Vistria Group's quiet bet behind youth mental health care

Vistria Group quietly invested in Sandstone Care, a provider of behavioral health care for young people.

Why it's the BFD: The covid-19 pandemic-fueled lockdowns, isolation and related fallout, paired with the rising usage of social media networks like Instagram, have had an outsized impact on the mental health of our nation's teenagers.

• Vistria, an impact-oriented PE shop, has been laying breadcrumbs that point to its big intentions to help tackle the youth mental health crisis. With Sandstone, the firm is proving true to its words.

Details: While a deal was not formally announced, Vistria now lists Sandstone, led by CEO Michael Hunter, as a portfolio company.

• With a footprint spanning Colorado, Maryland and Virginia, Sandstone offers outpatient care for young adults and adolescents struggling with substance abuse and co-occurring disorders.
• That includes detox, teen residential treatment, extended care, day treatment, intensive outpatient, sober living and general outpatient programs.

Behind the scenes: Vistria, in response to the United States Surgeon General's call to take action on the youth mental health crisis, pledged $250 million in June towards investments in U.S. providers of youth mental health services over the next three years.

• Meanwhile, sources tell Sarah the deal for Sandstone is valued upwards of $200 million. Two sources previously placed the provider's EBITDA at around $12 million.
• Raymond James provided sell-side advice on a process that never fully got underway, sources add.

What they're saying: Discussing the increased need for mental and behavioral health care, and related investment opportunities, Vistria's Amy Christensen told PE Hub in April:

"We are especially focused on companies that are working with kids and teens, who were disproportionately impacted by the pandemic..."

• Christensen highlighted decreasing sigma and attractive reimbursement dynamics as appealing investment factors, in concert with a growth in demand.

The big picture: Chicago's Vistria is big believer in the need for greater access to behavioral health care in various formats, with Sandstone coming just a few months after its acquisition of Kalamazoo, Michigan-based Beacon Specialized Living.

• The deal for Beacon, a community-based provider of treatment to individuals with serious mental illnesses, was valued upwards of $300 million, sources told Axios in March.
• Other current portfolio companies include BHG Recovery, an operator of opioid-treatment centers and Vistria-owned since 2018; and Sevita, a provider of community-based care to individuals with intellectual, developmental, physical, or behavioral disabilities or other special needs. (Madison Dearborn bought 25% of Sevita at an approximately $3 billion valuation, Axios reported in January)

What else we're watching: Outcomes for other behavioral health deals that have yet to play out: Centre Partners' Bradford Health Services, Levine Leichtman's Monte Nido & Affiliates and Housatonic Partners' Embark Behavioral Health.

Vistria did not return requests for comment.