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CONTRIBUTORS
Eric Williams
Managing Director
215-854-4065
Mark Surowiak
Director
215-854-4063
November 2019www.capstoneheadwaters.com
Capstone Headwaters
We are witnessing an unprecedented level of merger and acquisition (M&A)
activity and once-in-a-generation valuations for quality providers of autism and
childhood behavioral health services. The industry is growing at a rapid rate
due to increasing prevalence of developmental disabilities such as autism
spectrum disorder (ASD); more accurate diagnostic tools enabling earlier
identification; rising emotional, behavioral, and mental issues among school-
aged children; mounting recognition among parents and educators regarding
the benefits of early intervention; and mandated insurance coverage now in all
50 states. With 62 announced or closed transactions in the sector through
September 2019, transaction activity this year has nearly surpassed the record
levels experienced in all of 2018. Private equity (PE) has led much of the deal
activity, citing the favorable industry dynamics, market fragmentation, and
benefits of scale both operationally (training, recruiting, compliance, outcomes
data, payer leverage, etc.) as well from a valuation (multiple
expansion) perspective.
TABLE OF CONTENTS
Industry Overview
Key Trends & Drivers
Client Case Study
Notable Transactions
Select Transactions
Firm Track Record
AUTISM & CHILDHOOD
BEHAVIORAL HEALTH SERVICES
Q4 2019
INDUSTRY OVERVIEW
Source: Capital IQ, PitchBook, FactSet, and Capstone Headwaters Research
Date Target Acquirer Transaction Type
09/25/19 Invo HealthCare Golden Gate Capital Platform
09/24/19 Alpine Academy/Interventions Family Treatment Add-on
09/23/19 New England ABA Stepping Stones Add-on
05/06/19 Hopebridge Arsenal Capital Platform
04/05/19 SPG Ridgemont Equity Platform
03/15/19 Proud Moments Audax Group Platform
11/16/18 ABA of North Texas Pharos Capital Platform
Select Private Equity Transactions
Approximately 95% of children with autism have at least
one comorbid condition and over half have four or more
chronic conditions, such as anxiety, ADHD, OCD, and
emotional disorders to name a few, according to Open
Minds.1 In response, many experts are recommending a
multi-disciplinary approach involving speech language
pathologists, occupational and physical therapists,
psychologists, special educators, and medical specialists in
addition to behavioral therapists. This integrated
approach enables treatment plans to be tailored to the
individual needs of the child while more effective
collaboration/coordination among clinicians should yield
better outcomes for the child. In addition, parents benefit
from the added convenience of multi-disciplinary clinic
versus the alternative of seeing a multitude of specialists
at different locations.
2
Autism & Childhood Behavioral Health Services | Q4 2019
KEY TRENDS & DRIVERS
In 2018, the Center for Disease Control and Prevention
increased its estimate of Autism’s prevalence by 15
percent to one in 59 from one in 68 just two years prior
(Center for Disease Control and Prevention2) however,
many experts suggest this figure is grossly understated.
According to two national surveys conducted in 2016
which appeared in JAMA Pediatrics and Pediatrics, autism’s
prevalence was found to be closer to one in 40, according
to the Organization for Autism Research.3 While there is
heightened awareness among physicians, educators, and
parents, it is estimated that as many as 30% of children
with ASD remain untreated.
The Individuals with Disabilities Education Act (IDEA)
mandates the provision of free and appropriate public
school education for eligible students. Between 2011 and
2018, the number of students served under IDEA has
increased from 6.4 million to 7.0 million, as stated by the
National Center for Education Statistics.4
Correspondingly, the growth in the number of autistic
children served has followed this trajectory. The most
recent reported figures suggest there were approximately
617,000 children with autism receiving education under
the act for the 2015-2016 school year. Preliminary
estimates for the 2017-2018 school year suggest there are
up to 700,000 autistic students served under IDEA, an
increase of 13.5%.
