BEHAVIORAL HEALTH INDUSTRY OVERVIEW - … · BEHAVIORAL HEALTH INDUSTRY OVERVIEW September 2014 Investment banking services are provided by Harris Williams LLC, a registered broker-dealer

BEHAVIORAL HEALTH INDUSTRYOVERVIEW

September 2014

Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

BEHAVIORAL HEALTH MARKET OVERVIEW

The US Mental Health and Substance Abuse Services industry includes over 17,000 facilities with combined annual revenue of approximately $50 billion.

Including ancillary services, broader industry revenues represent over $300 billion combined.

Mental health and substance abuse market has grown at a 2.1% CAGR from 2008 to 2014E and is expected to grow at a 2.8% CAGR from 2014E to 2018P.

Demand for mental health services has reached an all-time high and continues to grow, while the supply of hospital beds dedicated to mental health patients has steadily declined.

• 13.6% decrease in number of public psychiatric beds from 2000 to 2011

• Supply / demand disconnect has resulted in shorter stays, growth in outpatient / community-based services, and an increased prevalence of mental illness among prison and homeless populations

US mental health industry remains highly fragmented, continues to incorporate ACA changes, and is expected to remain dynamic.

1

…GROWING MENTAL HEALTH BUDGETS TO MEET DEMAND

Source: 2012 Behavioral Health, United States Report from SAMHSA. Wall Street research, Treatment Advocacy Center, National Alliance on

Mental Illness, IBIS World Mental Health and Substance Abuse Clinics in the US March 2014, IBIS World Mental Health and Substance Abuse

Centers in the US February 2014, IBIS World Psychiatric Hospitals in the US December 2013, the Pew Center, and Congressional testimony.

Increasing or level budgets in 44 states.

LARGE AND GROWING INDUSTRY ACCOMPANIED BY…

($ in billions)

2014E – 2018P

CAGR

3.4%

2.6%

2.5%

19.5 19.8 20.3 19.4 20.0 20.5 21.4 22.2 22.7 23.2 23.6

13.3 13.7 14.0 14.4 14.8 15.2 15.8 16.3 16.8 17.2 17.5

10.2 10.5 11.0 10.9 10.9 11.1 11.6 12.0 12.5 12.8 13.2$43.0 $44.0 $45.3 $44.6 $45.7 $46.9 $48.7 $50.5 $52.0 $53.2 $54.3

$0

$20

$40

$60

2008 2009 2010 2011 2012 2013 2014E 2015P 2016P 2017P 2018P

Psychiatric Hospitals

Mental Health & Substance Abuse Counseling / Residential Care

Mental Health & Substance Abuse Clinics

13.6% 5.1%

5.1%

6.5%

8.0%

11.8%

15.1%

16.8%

18.7%

0% 5% 10% 15% 20%

Other Non-

communicable Diseases

Chronic Respiratory

Diseases

Diabetes, Urogenital,

Blood, and Endocrine

Diseases

Musculoskeletal Disorders

Neoplasms

Cardiovascular and

Circulatory Diseases

Neuropsychiatric

Disorders

Percent of Total U.S. DALYs

MENTAL HEALTH AND NEUROLOGICAL DISORDERS CREATE LEADINGDISEASE BURDEN ON US ADULTS

2

Source: The World Health Organization (WHO), SAMHSA, 2010. US Burden of Disease Collaborators, JAMA, 2013, and Congressional Testimony.

Major studies have indicated that Mental / Behavioral disorders have a profound impact on both length and quality of patient life.

LEADING CATEGORIES OF US DALY CONTRIBUTORS

MENTAL / BEHAVIORAL DALY CONTRIBUTORS

Disability-Adjusted Life-Year (DALY) is a metric that combines the burden of mortality and morbidity (non-fatal health problems) into a

single number. The DALY metric is used to provide a single number to capture all of the health costs caused by a disease (or averted by an

aid program) and is calculated as the sum of Years Life Lost (YLL) due to disease and Years Lived with Disability (YLD).

