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Wellbeing: Ticket sizes increase in European mental health services M&A— Dealspeak EMEA

Going to therapy has slowly been becoming more mainstream for years. As a result of this secular trend, ticket sizes in deals involving European mental health clinics and psychotherapy services have also been creeping higher.

“On the one hand, we see mental health services increasing exponentially; on the other, we can observe increasing destigmatisation of the treatments,” Steven Hacking, Partner at Eversheds Sutherland said. “That, combined with the productivity challenge, absenteeism, and the question of how we can get people back into work, are factors driving the sector.”

Deal volumes took off in 2023, largely thanks to the restructuring of a French care-homes provider Orpea, according to Mergermarket data. Following the debt-to-equity swap and cash injection, worth EUR 4.7bn, the company changed its name to emeis. It specializes in care and support for vulnerable people.

Between 2017 and 2020, the number of transactions in the area of mental health clinics/psychotherapy remained relatively constant (19 in 2017, 18 in 2018, 17 in 2019, 18 in 2020). The number of deals hit 32 in 2021.

Although deal count fell to 19 in 2022 and 14 in 2023, many of these were large-ticket transactions, including Orpea/emeis. Aggregate volumes hit EUR 8.5bn in 2023 – a clear record. The previous record over the last decade was EUR 2.3bn in 2016.

The year to date (YTD) is already off to a flying start with nine deals worth EUR 103m. This includes a fundraising of USD 20m from Spanish ifeel, which provides a mental-health platform, as reported.

Social concerns

Wellbeing has become a hot topic post-pandemic, with different stakeholders interested in the sector, according to Milena Prisco, Partner at Italian law firm Pavia e Ansaldo, who has assisted Unobravo, a provider of online psychotherapy services, in capital transactions. Unobravo has recently onboarded Northzone and H14 as new partners, as reported, and at the end of 2023 signaled interest in the M&A activities.

The changing deal dynamics reflect the democratization of mental health services, Prisco said. At the same time, wellbeing is also an important theme for corporates as executives grapple with their environmental, social and governance (ESG) strategies, she said.

A Berlin-based healthcare company called 7Mind is an example of this trend. It offers mindfulness and meditation content to its c.150,000 subscribers, which includes bothindividual users (B2C) and corporates (B2B). It was sold to private equity (PE) firm Oakley Capital’s portfolio company Gymondo at the end of last year, as reported.

Visions of deals

Further deals are expected. DomusVi, a French sponsor-backed owner and operator of nursing homes, has received expressions of interest for its mental health division Mentalia Saludas reported. The unit has attracted PE interest and could be worth more than EUR 100m.

Meanwhile, the Polish provider of psychotherapy online solutions Wellbee looks to consolidate its market with about three transactions within 18 months, and is in talks with potential targets, as reported.

Further to the leftfield, Beckley Psytech, a UK-based developer of novel psychedelic therapies for neuropsychiatric disorders, is looking to raise more than USD 100m next year to fund Phase III trials of a naturally occurring psychedelic compound for treatment of treatment-resistant depression. It could hire an advisor, as reported.

Psychedelic treatment remains complex from a legal and regulatory perspective.

In terms of the broader segment, regulatory issues can slow down consolidation, particularly with cross-border deals, Prisco said, adding that dealmakers need to take issues from data protection to tax into consideration.

Looking further ahead, artificial intelligence (AI) will be an emerging theme. Tech-enabled services are particularly exciting to investors, Hacking said, adding that governments are likely to take notice if providers can generate good results with earlier intervention.

As old-fashioned taboos about seeking help fade away, dealmakers can expect much more activity in the years ahead, from innovative AI providers seeking capital to PEs looking to back consolidators.