RISING PREVALENCE OF AUTISM AND BETTER
DIAGNOSTIC TOOLS
INCREASE IN COMORBIDITY AMONG ASD CHILDREN
378417
455498
538576
617
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013 2014 2015 2016Stu
den
ts (
tho
usa
nd
s)
Autistic Children Served Under IDEA
Source: National Center for Education Statistics
Source: National Center for Education Statistics
0% 10% 20% 30% 40%
Specific Learning Disability
Speech Language Impairment
Other Health Impairment
Autism
Developmental Delay
Intellectual Disability
Emotional Disturbance
Multiple Diseases
Hearing Impairment
Orthopedic Impairment
Student Served by Disability Type (2017-2018)
3
Autism & Childhood Behavioral Health Services | Q4 2019
With more comprehensive health coverage including large
group, small group, and individual plans combined with
federal and state funding for children with disabilities,
children and families are gaining greater access to care
and coordinated treatment plans throughout the home,
school and community settings. As such, providers that
offer a multi-disciplinary approach towards behavioral and
emotional development are experiencing heightened
demand and have garnered significant interest from
investors. Recent transaction activity has supported this
trend highlighted by Golden Gate Capital’s acquisition of
Invo HealthCare Associates (page five), which provides
services including ABA, SLP, and OT. In addition, Five
Arrows-backed The Stepping Stones Group has continued
to utilize inorganic growth to expand its treatment
offerings. The special education solutions provider
acquired Cobb Pediatric Therapy Services (February 2018,
undisclosed) in order to enhance its SLP offerings. The
transaction preceded Stepping Stones purchase of New
England ABA (see page five), growing its presence in the
home and community-based treatment market.
In April and August 2019, Wyoming and Tennessee
became the 49th and 50th states, respectively, requiring
insurance plans to cover medically necessary care for
autism, including ABA, marking a significant milestone for
individuals and families with ASD granting access to timely
access to medically necessary treatments. Additionally,
the federal government, through the IDEA continues to
play a prominent and permanent role in promoting
educational equality for children with disabilities. As a
grant basis statute, IDEA requires states agree to, “provide
a free appropriate public education (FAPE, i.e. specifically
designed instruction provided at no cost to the parents
that meets the needs of a child with a disability) to every
eligible child.”
In fiscal year 2019, funding totaled $13.4 billion with the
lion share allocated to Part B, at $12.8 billion (children
ages three and 21) which is up slightly from 2018
appropriations of $12.3 billion, according to Congressional
Research Service.5 In school year 2017-2018, the National
Center for Education Statistics reported that the number
of students who received special education services under
the IDEA Part B totaled 7.0 million or 14% of the national
public-school population.
INCREASING INSURANCE COVERAGE AND FEDERAL
FUNDING IN U.S.
KEY TRENDS & DRIVERS (CONTINUED)
Autism & Childhood Behavioral Health Services | Q4 2019
4
SPG partnered with Ridgemont Equity Partners (April 2019,
Undisclosed)
Capstone Headwaters advised SPG on its partnership with Ridgemont Equity
Partners. Terms of the deal were not disclosed.
SPG is a leading provider of behavioral health and allied healthcare clinicians
to school districts and early intervention agencies serving children with
Autism Spectrum Disorder (ASD), special needs, and
developmental/behavioral issues. The Company’s experienced staff of
behavioral analysts, speech-language pathologists, behavioral therapists and
technicians, developmental therapists, and school psychologists play a vital
role in improving educational outcomes for special needs children
and students.
Susan Stark, M.S., CCCSPL and Founder and President of SPG commented,
“Our partnership with Ridgemont will not only allow us to expand
geographically but also offer new treatment modalities to better serve the
autism community. Ridgemont has deep experience investing in behavioral
health and we are excited for the future growth of SPG.”
“Demand for healthcare staffing services related to special education
programs in the US is being fueled by the following factors: a trend among
school districts and agencies to increasingly rely on outsourced specialists to
meet rising therapy requirements, an acute shortage of therapists in many
regional markets, growing population of special needs children due to
better diagnosis and increased prevalence of developmental disabilities such
as Autism Spectrum Disorder, and mounting cognizance among parents and
educators of the benefits of intensive therapy and early intervention,”
commented Eric Williams, Managing Director of the Philadelphia-based
Capstone Headwaters deal team.
