Behavioral health M&A in motion: Monte Nido, Embark, Bradford

Private equity sellers are taking three different behavioral health companies to market.

• Centre Partners' Bradford Health Services, Levine Leichtman's Monte Nido & Affiliates and Housatonic Partners' Embark Behavioral Health are all currently exploring sales, sources tell Axios.

Why it matters: As demand for behavioral health services continues to outstrip supply, investors and strategic buyers of all types are deploying capital behind the sector's various subspecialties in a meaningful way. Ideally, more money in the sector means more access to care.

Consider Optum's recent $1.2 billion Refresh Mental Health buy, and the funding of virtual-first mental health startups like Eleos Health, which this morning raised $20 million in Series A funding.

Driving the news: In one of three situations, sources tell Axios that Jefferies is providing financial advice to Chandler, Ariz.-based Embark on a potential sale.

• Embark, formerly known as Calo Programs, provides various treatment programs for teens and young adults struggling with mental health and substance abuse issues.
• The company generates close to $40 million in EBITDA, sources say. That's up from some $5 million of EBITDA when Housatonic invested a minority stake in January 2017, one person adds.
• In other recent adolescent-focused mental health dealmaking, Onex Partners last year invested in Newport Healthcare at a $1.3 billion valuation.

Yes, and: Harris Williams is advising on the potential sale of Bradford Health Services, which sources say generates some $20 million to $30 million of EBITDA.

• Centre Partners’ investment in the Birmingham, Ala.-based business dates to mid-2016.
• Bradford provides drug and alcohol addiction treatment programs, both on an inpatient and outpatient basis, and via detox facilities, in Alabama, Arkansas, Mississippi, North Carolina and Tennessee.

Finally, initial bids were due March 22 for LLCP’s Monte Nide, one source says.

• Monte Nido, which Sarah first wrote in October had engaged Harris Williams for a sale, treats adults and adolescents with eating disorders.

• Approximately $45 million of EBITDA is marketed for the business, sources say. Since LLCP invested in September 2016, the company has more than doubled its footprint to 40 programs across 13 states.
• Arguably the best comp for Monte Nido is Eating Recovery Center (although it has more recently expanded into mood and anxiety treatment), which Apax Partners and Oak HC/FT joined hands to acquire in an approximately $1.4 billion deal in October, Sarah wrote previously.
• That translated to more than 15x ERC's marketed EBITDA of $91 million, sources said then, or closer to 18.5x when applying pro forma EBITDA, another source said.

The bottom line: Investors are lining up to back behavioral health providers, and that may ultimately help address the category's access program, both by adding new treatment facilities and leveraging virtual capabilities.

LLCP and Harris Williams declined to comment. Centre Partners, Housatonic, Embark, Bradford and Jefferies did not return requests for comment.