Footnotes
- Capital IQ, Company websites, and Press releases
- Substance Abuse and Mental Health Services Administration - 2018 NSDUH Annual National Report
Substance abuse treatment facilities M&A update
Read more about M&A trends and activity in this sector
Substance abuse treatment facilities M&A update
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Substance abuse treatment facilities M&A activity overview
Several factors are driving consolidation of addiction/substance abuse treatment facilities by both private equity funds and strategic healthcare organizations
- The addiction/substance abuse treatment market in the U.S. is highly fragmented and is ripe for merger and acquisition activity, investments and partnerships.
- Historically, deals for substance use disorder treatment facilities have accounted for more than 40% of the total behavioral healthcare sector deals.(1)
- The ACA’s mandate for health plans to cover substance abuse services has put health insurance coverage within reach of many more affected individuals, which is increasing deal activity in the sector.
- Going forward, a healthy amount of activity is expected to continue within the sector and a number of small independent programs are likely to be acquired by larger, better capitalized, and more managerially sophisticated enterprises.
- Private equity’s interest in behavioral and drug and alcohol rehabilitation facilities comes in response to a growing need for recovery services.
- Consolidation is expected to be driven by opportunities to leverage new regulations that increase access to care and to introduce economies of scale and scope into a highly fragmented industry.
Substance abuse treatment facilities transaction activity(1)
Deal activity by geography since 2018
Key factors driving consolidation activity in the substance abuse treatment sector
Highly fragmented market with low concentration
The market is highly fragmented with most enterprises operating on a local or regional basis.
Macro trends
The number of substance users has increased to 164.8 million in 2018 which presents an opportunity for treatment facilities to grow.(2)
Potential for economies of scale
Size advantages present an opportunity for investors to create value through improved profit margins and return on growth investments.
Favorable regulatory environment
Expanded healthcare coverage under the Mental Health Parity and Addiction Equity Act of 2008 and the Affordable Care Act of 2010.
We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below.
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Walter Olshanski
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Walter Olshanski
Managing Director, KPMG Corporate Finance LLC