CLIENT CASE STUDY: SPG
has partnered with
Ridgemont is excited to
partner with SPG, whose
clinical excellence, and
strong reputation among
therapists, schools and
families provides a strong
foundation for growth.
“
”- Scott Poole, Partner at Ridgemont
Golden Gate Capital acquires Invo HealthCare Associates, Inc.
(September 2019, Undisclosed)
Golden Gate Capital has acquired leading multidisciplinary, research-based therapy services provider,
Invo HealthCare Associates for an undisclosed sum. Founded in 1993, Invo offers autism and childhood
behavioral health services throughout the country in homes, schools, and community-based centers. It
leverages over 2,500 clinicians including board certified behavioral analysts, registered behavioral
technicians, speech-language pathologists, and occupational and physical therapists. Operating in 27
states, Invo serves more than 70,000 children annually in areas including ABA and behavioral and
mental health services.
San Francisco-based Golden Gate Capital is a leading private equity firm with $15 billion of committed
capital operating across a wide range of industries. Golden Gates purchase of Invo highlights the
heightened demand for multidisciplinary providers of developmental and behavioral services, offering
treatment through multiple avenues. The acquisition will propel Invo’s expansion initiatives to increase
its network of clinicians in order to provide widespread care to those diagnosed with autism and other
developmental challenges.
The Family Treatment Network Inc acquires Alpine Academy and Interventions Unlimited, Inc.
(September 2019, Undisclosed)
Pharos Capital-backed Family Treatment Network (FTN) has acquired ABA education and therapy
services provider Alpine Academy and Interventions Unlimited. Terms of the deal were not disclosed.
Alpine Academy operates as a private day school for children diagnosed with ASD and is
supplemented by Interventions which provides home and clinic-based programs for ASD, behavioral or
emotional problems, and other developmental disabilities.
FTN is a leading child and adolescent behavioral health services platform, specializing in autism services
and ABA therapy. The Tennessee-based special education and therapy provider was established by
Pharos Capital in 2016 in order to manage its portfolio of special needs schools, psychiatric residential
treatment centers, and community-based programs. The transaction expands FTN’s footprint into the
southeast and enhances its home, school, clinic, and community-based care solutions. “The need for
specialized, ABA-based autism services continues to grow, and we are pleased to expand our
geographic reach into Florida through this high-quality addition to our network,” commented Ed Irby,
CEO and Chairman of FTN, in a press release.6
The Stepping Stones Group, LLC acquires New England ABA
(September 2019, Undisclosed)
The Stepping Stones Group, backed by Five Arrows, has acquired New England ABA for an undisclosed
sum. Founded in 2015, New England ABA is an in-home and community based ABA therapy provider
for children and adolescents with autism. New England ABA will leverage The Stepping Stones national
footprint and clinical and operational capabilities to expand its autism treatment services in home and
community settings.
Since acquiring The Stepping Stones Group in January 2018 (undisclosed), Five Arrows has made three
add-on acquisitions to enhance its platform investments’ offerings in ABA therapy, speech pathology,
and other services to treat autistic and developmentally challenged individuals. “The acquisition of New
England ABA represents the execution of our articulated vision to expand The Stepping Stones service
delivery model to the community,” commented Michael Langer, Managing Director of Five Arrows
Capital Partners, in a press release.7
Several notable transactions have been announced or completed in the industry in 2019. Select transactions are outlined below,
followed by a more comprehensive list on the following page.
5
NOTABLE TRANSACTIONS
Autism & Childhood Behavioral Health Services | Q4 2019
Acquires
Acquires
Acquires
And
Date Target Acquirer Target Business Description
09/25/19 Invo Golden Gate CapitalProvides research-based therapy to children with developmental delays
including autism.
