Merger and acquisition firm Mertz Taggart has created a Behavioral Health Composite (BHC) index that will demonstrate the sector’s market performance and track trends over time. It’s a proprietary composite representing the publicly traded behavioral health companies: Acadia Healthcare (ACHC), American Addiction Centers (AAC) and Universal Health Services (UHS).
“It’s meant to serve as a proxy for investment interest in the behavioral health industry,” says Cory Mertz, managing partner with Mertz Taggart. “Generally speaking, as the interest in the industry goes up or down, so goes the index.”
The BHC graphic will be updated monthly and provides historical data starting from Nov. 1, 2014—the first month after AAC began trading publicly. Mertz anticipates that the index will reflect market corrections as well as highs and lows in investor confidence.
Additionally, a separate table compares stock prices and enterprise value of ACHC, AAC and UHS. It’s important to pinpoint the EBITDA multiples because they indicate the downstream multiples that each company might be able to command in the future, he says.
“Public companies are the ultimate consolidators in the industry, so the value that the publics can command will ultimately affect the private market,” Mertz says.
Smaller organizations might sell to private equity, who eventually might sell to other financial buyers, who then might sell to the three big consolidators, he says. Tracking the composite performance helps behavioral health executives understand the direction of the market overall.