Despite rising interest rates, bank failures, and a slowdown in M&A activity, valuations for healthcare services companies with adjusted EBITDA between $500,000 – $10,000,000 remain historically high. There are two main reasons for this: 1. Scarcity of Quality Companies on the Market. There is a shortage of quality healthcare services companies for sale in the lower-middle market, primarily due to the mass exodus of owners of privately-held businesses that occurred in late 2020 and throughout 2021. Healthcare Services Private Equity Total Deal Activity by Year Source: PitchBook Source Document (Q1 2023 Healthcare Services Report) ● Geography: US & Canada ● *As of March 31, 2023. There were two drivers of this bubble of activity: 1) COVID burnout. Operating a healthcare services company during peak, COVID was hard -- for owners, clinicians, caregivers, and office staff. Many owners, flooded with inquiries to sell, saw the opportunity to get out at peak valuations as too compelling to pass up; and 2) the threat, under the Biden administration, that the capital gains tax rate would increase from 20% to about 40%. During that period, if an owner was considering a sale in the next few years, the potential tax rate change made selling more attractive while rates were low. The current administration has continued advocating for the proposal as a means to fund its spending priorities, but is unlikely to get current congressional support. 2. Declining Private Equity (PE) Exits Creating Demand for Add-On Acquisitions. Private equity firms have faced challenges exiting their investments over the past few quarters. This is due to several factors, including rising interest rates and tightened lending standards. Healthcare Services Private Equity Exits by Year Source: PitchBook Source Document (Q1 2023 Healthcare Services Report) ● Geography: US & Canada ● *As of March 31, 2023. PE exits are often highly leveraged. In other words, the acquiring PE fund will put significant debt on the transaction to achieve the returns their investors require. Since debt is more expensive, values for these platform transactions, in the $100 million+ enterprise value range, have decreased over the past five quarters. As these firms find it more difficult to exit their investments, they increasingly seek to acquire well-managed, cash flow-positive, ‘add-on’ acquisitions. This allows them to increase both the EBITDA and their exit multiple, thereby significantly adding value to their portfolio companies. It also allows them to lower the 'effective' multiple they will have paid for all of the acquisitions combined. They can accomplish the 2nd objective while still paying premium prices by historical standards. This has driven the demand curve up for lower-middle market ($500K to $10M in Adjusted EBITDA) healthcare services companies, which has kept values high. However, not all private equity buyers are created equal in this respect. Those buyers that won’t require a lot of leverage to transact will often have both the ability and the motivation to pay a premium in a competitive M&A advisor-led process.

By Eduardo Tavel No matter where you are in your home-based care journey of ownership or operations, it’s never too early to think: “What’s next?” We get asked frequently, “Who are the buyers for home-based care companies?” In this article, we’ll categorize the investors or buyers who might be involved in your business’s next chapter. Depending on your ultimate exit strategy, you may run into some of them. Buyer Types Broadly, there are two types of home-based care buyers - strategic and financial. This article intends to: Explain the difference between the two buyer types Further break down each buyer type by category Because these buyers have fundamentally different goals, how they approach your business in an M&A transaction can differ significantly. Let’s begin with the notion that strategic buyers tend to dominate the M&A landscape in terms of deal volume: Strategic Buyers These buyers usually operate in the same or connected industry (see ‘payviders’ below) as the seller. They can realize synergies through acquisitions. Synergies represent a financial benefit to them, so they can afford a higher price than a buyer who can not capture them. These synergies can come in the form of duplicate cost savings, referral relationships, and, more recently, ‘value-based’ synergies. In the home-based care industry, we categorize strategic buyers as: Public companies Private Equity (PE) portfolio companies Non-PE-backed Public Companies These companies are consistently under Wall Street’s microscope and public scrutiny. They have different reporting requirements, and the price at the Price/EBITDA multiple at which their shares are trading could influence their acquisition decisions. Examples of publicly-traded home-based care companies include Amedisys, Addus, Enhabit, Aveanna, and The Pennant Group. This group has expanded recently to include “payviders” who are playing a significant role in the value-based care movement, including Cigna (Signify), United’s Optum Ventures (LHCG), and Humana’s Centerwell and Gentiva (which it co-owns with private equity group Clayton Dubilier Rice). Private Equity Portfolio Companies These companies are formed through platform investments – a private equity fund’s first acquisition and entry into an industry. Their growth strategies usually involve ‘add-on’ or ‘tuck-in’ acquisitions around their platform investment. Their cost of debt, which is a product of the interest rate environment and their leverage, can influence their acquisition appetite. Examples of private-equity-backed home-based care portfolio companies include: Elara Caring Help at Home AccentCare Care Advantage Compassus Non-PE-backed Every strategic buyer who is not public or PE-backed falls into this category. Their size and level of sophistication will influence their appetite for acquisitions. This includes both for- and not-for-profit health systems (for example, Trinity Health) or other larger industry not-for-profits – most prominently in the hospice industry. Financial Buyers On the other hand, a financial buyer is interested in investing in a company with a targeted internal rate of return (IRR) and exit date (subject to change, depending on market conditions) at the closing of its initial ‘platform’ acquisition. Since financial buyers are not operators, and to minimize risk, they will usually incentivize the company’s current operator(s) or an industry operating partner with equity in the platform. Private Equity Groups Private equity groups invest in private companies or buy out public companies and take them private. They raise money from limited partners, such as pension funds or wealthy individuals, and create a fund that typically lasts 7-10 years. From that fund, they buy stakes in businesses they hope to improve and sell at a profit, which they share with their limited partner investors. Most private equity groups employ a ‘roll-up’ strategy in the home-based care industry. Once the platform is acquired, that company will acquire multiple smaller home-based companies, usually in different markets. The goal is to create a larger, more efficient entity that can benefit from economies of scale, operational synergies, and increased market share. The key concept to this strategy is called 'multiple expansion', where the combined company will sell for a substantially higher multiple of its earnings than the individual companies they acquired. They will usually use debt financing for acquisitions to maximize returns. Examples of active private equity sponsors in home-based care include: KKR & Co. Inc. TPG Capital Webster Equity Partners Vistria Lorient Capital Family Offices Investment offices that manage capital for one or a small number of high net-worth families. Due to this, they have more flexibility regarding their holding periods and investment strategies. Like private equity groups, they must find a platform investment to break into the industry. Examples of active home-based care family offices include Dorilton Capital, via their investment in Traditions Health, and Kaltroco, who owns New Day Healthcare. Independent Sponsors Also referred to as fundless sponsors, independent sponsors are individuals or a group of individuals who identify and acquire companies, typically with the help of investors. They are often former investment bankers or private equity professionals who have the skills and experience to identify and execute on acquisition opportunities. They often target specific industries based on their expertise and historical success. Unlike private equity, Independent sponsors typically do not raise funds until they’ve identified a target. They work through various equity channels, such as private equity, family offices, hedge funds, and pension funds. Search Funds In the most common form of this investment model, an MBA graduate from a top business school obtains financial backing from the school’s prominent business network, hoping to acquire a profitable business that they can operate and scale. The backers could be successful school alumni, professors, debt partners that have established relationships with the schools, and more. Although this model started in 1984, it has recently gained popularity.