09/25/19New England
ABAStepping Stones Provides in-home and community ABA therapy.
09/24/19Alpine Academy /
Interventions
Family Treatment
NetworkProvides ABA-based educational services and ABA therapy to children.
09/11/19 Creative Kids Childcare Cadence Education Provides education centers for children.
08/23/19 Children Inc.Cincinnati Early Learning
CentersOffers child care and education services through research-based strategies.
08/22/19 American Institutes CVD MaterialsOffers educational services implementing behavioral and social science research.
07/11/19 Thrive Autism Solutions Blue Sprig Pediatrics Provides ABA analysis for autism spectrum disorders.
06/25/19 FastBridge Learning Illuminate EducationDevelops software for student progress including social emotional behavior assessments.
06/19/19 Rockstar Recruiting Stepping StonesProvides therapy, nursing, and behavioral health services to children with autism.
06/18/19Verbal Behavior
ConsultingBlue Sprig Pediatrics
Offers ABA therapy services to children with autism spectrum disorder.
05/06/19 Hopebridge Arsenal CapitalOffers ABA analysis, physical, occupational, and speech treatments to children.
05/02/19 Life Academy Christian Life Academy Provides schooling programs for pre-school through 12th grade.
04/05/19 SPG Ridgemont EquityProvides school and clinic-based behavioral health and therapeutic services to children.
03/29/19 Tangible Difference Blue Sprig PediatricsOffers aerospace test systems, automated test systems, and software integration.
03/29/19 MindfulNickelodeon Global
Network
Develops an educational mobile app that focuses on early childhood learning.
03/27/19 The Village Academy O2B Kids Operates a preschool and pre-k learning institution.
03/20/19STEM Learning
LabEdgeMakers Provides curriculum and development programs for K-12 educators.
03/19/19LEARN IT
SYSTEMSGryphon Provides academic and special education programs.
03/15/19 Proud Moments Audax Group Offers school and home-based autism behavioral health services.
02/11/19Stellar Collegiate Charter
SchoolCarmen Schools Offers 4K through third grade education services.
02/06/19 Glynlyon Weld North Provides educational opportunities for Pre-K through 12th grade students.
01/15/19 PV Waggle Houghton MifflinDevelops a learning platform for grades 2-8 that analyzes student
learning behavior.
01/04/19Therapeutic
InterventionsncgCARE
Provides school-based programs, therapeutic services, and foster care to children.
Note: CF = confidential; highlighted deals are Capstone Headwaters’ transactions
Source: Capital IQ, PitchBook, FactSet, and Capstone Headwaters Research
SELECT TRANSACTIONS
6
Autism & Childhood Behavioral Health Services | Q4 2019
FIRM TRACK RECORD
7
WEST TENNESSEE
BUSINESS COLLEGE
valuation advisory has been acquired by has been acquired by
has been acquired by has been acquired by
has secured financing
from
CMS SMALL-CAP
PRIVATE EQUITY FUND
has secured financing
from
A Premier Provider
of Early Education
& Childcare Services
has been acquired by has been acquired by
has been acquired by
has been acquired by
a portfolio company of
THE CARLYLE GROUP
has been acquired by
have been acquired by
and
has partnered with
Autism & Childhood Behavioral Health Services | Q4 2019
has partnered with
CITATIONS
1. Open Minds, “Autism-Increasing Demand, Increasing Cost & New Service Models,” https://www.openminds.com/market-
intelligence/executive-briefings/autism-increasing-demand-increasing-cost-new-service-models/, accessed November
14, 2019.
2. Centers for Disease Control and Prevention, “Data & Statistics on Autism Spectrum Disorder,”
https://www.cdc.gov/ncbddd/autism/data.html, accessed November 14, 2019.
3. Organization for Autism Research, “New Studies Estimate Autism Prevalence at 1 in 40,” https://researchautism.org/new-
studies-estimate-autism-prevalence-at-1-in-40/, accessed November 14, 2019.
4. National Center for Education Statistics, “Children and Youth with Disabilities,” ,
https://nces.ed.gov/programs/coe/indicator_cgg.aspaccessed November 14, 2019.
