Healthcare M&A update: Q1-2017

Sector spotlight: Behavioral health

The behavioral healthcare market saw substantially increased acquisition activity in the first quarter of 2017 (Q1-2017), representing one of the most active quarters since the first quarter of 2015 (Q1-2015). In Q1-2017, the number of announced behavioral healthcare mergers and acquisitions (M&A) increased by 50 percent from the fourth quarter of 2016 (Q4-2016) to a total of 12 acquisitions. Q1-2017’s total also represented a 33 percent year-over-year increase from the first quarter of 2016, when there were nine announced acquisitions.

The sector is poised for continued M&A activity as companies look to expand their operations into varying geographic locations and achieve operational efficiencies through economies of scale. Sector drivers include:

  1. Legislation: Recent changes have expanded the availability of behavioral healthcare services and have opened new channels for industry activity.
  2. Awareness: Industry demand has grown significantly as mental illness awareness has increased and care becomes a more integrated aspect of overall healthcare services.
  3. Substance abuse: A rising concern across the U.S., substance abuse has recently gained heightened interest as states grapple with how to curtail expanding abuse.

Driven by these tailwinds, the sector continues to garner significant interest from both strategic and private equity firms seeking to consolidate the fragmented market.

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