Mertz Taggart announced today that it was recognized as an M&A Source Top Firm of the Year for its outstanding performance in 2022. The company is one of four advisory firms in the United States to earn the award, which is based on total enterprise value transacted. M&A Source is the leading professional association of lower middle market M&A advisors nationwide. The association focuses on education, professional development, and networking opportunities for M&A intermediaries. “We appreciate our friends and colleagues at M&A Source and are honored for this award,” commented Cory Mertz, Managing Partner. “It’s a testament to our team of highly skilled and dedicated professionals and their passion for maximizing value for our clients.” We would also like to thank our clients, who have entrusted us with one of their most valuable assets: their businesses. We are grateful for the opportunity to serve them and help them achieve their goals. We value the relationships we have built with them over the years and look forward to continuing our industry partnerships. Mertz Taggart is an industry-leading healthcare services mergers and acquisitions firm based in Fort Myers, Florida. Our industry focus includes home-based care (home health, hospice, home care) and behavioral health (mental health services, addiction and eating disorder treatment, autism services). We represent owners of companies with between $500K to $20 million in EBITDA. Since 2006, our team has helped over 130 healthcare services business owners achieve their exit planning goals.

Despite Rising Interest Rates and Economic Uncertainty Over the past several weeks, we have had numerous conversations with private equity groups, large, publicly traded home-based care companies, and healthcare lenders. Conversations have been as broad as the debt and equities markets in general (considering recent banking turmoil) and as narrow as specific transaction opportunities we have recently taken to market. These discussions and 16 years of healthcare services M&A history have allowed us to formulate our current thoughts on the M&A marketplace for home-based care. And it’s not all bad. In fact, a lot of it is very positive. Interest Rate Impact With rising interest rates, compounded by stresses imposed on the U.S. and international banking systems, debt financing is getting more challenging and certainly more expensive if you can get it, especially for larger transactions. This has created a shift in the M&A world. On the one hand, financial theory will tell you that interest rates are fundamental to company valuation. As interest rates and uncertainty increase, the cost of capital increases, and investors demand higher returns. As a result, valuations will drop, all else being equal. However, we have a significant supply/demand imbalance of quality home-based care agencies on the market. At the high end of the market – transaction volume in the ~$100M to $1B+ has come down as capital has become more expensive. At this end, transactions tend to be much more highly leveraged. So, we’re seeing fewer large “platform” transactions. Because of this, and the public home care companies' lower overall valuation, many private equity-backed portfolio companies have delayed their exits, opting to double down on smaller ‘add-on’ or ‘tuck-in’ transactions. Generally speaking, private equity still has significant dry powder to invest as they continue to close new funds. At the lower end of the market, demand and, therefore, valuations are as strong as ever. “A lot of agency owners see the lower transaction volumes and hear the news of the financial markets and assume that demand has diminished. We have not seen this at the lower end of the market, say companies in the $3 million to $50 million range, which is where the majority of transactions occur,” said Mertz Taggart Managing Partner, Cory Mertz. “There are no hard lines here in terms of valuation, but generally speaking, the top has come off the high end of the market from the 2021 highs. We will not see a lot of transactions with valuations in the mid- to high-teens right now. But the lower end of the market is holding up fine. I can make the case that values for companies in this size range are higher today than before interest rates started to rise.” Supply and Demand So what is allowing values to stay afloat despite the current interest rate environment? It’s all about supply and demand. The supply of quality agencies going to market is low due to two factors: Owners accelerated their exits in 2020 and 2021 to avoid the not-yet-seen capital gains tax rate increases. One of the current administration’s priorities was double the capital gains tax rate from the current 20%. This created the rush to sell, which only subsided in late 2021 after it was clear this legislation didn’t have legs. This, along with low interest rates and plenty of cash available on the private equity balance sheets, drove record transaction volumes in those two years but left a shortage of quality providers wanting to sell in 2022 and 2023. The perception is that valuations across all sizes must have come down due to rising interest rates. On the demand side, many PE-backed acquirers have postponed their exits. Those portfolio company transactions tend to be more highly leveraged, where the cost of capital will significantly impact valuations. Public company valuations have also come down, impacting the price they can pay for large PE portfolio-type companies seeking a transaction. Generally speaking, private equity has the mandate to grow. So many PE-backed portfolio companies have doubled down on ‘tuck-in’ or ‘add-on’ acquisitions, which they can fund using the increasing piles of cash, both on the company and fund balance sheets “To be fair, buyers have gotten more disciplined in many ways,” said Mertz. “In some cases, they have honed in on what opportunities they want to pursue. In some cases, they’ve narrowed their criteria in terms of service lines/payers and geographies. Others are less likely to stretch on synergies they’ll factor into their valuation models or to look the other way on a small quality of earnings miss. As a result, we may end up getting fewer offers for an opportunity we take to market, but the offers we are getting are as strong as we’ve seen.” Interested in a confidential, complimentary valuation? Please contact us at info@mertztaggart.com. Trackbacks/Pingbacks The Resurgence of Private Duty Home Care M&A - [...] 2018 was a booming year for health care M&A activity. That’s especially true when it comes to private duty home care transactions... Treatment Center Value Insights: It’s All About the Multiple (…Or Is It?) - [...] I would go as far as saying it’s irresponsible to give guidance simply in the form of...