DALY metric provides a holistic measure of total disease burden

Higher DALY scores may allude to commercial opportunity based upon:

• Reduction of YLL, which may yield a corresponding rise in YLD

• Niche opportunities for underserved chronic conditions

• Extensive co-morbidities may provide opportunities to create a best-in-class population health treatment platform

Americans with a Serious Mental Illness (SMI) experience a significantly shorter life-span than the general American population

Mental and

Behavioral Disorders

Neurological

Disorders

0.06%

0.12%

0.25%

0.32%

0.46%

0.67%

0.71%

1.02%

1.40%

2.28%

2.61%

3.37%

0% 1% 2% 3% 4%

Idiopathic Intellectual Disability

Other Mental and Behavioral Disorders

ADHD and Conduct Disorder

Eating Disorders

Autism and Asperger's Syndrome

Dysthymia

Bipolar Disorder

Schizophrenia

Alcohol Use Disorders

Anxiety Disorders

Drug Use Disorders

Major Depressive Disorder

Percent of Total U.S. DALYs

SUBSTANTIAL UNMET NEED FOR MENTAL HEALTH SERVICES RESULTINGFROM GROWING DEMAND AND CONTRACTING SUPPLY

Utilization of prescription therapies has grown to help serve the unmet need for mental health services, while outpatient and inpatient services has remained flat.

3

Age Group Gender

…PREVALENCE OF ADULT MENTAL ILLNESS AND ACA

Source: SAMHSA, Center for Behavioral Health Statistics and Quality.

INCREASING MENTAL HEALTH SERVICE USE DRIVEN BY…

13.0% 13.2% 12.8% 13.0% 12.9% 13.3% 13.5% 13.4% 13.8% 13.6%14.5%

7.4% 7.1% 7.1% 6.8% 6.7% 7.0% 6.8% 6.4% 6.6% 6.7% 6.6%

10.5% 10.9% 10.5% 10.7% 10.9% 11.2% 11.4% 11.3% 11.7% 11.5%12.4%

0.7% 0.8% 0.9% 1.0% 0.7% 1.0% 0.9% 0.8% 0.8% 0.8% 0.8%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Pe

rce

nt

Usi

ng

Me

nta

l H

ea

lth

Se

rvic

es

in t

he

Pa

st Y

ea

r

Any Type of Care Outpatient Prescription Medication Inpatient

…SUBSTANTIAL UNMET NEED & COMMERCIAL OPPORTUNITY ACROSS THE ADULT POPULATION

18.6%19.6%

21.2%

15.8%14.9%

22.0%

18 or Older 18 to 25 26 to 49 50 or Older Male Female

Pe

rce

nt

with

an

y M

en

tal Illn

ess

(AM

I) in

th

e P

ast

Ye

ar

41.0%

62.9%

45.9%

29.0%

8.5%

Any Mental

Illness (AMI)

Serious Mental

Illness (SMI)

Moderate

Mental Illness

Low (Mild)

Mental Illness

No

Mental Illness

Tre

atm

en

t in

Dia

gn

ose

d P

op

ula

tio

n

Over 1/3 of SMI Patients & Over 1/2 of MMI Patients

DO NOTReceive Treatment

REDUCED SUPPLY DESPITE GROWING DEMAND RESULTS IN…

620

640

660

680

700

720

740

760

780

800

64

66

68

70

72

74

76

78

80

82

84

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Beds (k) Admissions (k)

For the Years Ended December 31, 2000 to 2011

(13.6%)

GROWING POPULATION OF INDIVIDUALS ELIGIBLE FOR CARE

4

…ARE DIMINISHING THROUGH RECENT REFORMS


REASONS FOR NOT RECEIVING MENTAL HEALTH CARE…

Recent changes from healthcare reform and reimbursement policies may promote expanded utilization• ACA seeks to reduce the negative stigma of mental

health and substance use disorder (SUD) treatments and services by:

• Including mental health and SUD benefits as “Essential Health Benefits”

• Applying federal parity protections to mental health and SUD benefits

• Providing more Americans with access to quality healthcare, mental health and SUD services

• Integrated Care models shift focus on inpatient treatment to a PCP lead team for treatment management

• Integrated care models may provide a path to greater “at risk” posture for both payors and providers

Healthcare reform aims to reduce the fiscal and psychological barriers to mental healthcare services.

