The behavioral health mergers and acquisitions (M&A) market is gaining momentum after a sluggish period, with 2025 shaping up to be a pivotal year. In a recent interview with Levin Associates, Andre Ulloa, Founder and Managing Director at M&A Healthcare Advisors, shared key insights into the trends fueling this resurgence and the challenges ahead.
Technology Is Reshaping Behavioral Health M&A
One of the most significant drivers of renewed activity in the behavioral health care (BHC) M&A space is the increasing role of technology. Artificial intelligence and advanced software solutions are helping treatment centers improve efficiencies, implement evidence-based care, and, most importantly, enhance success rates—a long-standing challenge in the sector.
“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 Expands Access and Sustains Care
Telehealth is another trend to monitor in the behavioral health space, extending care beyond traditional clinical settings and fostering long-term patient engagement. This expansion is particularly evident in autism care, where M&A activity is surging.
“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 on the Rise
Autism-related M&A activity has been steadily increasing, with applied behavior analysis (ABA) therapy driving demand. In 2024, autism ranked as the third most active BHC specialty, following counseling/psychiatric care and substance use disorder (SUD) treatment. The first two months of 2025 have already seen five autism-related deals—a promising sign for continued growth.
“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 & Market Realities
While interest in behavioral health investments is strong, deal execution remains a major challenge. Buyers are scrutinizing financials more rigorously than ever, especially after post-COVID valuation adjustments. Sellers who fail to provide clear, reliable financial data or who hold on to outdated valuation expectations may struggle to close deals.
“Our best ABA deals fly through when buyers trust the sellers’ numbers and sellers keep realistic about today’s market,” Ulloa noted.
Another complicating factor is the high borrowing cost for acquisitions, which remains around 5-6%. Private equity firms are prioritizing proven cash flow over speculative growth, forcing sellers to present strong financial fundamentals.
“Trust is the backbone of the deals we do,” Ulloa emphasized.
Valuation Trends & Key Metrics
In the current landscape, valuation multiples reflect the realities of reimbursement rates, operational stability, and contract structure. Ulloa outlined the latest figures:
- ABA therapy valuations typically range from 6X to 8X EBITDA, with commercial contracts adding value.
- Out-of-network SUD providers generally see multiples between 4X and 6X.
- In-network SUD and mental health providers can command higher multiples, often above 6X if they demonstrate strong operational efficiency.
“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.
Mental Health & SUD M&A Poised for Growth
The demand for mental health platforms is rapidly increasing, with particular interest in eating disorder treatment, flexible care models, and sober living services. Private equity firms are actively seeking investments that can expand the behavioral health care continuum beyond traditional substance use disorder treatment.
“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 predicted.
Notably, even out-of-network providers, which private equity previously avoided due to unpredictable cash flows, are gaining traction in M&A. Large firms like KKR, historically focused on in-network assets, are now embracing hybrid models, signaling a shift in investor sentiment.
“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 said.
Final Thoughts: A Market at a Tipping Point
With 17 behavioral health deals already announced in 2025, the market is heating up. If technology adoption, reimbursement improvements, and regulatory clarity continue to evolve, this year could mark a significant turning point for the behavioral health M&A sector.
M&A Healthcare Advisors is actively engaged in helping sellers navigate this complex landscape, ensuring they are well-positioned to capitalize on emerging opportunities.