COVID-19 Short-term Impact on Healthcare* M&A Buyer Mindset *Home Health, Home Care and Hospice and Behavioral Health In response to questions from the media, buyers, and sellers, Mertz Taggart undertook a qualitative survey of industry buyers. There has been a wealth of conjecture and prognostication about the short- and long-term effects of the COVID-19 outbreak on healthcare in general and mergers and acquisitions in particular. Rather than guessing, we decided to talk to the people in the trenches, so to speak. The commentary assembled in this overview represents not only first-hand experience with COVID-19’s impact on our industry but also some excellent insights into what is to come. As always, Mertz Taggart will do its best to keep a finger on the pulse of the market. Our plan is to share as much good information as possible with the community as we process it. In our small way, Mertz Taggart is trying to contribute to the available information to keep our friends and business partners informed as much as possible. Overview Perceived impacts of COVID-19 on healthcare M&A buyers indicate the following: Strategic buyers (both public companies, and mature PE-backed portfolio companies) buoyed by strong balance sheets, dedicated development teams, and industry savvy, will continue to do strategic transactions, albeit at a slower pace; Private equity interest in new opportunities is mixed, depending on the COVID-19 impact on other portfolio companies and their banking relationships. Methodology On March 19-20, 2020, Mertz Taggart conducted a brief qualitative survey of 24 industry leaders representing home care and behavioral health strategic buyers and private equity groups. Timeline for current deals The majority of respondents believe they will experience a slowdown in current closings. Reasons include market uncertainty, tightening credit, and a diversion to other corporate interests. “Although the M&A team is all systems go, the executive team and operations team have other pressing issues to deal with right now.” (Home health, home care, and hospice company) “The banks are still lending. They are going to get more stringent and are adjusting their coverage ratios. It will be difficult for banks to lend into a declining business.” (Private equity group) Several respondents believe the pace of their current closings will stay the same with one private equity respondent citing “the momentum we have built over the past several months” as a reason for optimism. A couple of respondents think their current closings will accelerate. “Opportunistic strategy” (Homecare company) “Going to try to accelerate closing on existing opportunities…” (Behavioral health company) The impact of COVID-19 on the pace of current closings led one respondent to be unsure of how the timeline would be affected. “Uncertainty in the current state of the virus is causing a lot of panic with sellers/buyers from the legislative and operational strain and it is still so early on. Unknown impacts on the economy could cause drastic changes in the sector and spark sellers' decisions to de-list because they are afraid of lower valuations. However, smaller agencies without less financial cushion may seek to sell to solidify some profit before folding.” (Home care company) Likelihood to look at new opportunities The majority of respondents believe their likelihood to look at new opportunities will stay the same. “We are in it for the long game and will continue to look at opportunities.” (Homecare company) “We’re PE, we look at everything.” (Private equity group) “This answer could change as things develop in the months to come but for now we plan to look at opportunities the same as usual.” (Hospice company) Several respondents describe they are more likely to look at new opportunities because of the favorable deals that arise from the marketplace. “Greater disruption creates greater opportunities at better potential risk/reward prices (if underwritten correctly.)” (Private equity group) Also, several respondents state they are less likely to look at new opportunities. “We’ll look at mental health opportunities, but everything else is on hold right now.” (Private equity group) “Although our business is doing well, our financial partner has other portfolio companies that are struggling and need attention.” (Behavioral health company) Other factors being monitored Respondents list travel limitations, social distancing, seller engagement due to the strain of COVID 19, reimbursement risk, supply chain problems, and clinical staff shortages as factors they are currently monitoring during this changing economic environment. Check back to hear what home care, behavioral health, and private equity groups are saying as we weather the uncertain times ahead. For up-to-date news, information and insights join our email list and follow Mertz Taggart on LinkedIn Facebook Twitter Trackbacks/Pingbacks Behavioral Health M&A Report: Q1 2020 - Mertz Taggart - […] to a recent survey by Mertz Taggart, strategic buyers forecast a slower pace of healthcare M&A transactions only for…

Post-Acute Care Transaction Activity Remained Robust During the First Quarter of 2020 Despite the continued transition to the Patient-Driven Groupings Model (PDGM), as well as the emergence of the COVID-19 national health emergency and other strong health sector headwinds, post-acute care transaction activity remained robust during the first quarter of 2020. Overall, the home health, hospice, and home care industries saw a combined 27 transactions during Q1, a slight uptick from the 25 total transactions reported in the same period a year ago, according to the latest M&A update from advisory firm Mertz Taggart. “There are some very real challenges on the horizon right now, but there’s still ample interest in quality home health, hospice, and home care assets,” Mertz Taggart Managing Partner Cory Mertz says. “And on the lending side, we’ve been hearing that banks are still open for business, though they might be behaving a bit more cautiously.” Of the deals that took place during the first quarter of 2020, the hospice segment saw the most activity, followed by home health. Home Health Transactions Rebound With 13 transactions, home health deals were up in Q1 compared to the previous quarter, which saw six deals. Both totals were sharp declines from the three-year high of 18 transactions recorded in Q1 and Q3 2018. However, this data is somewhat misleading, as all but seven of the 13 transactions included hospice. The decline in standalone home health deal volume is clearly linked to PDGM, as some buyers have chosen to observe the transition on the sidelines before jumping back into the M&A game. That’s primed to change throughout the rest of 2020, as PDGM has, for the most part, turned out to be a more manageable transition for many home health providers than expected. “I think all the preparation throughout 2019 really paid off,” Mertz says. “Many agencies and ownership groups have a good grasp on the model, so it’s probably not going to be the big speed bump for quality agencies that everyone anticipated.” Among the home, health transactions to take place in the quarter was Louisville, Kentucky-based BrightSpring Health Services’ deal for the home health and home infusion businesses of Advanced Home Care. For BrightSpring, the deal helps the company double down on its multifaceted care delivery strategy, which ranges from skilled home health and hospice to non-medical home care and pharmacy services. “Advanced Home Care has a 30-year heritage,” BrightSpring CEO Jon Rousseau said in an interview with Home Health Care News. “It offers tremendous partnership, innovation, and care management solutions to their ACO and hospital partners, so we’re really excited to build on that.” Additionally, at the very start of 2020, Lafayette, Louisiana-based LHC Group Inc. (Nasdaq: LHCG) announced several joint venture purchase and expansion agreements with partners in Texas, Arkansas, and Louisiana. In total, the January moves accounted for annualized revenue of approximately $23.8 million, according to the company. Meanwhile, on the private equity front, Seattle-based Fedelta Home Care received an investment from Montlake Capital. Hospice Stays Hot As has been the tale for the better part of two years, interest in the hospice space was substantial in the first quarter of 2020. At least 15 hospice transactions took place in Q1, one more than the previous quarter and six more than the first quarter of 2019. “The first quarter of 2020 saw more hospice M&A activity than any other quarter we’ve ever tracked,” Mertz says. Similar to home health agencies, hospice providers have been forced to navigate significant change over the past couple of months because of COVID-19. Those changes include pausing volunteer activities, redesigning bereavement care due to social distancing, and figuring out new electronic face-to-face flexibilities. Salt Lake City-based Bristol Hospice — a portfolio company of investment firm Webster