Mergium presents the outcomes of mergers and acquisitions and capital raisings (private placements) for autism services and pediatric therapy practices from 2019 to the first half of 2024, analyzed on a quarterly timeline.
This analysis focuses on practices that offer: (1) therapies for kids and young adults with autism and other disabilities; (2) treatments like behavioral (applied behavioral analysis (ABA)), developmental (speech, occupational, physical, and feeding therapies), educational, and social relational; and (3) services in-clinic, in-school, in-home, and/or telehealth.
We excluded companies that offer solutions, products, and tools to providers and families such as: (1) IT solutions (software, apps, and the like); (2) diagnostics tests; (3) medications; (4) matching platforms; and (4) virtual reality devices, among others.
The graph below depicts the distribution of mergers and acquisition transactions segmented by buyer category on a quarterly basis since Q1 2019:
Sources:
Mergium research
Notes:
Types of buyers:
M&A by private equity: These are transactions by private equity firms (“PE”). The statistics include secondary buyouts (SBOs) or sale of a practices by a PE to another PE.
M&A by Platform of PE: Typically, after closing of an M&A by a private equity, the acquired company (“Platform”) grows through acquisitions of smaller practices and de novo locations. The acquisitions of those smaller practices are registered here.
M&A by Strategic Investor: These are acquisitions of practices done by a company that is not a PE not a Platform of a PE. It includes companies that have raised capital through private placements.
Types of transactions:
Sale of majority interests - 100% or more than 50% of shares or interests.
Sale of minority interests - Less than 50% of shares or interests.
Our observations regarding activity during the first half of 2024 ("H1 24") are the following:
As we were expecting, the number of M&A transactions during H1 24 increased when compared to the first half of 2023 ("H1 23") (16 vs. 12 transactions).
The number of M&A transactions in Q2 2024 increased when compared to Q1 2024 (9 vs. 7).
Private equity transactions increased in H1 24 vs. H1 23: (7 vs. 2), platforms of PEs did less M&A (5 vs.8), and there were more M&A transactions by strategics (4 vs. 2).
This increase of activity happened even though interest rates are still high and there are still challenges in this healthcare segment including competition for staff, scarcity of BCBAs, therapist wage inflation, and the rigidity of payors rates.
The graph below presents the number of private placements (debt and equity) on a quarterly basis since Q1 2019:
Sources:
Mergium research, Securities and Exchange Commission (Edgar database)
Notes:
Private placement: These are acquisitions of shares and debt instruments by private investors when a company sells newly issued shares or acquires debt. These transactions are regulated by the U.S. Securities and Exchange Commission.
We observe the following:
Historically, the number and volume ($) of private placements of equity vastly surpass those of debt.
The largest equity private placements have been those of Cortica and Elemy.
Comparing H1 24 vs H2 23, there was an increase in the number of transactions (4 vs. 2).
Comparing TTM (trailing 12 months to June 24) vs. 2023, there was a similar amount of capital raised at $138 mm.
Given the weakening of inflation pressures, the prospects of lower interest rates in the short and middle term, the interest of buyers (strategic and institutional (PE)) in the pediatric therapy market, we foresee an increase in the number of M&A transactions and capital raise in the following quarters.
Buyers will continue to be more selective in picking up their M&A targets. Large practices will continue assessing de novo vs acquisition of smaller practices, and the latter will be determined mostly by strategic fit.
As mentioned in our prior newsletter, we are in contact with buyers interested in acquiring practices with the following characteristics:
Good clinical outcomes.
Brand recognition in the community.
Stability or growing rate of revenues.
Sustainable and healthy financial margins.
Low staff turnover.
Stable or growing patient census.
Good training models and healthy learning environments.
Healthy internal cultures.
Robust internal processes.
Strong information systems (financial, operational, etc.).
Owner's valuation expectations in line with the current macroeconomic situation and economics of the segment.
Additional resources:
If you need assistance selling or valuing your pediatric therapy practice, contact us.
If you need to read more about how to sell your pediatric therapy practice (ABA, OT, PT, ST), click here.
If you need to read more about selling a business, read more
If interested in reading more articles and insights by Mergium, click here
If interested in knowing about our experience in selling / acquiring healthcare services companies, click here