5. Congressional Research Service, “The Individuals with Disabilities Education Act (IDEA), Part B: Key Statutory and
Regulatory Provisions,” https://crsreports.congress.gov/product/pdf/R/R41833, accessed November 14, 2019.
6. P&T Community, “Pharos Capital’s Family Treatment Network Makes Strategic Investment in Alpine Academy and
Interventions Unlimited,” https://www.ptcommunity.com/wire/pharos-capitals-family-treatment-network-makes-
strategic-investment-alpine-academy-and, accessed October 8, 2019.
7. PR Newswire, “The Stepping Stones Group Acquires New England ABA, Inc,” https://www.prnewswire.com/news-
releases/the-stepping-stones-group-acquires-new-england-aba-inc-300923614.html, accessed October 9, 2019.
8
Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi-
tion activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any reference to or omission of
any reference to any company in this report should not be construed as a recommendation to buy, sell or take any other action with respect to any security of
any such company. We are not soliciting any action with respect to any security or company based on this report. The report is published solely for the
general information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial situation or
needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all
investors. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied
upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary
materially. We are under no obligation to update the information contained in this report. Opinions expressed are our present opinions only and are subject
to change without notice. Additional information is available upon request. The companies mentioned in this report may be clients of Capstone Headwaters.
The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such company. This
report may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The information contained
herein should not be construed as legal advice.
Autism & Childhood Behavioral Health Services | Q4 2019
Mark Surowiak
Director
[email protected] | 215-854-4063
Mark is a Director in the Philadelphia office with over 15 years of experience in mergers & acquisitions,
private placements and financial advisory services. While Mark's primary focus includes clients in the
health and medical industry, his experience spans a broad range of industries, including government
and defense contracting, manufacturing and outsourced business services sectors. Prior to investment
banking, he enjoyed a career in the social services field.
Previously, Mark served over 10 years as a senior investment banking professional in Morgan Stanley
Smith Barney’s Capital Strategies Group. Over his career, Mark has focused on developing deep
credentials and expertise in the sale and recapitalization of privately held businesses. He is a Series 7
and 63 Registered Securities Representative.
Autism & Childhood Behavioral Health Services | Q4 2019
Eric Williams
Managing Director
[email protected] | 215-854-4065
Based out of Philadelphia, Eric serves as a Managing Director at Capstone Headwaters and leads
Capstone’s Health and Medical practice. Eric has successfully completed more than 100 transactions in
sectors including contract manufacturing, pharmaceutical outsourcing, medical devices, and life
sciences, and health care services. Prior to Capstone, Eric was responsible for managing the Eastern
region for Morgan Stanley Smith Barney’s Capital Strategies Group and its predecessor, Citi Capital
Strategies. Eric has 20 years of experience managing strategic sale assignments and leveraged
recapitalizations for owners of privately held companies.
He has also executed complex cross-border transactions with foreign buyers based in London, Germany,
Sweden and Switzerland and has structured deals with leading private equity groups and strategic
corporate buyers. Previously, Mr. Williams worked as a senior executive with Newport Securities
Corporation. He graduated cum laude from the University of California and is a Series 7 and 63
Registered Securities Representative as well as a Series 24 Registered Securities Principle.
AUTISM & CHILDHOOD BEHAVIORAL HEALTH SERVICES REPORT CONTRIBUTORS
2019
GLOBAL M&A MIDDLE MARKETINVESTMENT BANK OF THE YEAR
2019
INVESTMENT BANKING FIRM OF THE YEAR
2019
TURNAROUND AWARDS
U.S. MIDDLE MARKET INVESTMENT BANK OF THE YEAR
2019
INDEPENDENT INVESTMENT BANKING FIRM OF THE YEAR
12
www.capstoneheadwaters.com
Capstone Headwaters is an elite investment banking firm dedicated to serving the corporate finance needs of middle market
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reach that includes over 450 professionals in 40 countries.
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