Equity Partners — alone announced at least three hospice-related deals. At the end of March, Briston acquired the Utah and California locations of Sojourn Hospice & Palliative Care, a Healthy Living Network company, for an undisclosed amount. About a month prior, Bristol announced a new partnership with Front Range Hospice and Palliative Care and its patient care services team in the Frederick, Colorado, area. Bristol additionally made a move in Texas — partnering with New Dawn Hospice — in January. Apart from Bristol’s transactions, PE firm Pharos Capital Group LLC recently announced that its post-acute care provider platform — Charter Health Care Group — acquired two hospice service providers: St. Luke’s Home Hospice LLC and Arizona Select Hospice LLC. Both providers were part of the VeraCare Hospice system. Home Care M&A Activity Rebounds The first quarter of 2020 saw a slowdown in-home care deals, with only seven transactions reported. “Home care remains attractive to buyers. I would not mistake a drop in-home care volume for a decline in investor interest,” commented Cory Mertz, “The low volume is more reflective of a lack of quality providers in the marketplace.” Q1 home care deals included MGA Homecare’s partnership with Chicago-based Flexpoint Ford LLC, announced in March. MGA Homecare is a provider of home health care, home therapy, and home- and community-based services to pediatric patients throughout Arizona, Colorado, and Texas. Arosa+LivHome — backed by Bain Capital Double Impact — also made another move in the first quarter of 2020 by acquiring Life Care Innovations in Illinois. And in another Q1 home care transaction, Care Advantage, a provider of home-based care services in the Mid-Atlantic, acquired Amaisa Home Care. Care Advantage is a BelHealth Investment Partners portfolio company. Looking Ahead The coming quarter will likely shift in terms of M&A activity given the COVID-19 pandemic and the sweeping impact it has had on the health care system and global economy. Stay tuned for future updates, or click the link to learn more about our recent survey of healthcare M&A buyers and what they are anticipating in the near team for transaction activity. Trackbacks/Pingbacks PDGM — Not COVID-19 — Mostly to Blame for Drop-in Home Health M&A Activity » RegentCares - […] So far in Q2, home-based care — including Medicare-certified home health, hospice, and non-medical home care — has seen… PDGM — Not COVID-19 — Mostly to Blame for Drop-in Home Health M&A Activity - Medicare & Health Insurance News - […] So far in Q2, home-based care — including Medicare-certified home health, hospice, and non-medical home care — has seen… PDGM — Not COVID-19 — Mostly to Blame for Drop-in Home Health M&A Activity – My Blog - […] So far in Q2, home-based care — including Medicare-certified home health, hospice, and non-medical home care — has seen… Home Health, Home Care & Hospice M&A Report: Q2 2020 – Mertz Taggart - […] In all, the home health, hospice, and home care industries saw just 19 deals during Q2, down from a… Why 2021 is Poised for a Comeback for Home Health M&A – Mertz Taggart - […] that expected M&A activity was curtailed significantly by the COVID-19 emergency beginning in Q1. Many of the small and… Home Health, Home Care and Hospice M&A Report: Q4 2020 – Mertz Taggart - […] expected due to the Patient-Driven Groupings Model (PDGM), home health dealmaking started off strong in 2020, with at least… Home Health, Home Care and Hospice M&A Report: Q3 2020 – Mertz Taggart - […] third quarter. Mertz Taggart tracked just two deals, down compared to Q2’s five transactions and Q1’s seven […]

Behavioral Healthcare Stocks down 0.5% in June The Behavioral Health Composite, which tracks investor interest in the three public behavioral healthcare companies – Acadia Healthcare (ACHC), American Addiction Centers (AAC), and Universal Health Services (UHS) – was down 0.5% for the month of June. The S&P 500, by comparison, was up 7.2% during the same period. “We’re seeing some strength from UHS and ACHC, coming off their May lows, while AAC continues to struggle,” said Kevin Taggart, Managing Partner at Mertz Taggart. The BHC index was slightly down after many down months. American Addiction Centers – AAC ( ↓14.9% ) continues to struggle in the month of June. AAC’s second in command, President and COO, Michael Nanko, resigned in mid-June, just weeks after unveiling a new 10-year vision for the company. Nanko will receive over $185,000, paid out over the next four months. Acadia Healthcare – ACHC ( ↑5.9% ) rose nicely in June after a down May. In late June, the company announced that the COO, Ron Fincher, is leaving the company, effective July 15. He will be replaced with Acadia’s Eastern Group president, John Hollingsworth. Fincher’s exit is the latest shake-up of Acadia’s leadership, which started in December after its board voted to oust Joey Jacobs, the company’s longtime chairman, and CEO, in an unusual weekend vote. Since then, Acadia President Brent Turner left the company, and Acadia board member Christopher Gordon resigned. Fincher will receive a cash payment of $1.2 million as part of a separation agreement. Universal Health Services – UHS ( ↑7.4% ) rose steadily throughout the month of June on no news. Perhaps we’ve seen a bottom here. For the last twelve months (LTM), the BHC is well behind the S&P 500 at a -29.7% loss relative to the S&P’s gain of 7.9%. Valuation – Public Comps Below are the Enterprise Value / EBITDA and Enterprise Value / Revenue ratios for AAC, ACHC, and UHS. The valuations provide a relative barometer for what smaller companies can expect. Given the higher relative risk of smaller companies (e.g., less liquidity, smaller revenue base), we typically (though not always) see multiples that are lower than those of the public companies. Stock Prices Company 6/30/19 AAC $0.86 ACHC $34.95 UHS $130.39 Enterprise Value/EBITDA Company 6/30/17 6/30/18 6/30/19 AAC 12.68x 12.04x N/A ACHC 12.98x 11.54x 12.32x UHS 9.23x 8.44x 9.44x Enterprise Value/Revenue Company 6/30/17 6/30/18 6/30/19 AAC 1.31x 1.80x 1.42x ACHC 2.64x 2.35x 2.29x UHS 1.58x 1.30x 1.47x M&A News June 20, 2019 – Kolmac Outpatient Recovery Centers (“Kolmac”) announced the acquisition of BioCare Recovery (“BioCare”). Headquartered in Yardley, PA, BioCare has provided outpatient addiction treatment in the form of medication-assisted treatment (MAT) and individual therapy for the past five years. Kolmac is a network of intensive outpatient (IOP) addiction treatment centers in Washington D.C. and Maryland. The acquisition of BioCare marks the beginning of Kolmac’s expansion into other states and communities. June 19, 2019 – The Stepping Stones Group, a national provider of therapeutic and behavioral health services for children in kindergarten through 12th grade, announced the acquisition of StaffRehab, a California-based provider of therapy, nursing, and behavioral health services for children with autism and special needs in school settings. StaffRehab will operate as a subsidiary of Stepping Stones in the company’s west region, and a pair of executives will transition to new positions in the deal. June 18, 2019 – AppleGate Recovery, a BayMark Health Services company, announced the acquisition of A.M.C. Nashville, an office-based opioid treatment (OBOT) program in Nashville, Tennessee. The facility, established in 2011, provides buprenorphine and Suboxone medication-assisted treatment with counseling in a physician’s office setting. AppleGate Recovery now operates 13 programs across 6 states that focus on outpatient treatment with buprenorphine and buprenorphine compounds. June 14, 2019 – Florida-based trauma center, Next Chapter (“NC”) Treatment Center has announced its merger with All Points North (“APN”) Lodge, the country’s newest comprehensive health and wellness center, with a special focus on substance abuse and addiction. Beginning October 2019, NC’s clinical care services will relocate to the APN Lodge campus in Edwards, CO as a part of APN Lodge’s larger continuum of care. June 11, 2019 – Newport Academy, a series of adolescent and young adult treatment centers specializing in mental health, trauma, eating disorders, and substance abuse, announced the purchase of Gray Wolf Ranch in Washington state. Founded in 1996, Gray Wolf Ranch has treated more than 1,500 young men with substance use and co-occurring mental health disorders. Gray Wolf is now a part of Newport Academy’s growing network of treatment centers across the country, with locations in Northern and Southern California, Connecticut, Pennsylvania, and Maryland. June 10, 2019 – Consolidated Care Inc. (“CCI”) announced that it will be acquired by TCN Behavioral Health Services (“TCN”), effective July 1, 2019. TCN is a not-for-profit agency that has provided adult and youth services in Greene County and the surrounding area for more than 25 years. It has locations in Xenia, Fairborn, and Kettering. The merger of the two agencies will allow for an expansion of behavioral health services.

