The behavioral health investment landscape is undergoing a notable shift. After a record-breaking 2021 and a strong Q1 in 2022, behavioral health M&A activity has slowed significantly in Q2. According to new data from Fort Myers-based M&A advisory firm Mertz Taggart, deal volume dropped to just 30 transactions in the second quarter—down from 40 in Q1. This cooling trend aligns with broader market forces and is reshaping how we view Behavioral Health M&A Trends 2022.
Despite the dip, industry optimism hasn’t faded. Mertz Taggart’s Managing Partner Kevin Taggart emphasized that while volume is down, demand for high-quality providers remains strong, and valuation multiples continue to be favorable. Investors are becoming more strategic, focusing on scalable models, digital innovation, and service quality—core themes driving Behavioral Health M&A Trends 2022 forward.
Market Headwinds Cool Transaction Volume
The slowdown can be attributed to several macroeconomic headwinds: rising interest rates, inflation concerns, fears of recession, and labor shortages across the healthcare workforce. These factors have led buyers to re-evaluate pricing, lengthen diligence processes, and prioritize lower-risk transactions. Still, the fundamentals of behavioral health remain attractive, especially with demand outpacing supply in most U.S. markets.
That’s why many in the industry see the current dip not as a downturn, but as a recalibration—a pause before the next wave of strategic deal-making that could redefine Behavioral Health M&A Trends 2022 in the months to come.
Private Equity and Tech-Enabled Care Still Dominate
Private equity and venture capital continued to play a dominant role in Q2. According to the report, 80% of all behavioral health transactions in the quarter involved PE or VC firms. Every venture capital deal featured a technology component aimed at expanding access or scalability, underscoring the central role of tech in Behavioral Health M&A Trends 2022.
This reflects a broader movement toward digital behavioral health—where remote care, patient engagement tools, and data analytics create opportunities to treat more people efficiently while improving clinical outcomes.
Substance Use Disorder: Notable Decline, But Key Deals Persist
One of the most dramatic changes in Q2 was the drop in substance use disorder (SUD) transactions. Deal count fell from 15 in Q1 to just 8 in Q2, nearly a 50% decline. This marks a significant shift compared to 2021, which saw 76 SUD-related deals across the year.
Despite the slowdown, standout transactions still made headlines and influenced Behavioral Health M&A Trends 2022:
- Bicycle Health raised $50 million in Series B funding to expand its virtual opioid use disorder treatment platform.
- Boulder Care raised $33.73 million to continue growing its telehealth-based SUD programs.
These companies exemplify how investor interest remains strong for differentiated, tech-enabled treatment models—especially those tackling the opioid crisis at scale.
Mental Health M&A Activity Still Healthy, But Slower
The mental health subsector continues to be a major driver of overall behavioral health investment. While deals dropped from 27 in Q1 to 17 in Q2, that number still exceeds the historical quarterly average of 14 deals from 2021.
This suggests a maturing market rather than a waning one—particularly for outpatient and virtual models, which are central to Behavioral Health M&A Trends 2022. Investors remain focused on platforms that can address growing mental health needs in youth, workplace settings, and underserved populations.
Autism and IDD Subsector Shows Upward Momentum
Autism and intellectual/developmental disabilities (IDD) was the only subsector to show a quarter-over-quarter increase in deal flow. Q2 recorded 7 deals, up from 6 in Q1. However, the total for the first half of the year—14 deals—is still behind 2021’s 21 deals in the same period.
Notable transactions shaping this niche include:
- Stepping Stones Group acquiring HM Therapy, expanding its services for children with behavioral challenges.
- Pathways Health and Community Support acquiring Psychological Assessment & Intervention Services.
This steady interest demonstrates how autism care continues to be a central component of Behavioral Health M&A Trends 2022, particularly given growing diagnosis rates and service shortages across the U.S.
Digital Mental Health Fundraising Slows in Q2
Digital mental health platforms had a blockbuster Q1, but Q2 told a different story. According to Rock Health, digital mental health startups raised $1.3 billion in the first half of 2022—but $1 billion of that came in Q1 alone.
This deceleration underscores the more cautious investment environment driving Behavioral Health M&A Trends 2022. Investors are no longer just seeking growth; they want evidence of outcomes, operational efficiency, and a clear path to profitability. That said, companies with strong hybrid models and payer alignment are still drawing interest.
Strategic Outlook: Strong Fundamentals, Selective Deals
While Q2 marked a slowdown in behavioral health transactions, it may also signal a maturing market where investors are more selective, disciplined, and focused on long-term value. Strategic buyers are targeting assets that offer tech enablement, operational stability, and measurable clinical impact—hallmarks of emerging leaders in Behavioral Health M&A Trends 2022.
Mertz Taggart’s report makes it clear: high-quality providers with scalable infrastructure, strong leadership, and growth potential will continue to command attention and favorable valuations.
As the second half of the year unfolds, deal volume may not match the pace of 2021—but the depth and strategic nature of deals will continue to evolve. Providers and investors alike should be watching Behavioral Health M&A Trends 2022 closely as the industry recalibrates and positions itself for future growth.
