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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. 

That list includes FFL Partners, Blackstone Group, TPG Capital, Gryphon Investors, Webster Equity, WindRose Health Investors, KKR, and Arsenal Capital Partners. 

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

1 big thing: Autism therapy M&A back in play

Illustration of an autism ribbon wrapped around a stack of dollar bills.

Good things come in threes for benefits startup Nomi Health, which on Wednesday bought Everyone Health and Sano Surgery for $26.5 million, marking its third such buy this year, CEO Mark Newman tells Erin exclusively. 

Why it's the BFD: The deal comes as consolidation continues linking like-minded health tech startups hoping to round out their offerings.  

Flashback: Highly acquisitive Nomi in January acquired Artemis Health, which uses data to help U.S. employers fine-tune health offerings, for $200 million.

Deal details: The company's most recent transaction will help Nomi expand its range of services and become a company specializing in what Newman calls "everyday delivery."

"As we expand to everyday delivery, we want to go higher level in terms of access points," says Newman. "The basics you need to go to school and live life have changed. Where do people go? We're building our own nationwide network."

As part of the deal, 12 full-time employees from Sano and Everyone join Nomi.

How it works: Based in Orem, Utah, Nomi connects employers with care providers. It has also provided COVID-19 testing for the state of Utah. 

The company's latest buys, Everyone and Sano, serve as online marketplaces for medical treatments. 

While Everyone has agreements with self-funded employers and third-party administrators, Sano has a network of roughly 6,000 medical facilities and 8,000 labs.

Context: Unification is particularly apparent in the health benefits sector, where Nomi operates and where point solutions have long ruled. For example:

Benefits company Accolade last summer acquired primary care startup PlushCare in a $450 million cash and stock deal.

Care navigation startup Transcarent in 2020 acquired BridgeHealth, a company that links workers with care sites.

What they're saying: As the health benefits sector matures, consultants tell Erin they foresee more and more platforms forming from the ashes of point solutions. 

"A lot of what we're seeing is point solutions that need to get brought together so we can serve the end-to-end needs of a state or county," Newman agrees.

Yes, but: Nomi found itself in hot water in March when federal authorities notified the company that several of its COVID testing sites were not in compliance with government standards, documenting issues such as leaving supplies out in the cold and failing to properly time test results, per Deseret News.

Newman says the issue has "been entirely resolved" and resulted from test sites being run during the peak of the COVID Omicron wave in the middle of winter, using state-provided tests Nomi was not as familiar with.

By the numbers: Newman wouldn't disclose Nomi's revenue but said it was in the nine-figure range.

The company serves 20,000 people daily with the care delivery portion of its business, he says.

And over the last year, it has added roughly 500 staff.

What's next: Nomi aims to be a kind of health plan enabler that helps to ensure access to care for underserved and vulnerable populations.

"We need to tie together the rebel alliance against the empire of traditional U.S. health care," Newman says.

2. The BFD: On buying streak, Nomi acquires Everyone & Sano for $27M

Illustration of two checks forming a health plus. 

Mirroring a slowdown in digital health funding this year, acquisitions in the sector also fell during the first half of the year, per a recent Rock Health report.

Why it matters: The volatile market is having a chilling effect on M&A activity in the health tech sector, which was supposed to heat up this year.

Flashback: Investors across the sector predicted that health tech consolidation — which peaked in 2021 — would continue to rule in 2022.

There were 574 M&A deals in the health tech sector last year —including Ginger and Headspace's $3 billion tie-up — up 44% from 2020, according to a CB Insights report.

We — and many others — thought the trend would continue, but we may have been wrong.

By the numbers: Last year saw, on average, 23 digital health mergers and acquisitions each month.

That dropped significantly during the first half of this year: While Q1'22 averaged just under 20 monthly M&A exits, Q2'22 averaged just 13.

What they're saying: Rock Health researchers say several factors are putting a damper on digital health M&A, including ...

Buyer anxiety: "With public and private markets in choppy waters, enterprises are likely to respond by conserving cash, trimming non-essential projects, and avoiding any decisions (including M&A) that could ruffle their shareholders’ feathers."

Mismatches between high 2021 valuations and performance and profitability in 2022.

"We wouldn’t be surprised if some acquirers that planned to close a deal in H1 2022 are choosing to extend their diligence process given marketplace sentiment," the report's authors write.

Yes, but: It's possible that M&A activity for the year is just off to a slow start, the researchers note.

"As 2022 continues, we expect to see digital health’s pace of acquisitions in the private markets rise once acquirer confidence buoys in the market," write Rock Health researchers Ashwini Nagappan and Adriana Krasniansky.

3. Acquisitions, meet adjustment

Xilis, a Durham, N.C.-based developer of precision therapy guidance tech for cancer, raised $19m in Series A extension funding (round total $89m). FPV Ventures led, and was joined by Alexandria Venture Investments and insiders EQT Life Sciences, Mubadala, Pear Ventures, GV, Duke Angel Network, Catalio Capital Management, Two Sigma Ventures, Felicis Ventures and Alix Ventures. www.xiliscom

 Brightline, a Palo Alto-based tele-mental health startup, raised $10m in Series C extension funding from Northwell Health. http://axios.link/K9J0

Kins, a New York-based virtual physical therapy startup, raised $4m in seed funding. W Health Ventures led, and was joined by Redesign Health. http://axios.link/dN7o

Acoustic, a medical device company focused on ultrasound technology, closed an undisclosed funding round. 

Heritage Group invested in TwelveStone Health Partners, a provider of comprehensive chronic care medication. https://www.12stonehealth.com/ 

As part of a new strategic partnership, Medtronic agreed to make an an additional investment of up to $75m into CathWorks, an Israeli medtech company focused on cardiovascular disease.

Medtronic has an option to acquire CathWorks by July 2027 in a deal valued up to $585m, plus potential additional earn-out payments. https://www.cath.works/

TherapeuticsMD, a women's health care company, announced the termination of its merger agreement with Athene Merger, an affiliate of EW Healthcare Partners. https://www.therapeuticsmd.com/

4. Deals o' the day

Certara appointed Eran Broshy, former CEO of inVentiv Health (now part of Syneos Health), to its board of directors.

Amae Health named former Carbon Health senior program development manager Jen Zhu chief of staff.

Walmart Health promoted Amber Olsen from Epic clinical applications program manager to director of clinical applications.

Story Health named Saint Luke’s Mid America Heart Institute heart failure specialist Andrew Sauer to its advisory board.

Hazel Health named former Audacious Inquiry chief product officer Zach Novak its chief product officer.

5. It's Personnel

🎪 Erin got tickets for her first outdoor music festival since the pandemic started, and she is equal parts nervous and excited.

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July 13, 2022

1 big thing: Autism therapy M&A back in play