Behavioral Healthcare Stocks down 7.2% in April The Behavioral Health Composite, which tracks investor interest in the three public behavioral healthcare companies – Acadia Healthcare (ACHC), American Addiction Centers (AAC), and Universal Health Services (UHS) – was down 7.2% for the month of April. The S&P 500, by comparison, was up 2.7% during the same period. The loss in the BHC index was mainly driven by AAC. American Addiction Centers – AAC (↓23.7%) fell sharply on the delivery of its postponed Q4 2018 earnings call. For Q4 2018, revenue decreased 26.6% to $57.4MM year over year. Net loss was ($1.52) per diluted common share and adjusted EBITDA was ($12.4MM). “The last several months of 2018 saw a census decline that was more significant than we originally anticipated, with an initial 30% drop in call volume resulting in a sharp decrease in admissions in the second half of 2018 which resulted in a corresponding decrease in revenue,” said Michael Cartwright, Chairman, and CEO. “However, admissions have begun to improve in early 2019, with average admissions per day up by more than 25% for March 2019 compared to December 2018.” The company is also exploring strategic alternatives in its real estate portfolio, including sale-leasebacks of individual facilities or larger portions of the company’s real estate portfolio, to generate additional liquidity. In March 2019, the company also closed a $30.0MM incremental term loan with its existing lenders. Acadia Healthcare – ACHC (↑8.0%) increased on positive Q1 2019 earnings. The Company reported revenue of $760.6MM for Q1 2019, a 2.5% increase from the same period the prior year. EPS was $0.34 per diluted share for Q1 2019 compared with $0.58 per diluted share for the same period the prior year. Total same facility revenue increased 5.6% for Q1 2019 YoY, including a 2.8% increase in patient days and a 2.7% increase in revenue per patient day. Total same facility EBITDA margin declined 150 basis points to 22.7%. U.S. same facility revenue rose 6.1%, on a 4.3% increase in patient days and a 1.7% increase in revenue per patient day. U.S. same facility EBITDA margin was consistent with the first quarter last year at 26.1%. U.K. same facility revenue grew 4.7% for the first quarter of 2019 from the first quarter last year, including a 0.9% increase in patient days and a 3.7% increase in revenue per patient day. U.K. same facility EBITDA margin declined 430 basis points to 16.3%. Acadia’s consolidated adjusted EBITDA for Q1 2019 was $136.0MM, compared with $145.7 million for the same period the prior year. Acadia also affirmed its previously established financial guidance for 2019. Universal Health Services – UHS (↓5.9%) was down for the month of April. On April 26th, UHS delivered its Q1 2019 earnings. EPS for Q4 came in at $2.45 per share, down 5.8% from estimates. Revenue came in at $2.75Bn compared to estimates of $2.74Bn. For the Behavioral Health segment, on the same facility basis, adjusted admissions inched up 2.9% while adjusted patient days dipped 0.9%, both on a year-over-year basis. Net revenues were up 3% during the quarter under review on the same facility basis. For the last twelve months (LTM), the BHC is well behind the S&P 500 at a -28.7% loss relative to the S&P’s gain of 11.0%. Valuation – Public Comps Below are the Enterprise Value / EBITDA and Enterprise Value / Revenue ratios for AAC, ACHC, and UHS. The valuations provide a relative barometer for what smaller companies can expect. Given the higher relative risk of smaller companies (e.g., less liquidity, smaller revenue base), we typically (though not always) see multiples that are lower than those of the public companies. Stock Prices Company 4/30/19 AAC $1.61 ACHC $32.02 UHS $126.87 Enterprise Value/EBITDA Company 4/30/17 4/30/18 4/30/19 AAC 12.23x 12.30x N/A ACHC 12.10x 10.91x 11.75x UHS 9.15x 8.59x 9.32x Enterprise Value/Revenue Company 4/30/17 4/30/18 4/30/19 AAC 1.35x 1.69x 1.20x ACHC 2.47x 2.23x 2.18x UHS 1.57x 1.40x 1.45x M&A News April 30, 2019 – BayMark Health Services announced the acquisition of Recovery Services of New Mexico (RSONM). RSONM has three traditional Opioid Treatment Programs (OTP), one physician’s office-based treatment program providing buprenorphine treatment, and a fifth location inside of Bernalillo County Metropolitan Detention Center providing opioid medication treatment services for incarcerated individuals. BayMark Health Services operates more than 218 locations, offering various treatment methods for opioid addiction, across the country. Mertz Taggart acted as exclusive M&A advisor to this transaction, representing the seller. April 23, 2019 – LifeSkills, Inc. (LifeSkills) and Pennyroyal Center, the largest behavioral health care organization in Southern Kentucky, have announced that they will merge as of July 1. The merged entity will total over 875 employees, and 26 service locations, all of which will remain in operation. The combined entity will have a total budget of just over $95 million and will continue to operate under the LifeSkills and Pennyroyal Center names in their respective markets. April 17, 2019 –Pinnacle Treatment Centers (PTC), a provider of accessible treatment for substance use disorders, announced it has acquired four outpatient opioid treatment programs within the state of Virginia, including one office-based opioid treatment program (OBOT) and three opioid treatment programs (OTPs) for adult men and women. The three OTPs are American Addiction Treatment Center (AATC) and the OBOT is Addiction Medicine Specialists Inc. April 16, 2019 – Bridges Fund Management, a specialist fund manager focused exclusively on sustainable and impact investment, with offices in London and New York, has made an investment in Sunrise, a medication-assisted treatment, and behavioral counseling program for individuals suffering from opioid use disorder. Sunrise provides medication-assisted treatment and behavioral counseling programs to individuals suffering from opioid use disorder, treating patients through five clinics in Ohio. Sunrise’s management team is retaining a significant ownership stake in the business. April 16, 2019 – Blue Sprig Pediatrics, Inc. (BlueSprig) announces that it has acquired the assets of West Texas Autism Center, a West Texas-based autism therapy provider with two clinics in Abilene and San Angelo. West Texas Autism Center is a clinic-based provider of Applied Behavior Analysis (ABA) therapy services treating children with Autism Spectrum Disorder (ASD). Headquartered in Houston, TX, BlueSprig is the largest autism services provider in Texas with locations in Ohio, Oklahoma, Oregon, South Carolina, and Washington. April 11, 2019 – Kadiant Inc., which was established in 2019 between Lani Fritts, TPG Capital, and Vida Venturesa as a provider of Applied Behavior Analysis (ABA) therapy to individuals with autism spectrum disorder (ASD), announced it has partnered with two ABA therapy providers: Kids Overcoming (KOI) and Integrated Behavioral Solutions (IBS). The founders of KOI and IBS will join Kadiant on the executive team. April 11, 2019 – Sprout Health Group, a leading network of inpatient and outpatient facilities for treating addiction and co-occurring disorders, announced the acquisition of Endeavor House North, a drug treatment center in Kearny, NJ. Sprout is assuming management of the program, including taking care of current patients, while also investing to revitalize the facilities. The acquisition enables Sprout to serve all regions of New Jersey and surrounding areas, while putting the group in-network with every major insurance carrier in the state, including Horizon Blue Cross Blue Shield, Optum, Cigna, and Aetna. Follow to link to see Behavioral Health Composite – June 2019