5.5%

7.3%

7.9%

8.1%

8.2%

9.5%

9.5%

9.6%

10.2%

14.3%

22.8%

28.2%

45.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Health Insuance Did Not Cover Any

Treatment

Treatment Would Not Help

Health Insurance Did Not Cover Enough

Treatment

Might Have Negative Impact on Job

Did Not Want Others to Find Out

Fear of Being Committed /

Having to Take Medicine

Might Cause Neighbors /

Community to Have Negative Opinion

Concerned About Confidentiality

Did Not Feel Need for Treatment

Did Not Have Time

Did Not Know Where to Go for Services

Could Handle the Problem

without Treatment

Could Not Afford Cost

HHS ESTIMATES 62 MILLION WILL GAIN COVERAGE

ACA

Implementation

32

Small Group

Markets

23

Individual

Markets

7Federal Parity

Protections

30

(millions)

May be mitigated by ACA

Mental Illness, No

SUD

35.3MM

SUD and Mental Illness

8.4MM

SUD, No Mental Illness

12.3MM

MM

10MM

20MM

30MM

40MM

50MM

60MM

SUD and Mentally Ill Patients

SUBSTANTIAL UNMET NEED FOR MENTAL HEALTH / SUBSTANCE ABUSE

5

…PRESENTING A CLEAR UNMET PATIENT NEED


MAJORITY OF POPULATION REMAINS UNTREATED…

Adults diagnosed with both Substance Use Disorder (SUD) and Any Mental Illness (AMI) remain largely underserved.• Payment / reimbursement barriers may exist to achieving

appropriate care

− Certain states prohibit same-day billing for certain combinations of behavioral health services

− While Medicare often covers the services of licensed mental health practioners, many substance use treatment professionals are not licensed - which creates a funding gap

Only 8% of properly diagnosed patients receiving treatment, receive appropriate care

Substance abuse and mental health co-morbidity is untreated in over 50+% of population.

PREVALENCE OF SUBSTANCE ABUSE AMONG MENTALLY ILL

39.9%

29.4%

18.0%

34.5%

22.6%

8.6%

18 - 25 26 - 49 50+

SMI AMI

No

Treatment

54%

Mental

Treatment

Only

34%

SUD + Mental

Treatment

8%

SUD

Treatment

Only

4%

Medicaid

27%

Other State

and Local18%

Medicare

8%

Other

Federal5%

Private

Insurance27%

Out of

Pocket12%

Other Private

3%

2009

EVOLVING MENTAL HEALTH REIMBURSEMENT PARADIGM

Even as Medicare expands, private payors will be increasingly pressured to maintain coverage.

6

CURRENT MENTAL HEALTH FINANCINGPRE-ACA ACA REFORM IMPLEMENTATION

Federal

13%

State

45%

Private

42%

Fee-for-service dominates the entire healthcare industry including mental / behavioral health

State mental institutions have historically borne a heavy burden for those with a “Serious Mental Illness”, however, recent history has seen significant closure of state institutions

Employers could elect to offer less coverage to employees on mental health than on traditional physical health

State sponsored institutions have seen a reduction of funding and facilities

Medicare expansion and Mental Health Parity laws could expand potential patient population by up to 62 million

ACA parity regulations promote mental health as part of an “Essential Health Benefits”

Integrated care platforms (i.e., Medicare health homes) are piloting bundled payment programs

Source: National Alliance on Mental Illness. State Legislation Report, 2013.

POTENTIAL IMPACT OF CONTINUING HEALTHCARE REFORM

Higher levels of integration of medical and physical expected to promote higher quality outcomes based care.

7

Coordinated Co-Located Integrated

Level 1:Minimal

Coordination

Level 2:Basic Collaboration at a

Distance

Level 3: Basic Collaboration

On-Site

Level 4:Close Collaboration

On-Site with Some

System Collaboration

Level 5:Close Collaboration

Approaching an

Integrated Practice

Level 6:Full Collaboration a

Transformed / Merged

Integrated Practice

Individual screening /

assessment

Separate treatment plan

Evidence Based Practice

(“EBP”) unique to each

specialty

Individual screening /

assessment

Separate treatment plan

Separate responsibility for

care / EBP

May agree to specific

screening for in-house

referrals

Some shared info between

service plans

Shared knowledge of EBPs

Agree on specific screening

Collaborative treatment

plans for some patients

Some EBPs and training

shared, but focused on

specific population

Consistent common

screenings

Collaborative treatment

plans for shared patients

EBPs shared across system

with some joint monitoring

Standard population based

medical and BH screenings

Single patient treatment plan

EBPs are team selected

Physical / Behavioral health

are separate issues

Patient must navigate

separate practices

Health needs treated

separately; records are

shared

Patients may be referred;

care access still impaired


separately at same site

Proximity allows referrals to

be more successful


separately at same site

Internal patient referrals

allow for better follow-up

Health needs treated by

team for shared patients

Patient treated by a team,

as needed

All health needs treated by a

team

Patient experiences a

seamless response to all

healthcare needs

No coordination or

management

Up to providers to integrate

Some practice leadership in

info sharing

Some provider buy-in to

collaboration

Org leaders supportive, but

co-location viewed as

‘project’ or ‘program’

