Activity in the Behavioral Health Care (BHC) mergers and acquisitions (M&A) market is ramping up after a few slow years. As treatment providers and investors navigate this dealmaking landscape, the sector is poised for significant activity in 2025 and beyond. To unpack these trends, the LevinPro HC team spoke with Andre Ulloa, Founder and Managing Director at M&A Healthcare Advisors, who shared insights into the forces shaping the market and where it’s headed next.
M&A Healthcare Advisors has carved out a niche in the BHC M&A space by specializing in navigating complex, lower-middle market deals. This focus helps the firm tackle the real hurdles in the behavioral health industry. That expertise is increasingly vital as the sector begins to see an uptick after a few slow years, fueled by trends now coming into play.
Ulloa commented on technology’s major role in this uptick, reshaping how treatment centers operate and draw interest. Beyond flashy tools, artificial intelligence and software are zeroing in on the sector’s Achilles’ heel—low success rates—a challenge he described as a stubborn barrier begging for innovation after years of stagnation.
“So much of behavioral health M&A is tech-driven. Artificial intelligence and software at treatment centers are creating efficiencies and driving value with evidence-based treatment, boosting success rates that are quite low,” said Ulloa.
Telehealth is another critical piece, extending care delivery beyond traditional settings. Ulloa emphasized its role in sustaining patient connections and supporting families, particularly in high-demand areas like autism care, which is seeing heightened M&A activity.
“Telehealth’s a big deal across behavioral health now. It’s a great tool keeping detox alumni connected and guiding families with autism patients at home,” Ulloa explained.
Autism M&A, centered on applied behavior analysis (ABA) therapy, is a significant driver of activity in the BHC market. In 2024, autism ranked as the third most active BHC specialty, trailing only counseling/psychiatric care and substance use disorder (SUD) treatment specialties. Autism M&A has been on the rise recently, according to transaction data. Autism deals increased from 11 announced in 2023 to 13 in 2024, a slight uptick. In the first two months of 2025 there have been five autism-related deals, compared to none announced in the first two months of 2024—a pace suggesting it could overtake higher-ranked BHC specialties if trends hold.
“Autism M&A is booming because patient populations are growing. Five years ago, we had massive consolidation, and now mature platforms are bolting on acquisitions,” said Ulloa.
Deal execution remains a critical hurdle. Ulloa noted that buyers are dissecting financials with forensic intensity after spotty post-COVID growth left some platforms overvalued. Sellers who can’t back up their numbers or who cling to 2021-era multiples risk derailing talks, especially with private equity favoring proven cash flows over speculative bets.
“Our best ABA deals fly through when buyers trust the sellers’ numbers and sellers keep realistic about today’s market,” Ulloa noted.
Persistent high borrowing costs, around 5-6% for acquisition financing, compound this scrutiny. The market’s reset from peak valuations since 2021, when ABA deals occasionally hit double digits, underscores that credibility is a deal’s lifeline.
“Trust is the backbone of the deals we do,” said Ulloa.
That trust directly shapes valuations, as buyers lean on reliable metrics to navigate the shifting BHC market. Persistent reimbursement shortfalls, notably in mental health where payout rates trail commercial benchmarks by up to 20%, coupled with regulatory flux from evolving Medicaid policies, continue to exert significant pressure on deal pricing as of Q1 2025.
“ABA valuations sit at 6X to 8X, and easily assignable commercial contracts can provide an edge on multiple. For treatment SUD, out-of-network gets 4X to 6X as bolt-ons, while in-network SUD and particularly mental health hits above 6 times or more if it’s humming,” Ulloa explained.
With 17 BHC deals announced already in 2025, demand for mental health platforms is heating up. Private equity is circling platforms that can bridge gaps in eating disorder and sober living care, areas where reimbursement lags but patient need is acute. For the first two months of this year, private equity firms and/or a portfolio company were involved in 10 deals, or 59% of the BHC deals announced.
“Mental health M&A will take off in 2025 with eating disorders, flexible treatments and sober living after detox, expanding the care continuum beyond substance abuse,” Ulloa said.
SUD and mental health deals are accelerating too, even among out-of-network providers, a pivot Ulloa finds striking given private equity’s past aversion. For example, KKR, a firm that historically sidestepped out-of-network SUD assets due to volatile cash flows and favored stable in-network plays like its 2019 BrightSpring acquisition, has recently embraced hybrid models with the formation of Geode Health, which includes out-of-network services by 2025. M&A Healthcare Advisors’ pipeline, which Ulloa described as a mix of deals poised to close if Medicaid efficiencies materialize, suggests this trend could pick up with policy support under the current administration.
“A year from now, I see substance use disorder and mental health centers, even those Out-of-Network, taking off. We are concentrated in a number of these deals, at present,” Ulloa predicted.
The BHC M&A market is at a tipping point. If technology and policy align as Ulloa expects, 2025 could redefine the sector’s scale, pulling in bigger players and testing whether today’s disciplined deals can sustain tomorrow’s growth ambitions.