The Resurgence of Private Duty Home Care M&A 2018 was a booming year for health care M&A activity. That’s especially true when it comes to private duty home care transactions, largely because services that improve functional mobility, maintain cognitive engagement, and address social determinants of health are being increasingly valued within the broader continuum of care. Of the home health, hospice and home care segments, the home health industry saw the greatest number of total transactions in both 2017 and 2018. Home care, however, saw the most noticeable spike in deal activity. In 2017, there were just 20 home care deals. Last year, that more than doubled, jumping to 46 total transactions. “Private duty has suddenly received more attention and focus than it has in the past few years,” Cory Mertz, managing partner of Fort Myers, Florida-based M&A advisory firm Mertz Taggart, said. “That includes attention from public companies, along with private equity and strategic buyers.” Favorable Conditions for Home Care Indeed, in-home care is being more widely seen as a cost-effective way to monitor and manage patients, preventing unnecessary emergency room visits and potential re-hospitalizations. Part of that shift has been triggered by policymakers, who have opened the door for more in-home services and supports as supplemental benefits under Medicare Advantage plans, a trend that’s likely to continue in years to come. In fact, former U.S. Speaker of the House Paul Ryan recently spoke about the momentum that Medicare Advantage has seen of late during a keynote discussion at the National Investment Center for Seniors Housing & Care’s (NIC) spring conference in San Diego. “I believe the future for Medicare is in the Medicare Advantage type of space,” Ryan, who left office in January, said. “It saves money and it helps patients get better health outcomes.” Of the 46 home care transactions from 2018, 13 came from publicly traded companies, with Canada-based Nova Leap (TSXV: NLH) completing five deals and Baton Rouge, Louisiana-based Amedisys Inc. (NASDAQ: AMED) completing three transactions. Nova Leap has big plans for 2019 as well, already announcing its intent to acquire up to four additional agencies in the year ahead. Private equity companies completed eight “platform” transactions, including Bain Capital Double Impact’s acquisition and subsequent combination of regional health care companies Arosa and LivHome, plus KKR’s move to acquire and merge BrightSpring Health Services and PharMerica. An affiliate of Walgreens Boots Alliance (NASDAQ: WBA) was also a part of that deal. The remaining home care transactions came from PE-owned home health providers, other strategic buyers, and a handful of post-acute care groups. “A lot of these deals have been for standalone agencies, but we’ve even seen interest in franchise networks,” Mertz said. “And that’s for a few of reasons. Franchise deals can capture the growth of the industry, but they’re also more scalable, have a more recurring revenue model than agencies themselves, and the ability to establish regional or national partnerships with other care providers.” Tailwinds, To Be Continued… To some extent, the spike in transactions for home care — and lack of a similar spike in home health and hospice transactions — also has to do with major regulatory and oversight headwinds. On the home health care side, providers are facing the biggest payment overhaul in years under the Patient-Driven Groupings Model (PDGM), which could pose a nearly 6.5% cut to the industry depending on how certain behavioral adjustment aspects shake out. Home health providers also face the looming Review Choice Demonstration, an updated version of the widely opposed Pre-Claim Revenue Demonstration. When it comes to hospice, meanwhile, federal watchdogs have vowed to ramp up their efforts in sniffing out fraud, waste and abuse — positioning home care as a potentially safer bet in a time of change. “Home health, hospice and home care are all still attractive segments bound to see robust M&A activity due to the changing demographics of this country,” Mertz said. “But you can argue home care will see the smoothest sailing in the near-term, further propelled by Medicare Advantage opportunities that arise.” -Mertz Taggart

Considering a Hospice Sale At Some Point? Get Your Documentation in Order Now For hospice organizations looking to sell, the market has never been hotter. That is, of course, if a seller has all of its clinical records and compliance documentation in order. Hospice deal volume increased substantially from 2017 to 2018, increasing from 28 deals in 2017 to nearly 40 last year, proprietary Mertz Taggart data shows. In many cases, these transactions have included double-digit EBITDA multiples and soaring price tags, heightened by hospice’s favorable reimbursement climate and emerging positions within the overall continuum of care. Interest among private equity buyers — and sellers — has helped drive the hospice market as well. For proof, look no further than the recent rumors swirling around hospice giant Compassus’ reported sale interest. “Audax Group and Formation Capital bought Compassus in late 2014, so they’re likely nearing the ideal time to sell,” Cory Mertz, managing partner of Mertz Taggart, says. “But there are several reasons why this is a great time for any size hospice provider to explore the M&A market and capitalize on some of the trends we’re seeing.” “We’ve seen a record number of transactions announced, but we are also seeing a number of transactions not closing…” Clean documentation demonstrating a history of Medicare compliance is paramount to the success of any hospice deal, as unkempt recordkeeping can leave both buyers and sellers exposed to potential risk. That’s especially true with federal watchdogs, such as the U.S. Department Health and Human Services Office of Inspector General, more closely scrutinizing the hospice industry. “We’ve seen a record number of transactions announced, but we are also seeing a number of transactions not closing,” Mertz says. “Most operators assume that because they recently passed a state or accreditation survey, that they’re in good shape. But due diligence is very different from a survey. It’s an audit.” Medicare regulations change on a regular basis, so sellers need to show they’re keeping up, McBee Associates Inc. President Mike Dordick says. Pennsylvania-based McBee delivers financial, operation, and clinical consulting services to health care providers across the care continuum. “A review of your records by a third-party prior to sale can add value to your company in two ways,” Dordick says. “First, it gives the buyer the knowledge that you take compliance very seriously and were willing to show the result of that. Secondly, it can enhance the number of potential buyers by showing why your agency is more valuable than another that may be on the market.” Common Documentation Issues One of the biggest hospice deals to take place in 2018: Baton Rouge, Louisiana-based Amedisys Inc.’s (Nasdaq: AMED) play for New Jersey-based Compassionate Care Hospice for a fixed price of $340 million, inclusive of $50 million in payments related to a tax asset and working capital. The deal — which reflects the strong