Provider buy-in to effective

referrals

Leadership supports

integration through problem

solving system barriers

Greater buy-in although not

consistent

Leadership supports closer

integration, practice areas

remain fundamentally the

same

Nearly all providers buy-in

Leadership supports

integration as primary

practice model

Integrated care embraced

by all providers

Separate funding

No sharing of resources

Separate billing

Separate funding

May share resources for

single projects

Separate billing

Separate funding

May share facility expenses

Separate billing

Separate funding; may share

grants

May share some OpEx

Separate billing

Blended funding; various

forms of expense sharing

Combined billing or

otherwise agreed upon

Integrated funding

Shared resources

Billing maximized for

integrated model

Timely and autonomous

decisions on care

Existing model

Maintains current operating

structure

Some info sharing helpful to

patients & providers

Co-location leaders to more

direct interaction

Referrals are more successful

Removal of some system

barriers

Patients viewed as shared

responsibility

More responsive patient care

Increasing provider flexibility

All / almost all system barriers

resolved

Patient needs addressed as

they occur

Services may overlap

Some aspects of care may

take a long time to be

diagnosed

Info sharing may not be

broad enough to affect care

Referrals may fail due to

barriers

Proximity may not lead to

greater collaboration

Limited flexibility with no

change to traditional roles

System issues may limit

collaboration

Conflicting agendas may

create tension

Practice changes may

create lack of fit for some

providers

Time is needed to smooth

integration

Sustainability issues may stress

the practice

Outcome expectations not

clearly established

Clin

ica

l

De

live

ry

Pa

tie

nt

Exp

erie

nc

e

Pra

ctic

e /

Org

an

iza

tio

n

Bu

sin

ess

Mo

de

lStr

en

gth

sW

ea

kn

ess

es

Gradual Movement to Integrated Healthcare

Current Goal

Source: SAMHSA.

Recovery 78%

Youth

16%

Weight Management

6%

NOTABLE INDUSTRY PARTICIPANTS

Large strategics remain the most likely consolidators in a highly fragmented space.

8

UHS ACADIA MAGELLAN

Market Cap: $11,068 MMLeverage: 2.3x Total Debt / EBITDA

Business DetailsOwn and/or operate 24 acute care hospitals and 193 behavioral health centers located in 37 states

50/50 revenue split between acute care and behavioral health care, but EBITDA is ~75% behavioral health based

Forecasting 4-4.5% total revenue growth for behavioral health business in 2014

“Our acquisition pipeline is very busy in the behavioral division. In fact, we have entered into an agreement to purchase the 48-bed Palo Verde Behavioral Health services facility in Tucson…Our goal is to add approximately 600 new beds, including 2 de novo hospitals and convert approximately 100 beds from residential treatment care to acute behavioral care in 2014.” – Steve Filton, CFO


Business DetailsAcadia is a facility-based behavioral healthcare company established in 2005 to acquire, develop and operate behavioral healthcare facilities

Acquired ~$600 MM in revenue over last 3 years

Improving mix of services by increasing acute psychiatric beds, now >60% of the 4,200 total beds

“Our current plans for 2014 call for more than 300 beds to be added. We also expect to continue to add beds through acquisitions…We currently have approximately $232 million of availability under the revolver, and this will be used primarily to fund future acquisitions.” – Joey Jacobs, CEO


Business DetailsManages behavioral health, radiology, and specialty pharmacy services for government agencies, health plans and corporations

Targeting $2.5 billion incremental revenue from Magellan Complete Care, a program integrating the management of physical and behavioral healthcare

Behavioral services, commercial and public, accounted for 70% of 2013 revenue

Forecasting 5% total revenue growth in 2014

Source: SEC filings, Capital IQ, Wall Street research, Market data as of September 10, 20141) For the year ended December 31, 2012. 2) For the year ended December 31, 2013.

