Any insights on sales multiples in outpatient mental health deals?

November 29, 2024

by an intermediary from The College of New Jersey in Princeton, NJ, USA

Hey everyone, Happy Thanksgiving.

I’m looking to get some education from anyone who’s done outpatient mental health practice M&A.

We currently own three outpatient therapy clinics in central NJ. We’re part of a franchise system with cpom regulations so we have to separate out the clinic entity and the MSO.

We’ve been open for 1.5 years and we’ll finish this year around $1.7M top line. We’re still only around 30% capacity across the three clinics so we have a ton of room to grow in###-###-#### We’ve reached break even and will be profitable with around 10-12% net margins going forward.

Assuming we get all three clinics at full capacity (12 therapists per office, 45 clients per therapist), does anyone have an idea what kind of EBITDA multiple we could command, approx?

Reply by a searcher
from Columbia University in Miami, FL, USA

Hi Andy, we do mental health outpatient acquisitions exclusively.

The franchise variable - depending on the franchise - could be an issue for an acquirer. But leaving that aside, if you're doing 12% on 5.66 of top-line, that'd be 680 of EBITDA. Are you just talk therapy (no higher margin lines of business like psychiatry, psych testing)? If so, and you were doing 680 EBITDA right now, maybe you could get around 5x EBITDA.

Too small for us now but NJ is interesting to us so may be worth a chat in the new year.

Reply by a searcher
from New York University in United States

Does your franchise have a franchise development person that you can talk to? That's probably the best source for comps. The market for scaled platforms (multi-location, 3-5MM+ EBITDA) is fairly robust (probably 10x+) but for smaller practices it depends on a ton of factors (and it also doesn't help that some of the roll up platforms have M&A on pause at the moment).

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