demand for hospice assets, particularly from home health companies — will effectively make Amedisys the third-largest hospice provider in the United States. But a clean compliance history and quality clinical records are important regardless of size, Rachel Hawkins, senior manager for Simione Healthcare Consultants LLC, says. When there are red flags, hospices generally have the same persistent issues across the board. Hospice agencies using outdated forms is a frequent issue according to Hawkins, who has worked on several hospice transactions in 2018. In some cases, that may mean hospice agencies using old language on notice-of-election forms. Often, hospice agencies fail to provide proof that interdisciplinary meetings included attendance by all core team members as well. “The intensity of the focus on hospice is only growing…” Other common issues: not meeting all face-to-face documentation requirements, using inappropriate diagnosis coding and having certifications of terminal illness (CTIs) that are missing information. While many of these are related to medical needs and Hospice Conditions of Participation (CoPs), agencies can’t afford to drop the ball when it comes to billing either, Hawkins says. “The intensity of the focus on hospice is only growing,” she says. “That said, our hospice leaders need to understand there is clinical compliance with the hospice CoPs, but also billing compliance. It is in this area of billing compliance and the technical requirements required to submit a claim that we see the largest knowledge gap.” Ensuring Best-in-Class Hospice Performance Hospice providers looking to sell can take several measures to ensure best-in-class performance and secure the most value for their business. That starts with educating all levels of staff on the most current hospice CoPs and Medicare billing requirements, while also designating a dedicated person to staff up-to-date on the hospice regulatory agenda — from both a state and federal perspective. Furthermore, sellers need to make sure they have established quality assurance programs in place that are simultaneously realistic and effective. These programs need to be able to monitor and measure key clinical outcomes, regulatory compliance and billing, while holding an agency accountable for performance. Software solutions can likewise serve as valuable tools, experts maintain. By and large, hospice providers that use software solutions to help with documentation and record-keeping report being more confident in their ability to survive audits and respond to formal additional documentation requests. And ultimately, it could make or break a deal when it comes to a potential acquisition down the road. “Buyers will be looking at acquisitions from an audit risk standpoint, anticipating more industry audit activity going forward, and the potential for significant clawback due to items that may have been overlooked in a survey,” Mertz says. “These things are easily correctable, but it’s important for agencies to be proactive and consistent with respect to documentation should they ever want to pursue a sale.” -Mertz Taggart

Why Exit Does Not (and Should Not) Mean Retirement Many people assume that when the subject of “exit” comes up with a business owner, we are discussing the owner’s retirement. This is not always true, and assuming it is true creates problems for owners, their companies, and their families. Exit does not have to mean retirement. Separating exit and retirement (and approaching them differently) makes for better exit planning, a smoother transition for the company, and happier life for the owner and his or her family. Here’s why. Business owners typically interact with their companies in three ways: Ownership – you own some or all of your company Involvement – you are engaged in your company’s activities, usually on a day-to-day basis Leadership – you are a leader within your company, typically the chief executive or similar level Put these three letters together and you get the word OIL. It’s helpful to remember this acronym because it can help owners better understand their personal exit goals and build flexibility into the exit planning process. The OIL Doesn’t Need to Flow Together In most situations, business owners think about and act as though their ownership of the company, their involvement within the company, and their leadership over the company are completely intertwined and inseparable. In other words, the OIL must always flow together. Owners often think this way because that’s how it’s been during their careers. Business ownership dominates their financial reality, they are fully involved in the company from a time and emotional standpoint, and they are clearly a leader over the company. However, the OIL does not need to flow together. You could sell some or all of your ownership of your company but remain fully Involved in the company and continue as the key leader. Or, you could keep your ownership of your company but hire a new CEO (or equivalent) to replace you as the company’s leader. Both examples demonstrate that you can pursue and implement different timelines for reducing or ending your ownership of the company, involvement in the company, and leadership over the company. Sure, sometimes at exit all three things end at once, but it does not have to be that way. You absolutely can “exit” your company but not retire. Overcome 3 Common Exit Planning Challenges All of this is significant because sometimes business owners get stuck in their “exit planning” if they think and act as though the OIL must always flow together. Here are three common exit planning challenges, and how thinking about OIL differently can lead to exit success: You want to sell some or all of your business to “take some chips off the table,” but you are worried about not knowing what you would do with yourself because you don’t want to retire. Well, we now know that you don’t have to retire. Consider targeting buyers who will acquire some or all of your company but want to keep you around and can offer exciting opportunities in the new organization. You want to sell your company to one or more employees, but you are worried about control — you must make sure the company performs well while buying you out. Well, we now know that you can continue to be involved in the company and remain the leader over the company while selling your ownership of the company. It’s possible for your ownership to decrease to nothing while you remain the chief leader of the company! (Ask us how to do this.) You want to pass your business down to one or more family members, but you don’t want to retire for now (and maybe never), nor do you want to give up control just yet (and maybe never). It’s possible to transfer some to all of your ownership to those family members without ever retiring (meaning without ending your involvement) and without giving up leadership unless and until you are ready. (Ask us how to do this.) Assuming that exit equals retirement creates roadblocks to exit success for the owner, his or her family, and his or her company. A better approach is to think about O, I, and L separately, and examine how unbundling these issues can create a better exit plan. -Mertz Taggart

