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Scoop: NexPhase seeks buyer for ABA therapy company Action Behavior Centers

Jul 13, 2022
Illustration of an autism ribbon wrapped around a stack of dollar bills.

Illustration: Shoshana Gordon/Axios

A sponsor-focused sale process is underway for NexPhase Capital Partners-backed Action Behavior Centers, sources tell Sarah.

Why it matters: ABC is among few scaled autism platform opportunities in play following a post-COVID slowdown of activity and could be a harbinger of more dealmaking to come. (At least one other smaller but independent autism therapy organization is also in the market, sources say.)

What's happening: Moelis and TripleTree are advising the sellers of the Austin, Texas-based business in what remains a competitive second round of the process, sources say.

  • Trailing adjusted EBITDA is approximately $40 million, with the company projecting $60 million in adjusted EBITDA by year-end, they say.

Flashback: NexPhase put the Texas autism-treatment company on the block in September 2019, less than a year into its investment, Sarah wrote previously.

  • Berkery Noyes was engaged last time around, with around $20 million of EBITDA marketed at the time, sources said then.
  • NexPhase, whose members spun out of Moelis Capital Partners in 2016, recapitalized ABC in October 2018. Cain Brothers advised on that deal.

Zoom in: ABC, which started as one center five years ago, today provides autism treatment across a network of more than 3,000 autism professionals in Texas, Arizona, Colorado and Illinois.

  • Its service mix is diversified, with varying techniques for treatment offered via centers, the home and school settings.

State of play: Labor challenges and attrition spurred by the pandemic have over the last six months started to stabilize, all the while the demand side of the equation continues to increase, says one investor with a company in the sector.

  • "We're seeing a rematching of the demand curve and supply of therapists coming back online." As the market normalizes, "you'll see a lot more activity," the source says, speculating that more autism platforms will soon come to market.
  • Certain PE-backed companies have faced challenges with M&A integration and fine-tuning recruiting and retention plans, another source says. ABC, by contrast, has grown entirely organically, which has likely helped insulate the company from turnover issues, the source said.

Yes, and: Diagnosis rates are still on the rise — with about 1 in 44 children identified with autism spectrum disorder, per the CDC — all the while the highly fragmented sector continues to call for greater professionalization.

Context: While add-on activity in autism has remained robust, there have been very few platform trades through the pandemic.

  • The last major change of ownership came in September 2021, when Abry Partners' Lighthouse Autism Center — which marketed $29 million in 2021 pro forma adjusted EBITDA for 2021 — commanded just north of $400 million in a sale to Cerberus Capital Partners, sources said at the time.
  • A wave of private equity firms entered the sector in the few years leading up to the pandemic, and generally speaking, assets have commanded teens to high-teens multiples (depending on what EBITDA you're talking about).

💭 Sarah's thought bubble: A long list of buyouts shops are three-plus years into their autism treatment investments, with some hitting five-year holds. That may suggest the sector is getting ripe for another flurry of M&A.

NexPhase declined to comment, while Moelis and TripleTree did not return requests for comment.

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