Home Venture Capital Behavioral Health Dealmaking to See More Venture Capital Investment in 2024

Behavioral Health Dealmaking to See More Venture Capital Investment in 2024

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While behavioral health dealmaking remained slow in the last quarter of 2023, seed and venture deals became a more active part of the space.

That’s according to Mertz Taggert’s Q4 2023 dealmaking report, which recorded 31 transactions in the fourth quarter of 2023–the least since 2020. Overall, there were 136 behavioral health deals in 2023, compared to 188 in 2022. Still, things may be looking up for 2024.

“We’ve had the opportunity to speak with industry and financial buyers over the past few weeks,” Kevin Taggart, a managing partner at Mertz Taggart, said in the report. “The consensus today is that we’ll have increased activity across the sector. Improved capital markets and quality deal flow will drive the activity, especially in the 2nd half of 2024.”

Venture capital investment could make up a more significant share of dealmaking in the behavioral health space in the future. The report found that seed and venture funding accounted for 12 of the 31 deals in Q4. The investment totaled $257.9 million.

“Some of these venture-backed firms will end up being major players in the industry, but I also think that many of them won’t make it for a variety of reasons,” Taggart said.

Some of these venture deals include alcohol reduction platform Sunnyside’s $11.5 million raise, video game mental health company Hero Journey Club’s $14.6 million round and Patient-matching platform Headway Health’s whopping $125 million Series C round.

Mental health was the most active segment of behavioral health of dealmaking, accounting for 19 deals in Q4. It is important to note that the report counted some companies in multiple sub-industries.

Private equity investment made up the vast majority of these deals, according to the report.

For example, Thurston Group-backed ARC Health has been one of the most active acquirers in the mental health space over the last few years. Its Q4 deals include Exult Healthcare Solutions, Advanced Psychiatric Group, and Mindsoother Therapy Center.

Addiction treatment M&A was the second most active subsector, with a total of 11 transactions in the space in Q4–the most deals the space has seen all year. Yet, the total number of deals in addiction treatment space for 2023 pales compared to previous years. Last year, there were 28 deals in the space, compared to 51 in 2022. 

Autism and IDD services continued its deal slump in Q4, with only three deals. There were a total of 17 autism and IDD transactions in 2023, compared to 24 in 2022.

Still, some companies managed to close deals, including venture-backed autism provider Cortica, which raised $40 million. Additionally, the report notes KKR-backed autism provider BlueSprig Pediatrics acquired Trumpet Behavioral Health.

Things could be looking up for the autism space in 2024. Earlier this month, Forta, a startup that pays parents to become registered behavior technicians (RBTs) to treat their kids with autism, raised $55 million.

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