Commentary: There’s tremendous opportunity to provide access to mental and behavioral health services

The Vistria Group co-head of healthcare Amy Christensen says she foresees slow dealmaking conditions stretching until the end of the year.

Why it matters: Amid a market rife with broken processes, dealmakers are moving forward with caution and creativity.

This interview by Aaron Weitzman originally appeared in Axios Pro’s Expert Voices series. It has been edited for length, style and clarity.

What’s your diagnosis of the current market environment and what might it take for it to “normalize”?

“I think the credit markets have opened up in a positive way and it feels like there’s more stability in that market than there has been in the last six, nine, 12 months.”

“But the reality is that rates are still high and leverage multiples have changed.”

“On the equity side, there is capital to be deployed and an appetite to do deals, but we still have a bid-ask spread in some parts of health care that I think is making it challenging to get deals done. I think you might still see the current deal environment persist for another six months.”

How is Vistria navigating the specter of broken processes and what have your observations been as a buyer?

“We’re still going through the normal process and focusing, like I said, on this balance between liquidity and making sure that you have a valuation and a structure that reflects the value creation.”

“I will say, in the broader market, it does feel like we’re seeing people get more creative on deals, and that tends to play out in the structuring of transactions.”

“So we’re seeing concepts and trends that we haven’t seen in a few years, and I think it’s LPs are looking for liquidity.”

“We’re also seeing concepts like seller debt come into place in a more meaningful way than we have in the past, where sellers are willing to take a piece of paper, structured in a lot of different ways, but typically structured as debt, as opposed to getting cash for their business.”

Given Vistria’s focus on behavioral health, what’s the outlook on M&A in the sector?

“Even with the market conditions as they are, we believe there are secular trends and tailwinds in healthcare that will persist regardless of the short-term deal environment and behavioral health definitely falls into that place.”

“We believe there’s still tremendous opportunity to not only provide access to mental and behavioral health services, but truly integrate those services into the broader health care ecosystem.”

“I do expect that we’ll see more health plans try to figure out how to better manage their spend and what assets they’re going to need to aggregate if they want to manage that patient population and not spend in-house versus outsourcing it, which they’ve traditionally done.”

“I think that actually creates an interesting buyer universe for behavioral health that maybe hadn’t existed a couple of years ago.”

Amy Christensen is a Senior Partner and Co-Head of Healthcare at The Vistria Group.