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Scoop: Linden starts sale process for Pinnacle Treatment Centers

Jul 14, 2022
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Illustration: Sarah Grillo/Axios

Linden Capital Partners is exploring the sale of addiction treatment provider Pinnacle Treatment Centers, multiple sources tell Axios.

Why it matters: Demand for better access to behavioral health services, including substance abuse treatment, continues to outpace supply.

  • U.S. drug overdose deaths in 2021 were up 15% year over year, led by opioid and meth use, according to the CDC.
  • Secular tailwinds have long fueled demand for behavioral health care, and the consequences of the pandemic, be it unemployment or loss of life, have only added to long-term distress — increasing that supply-demand imbalance.

What’s happening: Lincoln International has been hired to manage the sale of Pinnacle, which is just kicking off, sources say.

  • Mt. Laurel, New Jersey-based Pinnacle is projecting around $70 million to $75 million of 2022 EBITDA, sources say.

Context: Pinnacle offers various programs including detoxification, residential, inpatient, partial hospital and outpatient treatment for those suffering from substance abuse addiction. It also offers medication-assisted treatment for opioid addiction.

  • Pinnacle treats more than 10,000 daily via its more than 115 locations in eight states.
  • That implies its footprint has grown almost four-fold under Linden's six-year hold — at the time of sale, Pinnacle was a 30-plus facility network in five states.

State of play: Private equity firms have built out a handful of behavioral health platforms dedicated to addiction treatment.

  • Community Medical Services, an opioid treatment provider, was acquired by FFL Partners and Two Sigma Impact in December.
  • Behavioral Health Group is an opioid treatment network that Vistria Group bought in 2018 at a valuation of $250 million-plus, Sarah wrote then.
  • BayMark Health Services is an opioid addiction treatment company that Webster Equity Partners put into a continuation fund last year.
  • Summit BHC is an acute psychiatric care and addiction treatment company that Patient Square Capital bought for a $1.3 billion enterprise value last year, producing a 4x return for sellers Lee Equity and FFL Partners, Sarah wrote.

💭 Our thought bubble: Despite a spate of sponsor-driven activity, quality questions have made investing in the space more challenging in past years.

  • However, as programs increasingly focus on quality metrics, evidence-based practices and payor transparency, we could see more capital flow into the sector—particularly against the backdrop of a continuing opioid crisis.

Linden declined to comment and Lincoln did not immediately return a request for comment.

Claire Rychlewski contributed to this report.

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