Behavioral Healthcare Stocks Down 4.0% in October The Behavioral Health Composite, which tracks investor interest in the three public behavioral healthcare companies – Acadia Healthcare (ACHC), American Addiction Centers (AAC), and Universal Health Services (UHS) – was down 4.0% for the month of October. The S&P 500, by comparison, was down 7.3% during the same period. In related news… American Addiction Centers – AAC (↓25.7%) continues its slide. As mentioned in last month’s edition, analysts have become nervous for two reasons: 1) very disappointing Q2 earnings, missing consensus estimates by 50%; 2) spurring uncertainty about what AACs future business will look like after a substantial makeover in both operations and marketing. On October 16, Raymond James lowered its price target for AAC. Zacks Research then downgraded the stock from HOLD to SELL on October 17, which triggered the beginning of its most recent sell-off. Acadia Healthcare – ACHC (↑19.2%) increased on a rollercoaster October after a down month in September: The stock rose nicely – 10% during the first few days of the month until, on October 9th, the law firm of Levi and Korsinsky announced a class action lawsuit against the company. The suit alleges ACHC knowingly issued misleading statements about the quality of its then-recently-acquired UK operations and, while the stock was artificially inflated, the CEO and President collectively unloaded $35 million in company shares. The stock plunged over the next few trading days after the announcement. On October 18, Reuters reported that Acadia had been approached by private equity powerhouses KKR and TPG Global about selling itself. The buyout talks continue to underscore the interest by private equity firms in the sector. Universal Health Services – UHS (↓5.5%) declined slightly through the month on lowered outlook for the balance of the year. On October 26, UHS delivered Q3’18 results, which were generally positive. Revenue lagged estimates by 1.2% but beat prior year by 4.2%. However, EPS beat prior year by 36% and estimates by 11.5%, but it was not enough to overcome the somewhat more pessimistic outlook. For the last twelve months (LTM), the BHC is ahead of the S&P 500 at a 6.8% gain relative to the S&P’s gain of 5.3%. Valuation – Public Comps Below are the Enterprise Value / EBITDA and Enterprise Value / Revenue ratios for AAC, ACHC and UHS. The valuations provide a relative barometer for what smaller companies can expect. Given the higher relative risk of smaller companies (e.g., less liquidity, smaller revenue base), we typically (though not always) see multiples that are lower than those of the public companies. Stock Prices Company 10/31/18 AAC $5.51 ACHC $41.50 UHS $121.56 Enterprise Value/EBITDA Company 10/31/16 10/31/17 10/31/18 AAC 18.86x 12.66x 10.33x ACHC 13.60x 10.40x 11.51x UHS 9.06x 8.17x 9.03x Enterprise Value/Revenue Company 10/31/16 10/31/17 10/31/18 AAC 2.34x 1.43x 1.39x ACHC 2.89x 2.12x 2.32x UHS 1.60x 1.35x 1.44x M&A News October 1, 2018 – A consortium of investors, including Invo Healthcare Partners, announced the acquisition of Xcite Steps. Based in California, Xcite Steps provides Applied Behavioral Analysis (ABA) to children, adolescents, and adults with autism spectrum disorder (ASD) and intellectual and developmental disabilities. Invo Healthcare, a national provider of school and community behavioral health and other therapeutic services to individuals with special needs, including Autism Spectrum Disorder, acquired the company. This acquisition will build out Invo’s west coast platform by adding Xcite Step’s ABA services to their existing school and related therapy programs. October 2, 2018 – Varsity Healthcare Partners (“VHP”), a lower middle-market private equity firm focused on healthcare services, announced the completion of a growth capital investment in Ideal Option, a provider of medication assisted treatment (“MAT”) and behavioral counseling services for individuals suffering from Opioid Use Disorder. Headquartered in Kennewick, Washington, Ideal Option has delivered personalized medicine to over 20,000 patients through a network of 56 office-based opioid treatment (“OBOT”) clinics across 10 states. October 2, 2018 – BrightSpring Health Services recently acquired Gateway Pediatric Therapy, located in the Great Lakes Region. Gateway is a provider of center-based, in-home and community-based applied behavior analytic (ABA) services to children with Autism Spectrum Disorder. BrightSpring, owned by Onex Corporation, is a leading human services company that provides residential, therapeutic, job training and educational supports to people with developmental or other disabilities, to elderly people who need in-home care assistance, to youth with special needs, and to adults who are experiencing barriers to employment. October 3, 2018 – BayMark Health Services announced the acquisition of Tri-City Institute, a medication assisted treatment provider in Los Angeles, CA. Tri City, established more than 25 years ago, built a strong reputation by providing discreet, patient-focused medication assisted treatment services. Baymark provides medication assisted treatment to more than 46,000 patients in recovery from opioid use disorder. October 11, 2018 – Lighthouse Autism Center, a leading provider of center-based, Applied Behavioral Analysis (ABA) therapy, today announced a strategic investment from Abry Partners, a Boston-based private equity firm. The investment will allow Lighthouse to accelerate geographic expansion and to bring additional services to children with autism. It will also support Lighthouse’s continued focus on driving strong clinical quality and leveraging technology to better track and utilize data to enhance outcomes. The investment in Lighthouse represents the latest platform in the continuation of Abry’s healthcare investment strategy. October 19, 2018 – Seaside Healthcare, a Louisiana-based behavioral healthcare services company, announced that it has acquired Faith in Families Mental Health Agency, which is headquartered in Reidville, N.C. Founded in 2008, Faith in Families provides mental health services for children, families and adults at its four North Carolina locations. Faith in Families joins the Seaside network of treatment centers, which operate in North Carolina, Louisiana and Georgia. October 24, 2018 – NexPhase Capital (“NexPhase”), a lower middle market private equity firm, announced the successful recapitalization of Action Behavior Centers, an Austin-based provider of Applied Behavior Analysis (“ABA”) therapy for children diagnosed with autism spectrum disorder (“ASD”). Action Behavior Centers has five locations in Texas and focuses on early intensive behavioral intervention for children between the ages of 2 and 6 years old in order to maximize clinical outcomes. October 24, 2018 – LEARN Behavioral, a provider network that serves children with autism and other special needs, has acquired Total Spectrum, a provider of applied behavioral analysis services for families and children with autism spectrum disorder. LEARN Behavioral, based in Baltimore, MD, serves more than 3,000 families annually. Based in Elmhurst, Ill., Total Spectrum operates in Illinois, Indiana, Michigan and Wisconsin, providing in-home and clinical-based applied behavioral analysis services for more than 400 clients per year. October 29, 2018 – Pennsylvania Adult & Teen Challenge, an addiction treatment and recovery facility in Rehrersburg, PA, acquired Naaman Center, a provider of outpatient treatment and care in Elizabethtown, PA. This partnership provides opportunities for both organizations to move into geographic areas in need of services for individuals suffering from substance use disorder. Both companies are faith-centered, non-profit organizations.