Must Demonstrate
The specific investment appeal of a provider depends significantly on its size. Smaller agencies looking to become part of a larger PE platform need to show they are organized, efficient, and poised for growth.
For Smaller Providers:
- Growth Capacity: Investors want to see that a small provider can fill cases quickly and manage increasing demand.
- Organizational Readiness: Financial and operational records must be clear and audit-ready.
- Scalability: Even mom-and-pop operators need to show a willingness and ability to expand.
“That’s oftentimes a very difficult thing for smaller, mom-and-pop type [providers],” said Roger Strode, a partner at Foley. “[If that’s the case], hire a good investment banker. [They] are the ones that know how to make a market for your business.”
For Larger Providers:
Larger providers face a different level of scrutiny. Beyond internal operations, PE firms will evaluate their strategic approach to expansion.
“For larger assets, if you can have a proven de novo strategy and a proven M&A strategy, I think that significantly increases the multiple that would be commanded by your particular platform,” said Eugene Goldenberg, managing director at Edgemont Partners.
Investors want to know:
- How do you identify and evaluate acquisition targets?
- How quickly can you integrate acquisitions and make them profitable?
- What is your growth trajectory, and what barriers have you encountered?
The more streamlined and effective a large provider’s M&A strategy is, the more likely they are to command top-tier multiples.
Infrastructure and Outcomes: The New Gold Standard
What truly sets leading providers apart is their ability to measure and prove positive outcomes. As investors become more sophisticated, they are putting greater emphasis on:
- Evidence-based interventions
- Measurable client progress
- Efficient use of resources
“PE companies that I’ve talked [to] have indicated they are going to significantly invest in infrastructure, data management and financial management to prove that their outcomes are superior,” Donovan noted.
This emphasis on infrastructure and accountability marks a shift away from pure growth metrics to a more balanced view of sustainability, quality, and scalability.
Conclusion: Opportunity with a Catch
The private equity boom in autism services is real, and the opportunity is immense. However, the most successful providers in 2020 and beyond will be those that have their house in order. Low staff turnover, consistent referrals, scalable infrastructure, and measurable outcomes are no longer nice-to-haves—they’re essential.
As PE firms look to expand their footprint in behavioral health, autism care is emerging as the crown jewel. For providers ready to rise to the occasion, this year could be the beginning of an era of unprecedented growth and impact.