Behavioral:

Commercial33%

Behavioral: Public Sector

30%

Radiology

Benefits

19%

Pharmacy

Solutions

18%

Segment Profit Mix2

Behavioral Services:

63% of Profit

PROVIDERS PAYOR / BENEFIT MANAGER

CRC

Owned by Bain CapitalLeverage: 6.7x Total Debt / EBITDA

Business DetailsA leading provider of treatment services related to substance abuse, troubled youth, and other addiction diseases and behavioral disorders

Recovery Division: 30 inpatient, 16 outpatient facilities, 58 comprehensive treatment centers in 21 states

Youth Division: Operates nine adolescent and adult programs in three states

Weight Management Division: 17 facilities in eight states and the United Kingdom

Acquired Habit OPCO in December 2013

CRC Revenue Mix1

Behavioral

Services:

100% of Profit

Company Ownership Description Services Offered

AdvoServ GI PartnersServes the needs of children and adults with intellectual and

developmental disabilities and severe behavioral challenges.

Autism, Pervasive Development Disorder, ADHD,

Schizophrenia, Depression, Psychosis, OCD

Aurora Behavioral Health Care PrivateOperates hospitals focused on behavioral health and chemical

dependency services for seniors, adults, adolescents and children.

Alcohol Abuse, Drug rehab, Mental Health, Anxiety,

Bipolar Disorder, Depression, PTSD

Beacon Health Strategies Diamond Castle Holdings

Engages in the development and management of mental health and

substance abuse programs for commercial, Medicaid and Medicare

populations.

Benefit Management for Mental Health, Drug

Rehab, Alcohol Abuse, Psychotropic Drug

Intervention Programs

Behavioral Health Group Frontenac Company

Provides opioid addiction treatment services. through treatment

centers. Offers pharmacotherapeutic maintenance and detoxification

services in a conventional outpatient setting.

Substance Abuse

Behavioral Health of the Palm

BeachesPrivate

Operates addiction treatment and mental health facilities and

specializes in the treatment of co-occurring disorders.

Mental Health, Drug Rehab, Alcohol Abuse, Eating

Disorders, Anger Management, Gambling

Castlewood Treatment Center Trinity Hunt Partners

Operates as a center for eating disorders recovery providing

comprehensive treatment for anorexia, bulimia, compulsive

overeating, and binge eating disorders.

Anorexia, Bulimia, Compulsive Overeating, Binge

Eating Disorders

Community Education Centers

(merged with MinSec

Correctional)

New Spring Capital

Operates community corrections facilities, behavioral health treatment

centers and outpatient programs for the rehabilitation of early release,

non-violent individuals in federal, state and local criminal justice

systems.

Mental Health, Drug Rehab, Alcohol Abuse

CRC Health Group Bain Capital

Provides treatment services related to substance abuse, troubled

youth, addiction diseases and behavioral disorders primarily in the

United States.

Mental Health, Drug Rehab, Alcohol Abuse,

Troubled Youth Programs, Weight Management,

Outpatient Opiate Programs

Eating Recovery Center Lee Equity Partners, LLC

Operates as an international center for eating disorders recovery

providing comprehensive treatment for anorexia, bulimia, binge eating

disorder and other eating disorders.

Anorexia, Bulimia, Binge Eating, Other Eating

Disorders

Elements Behavioral Health Frazier Healthcare Ventures

Develops or acquires a range of highly specialized programs that are

designed to achieve lasting recovery and sustained clinical

improvement for behavioral health issues.


Addiction, Adolescent Rehab, Christian Drug

Rehab, Eating, Sex Addiction, PTSD

Family Help & Wellness Trinity Hunt Partners

Partners with clinicians and educators to help families and adolescents

with emotional and behavioral issues that had not been adequately

addressed through previous family and local community interventions.

Mental Health, Drug Rehab, ADHD

Foundations Recovery

NetworkPritzker Group

Provides treatment for persons with a dual diagnosis of substance

addiction and mental health disorders.Mental Health, Drug Rehab

NOTABLE INDUSTRY PARTICIPANTS – PRIVATE COMPANIES

9

NOTABLE INDUSTRY PARTICIPANTS – PRIVATE COMPANIES

10

Company Ownership Description Services Offered

Genoa HealthcareBeecken Petty O'Keefe &

Company Builds and operates pharmacies for the mental health community.

Pharmacy provider to patients suffering from

schizophrenia, acute bipolar disorder, or severe

depression

Haven Behavioral Healthcare

Ascension Ventures, Clayton

Associates, Cressey & Co., WP

Global Partners

Provides inpatient psychiatric stabilization and treatment to senior

adults experiencing acute symptoms of depression, anxiety, psychosis

or other severe behavioral problems.

Mental Health, Drug Rehab, Alcohol Abuse, PTSD,

Marital Therapy

Monte Nido Holdings Centre Partners ManagementOffers residential programs for anorexia treatment, bulimia treatment,

binge eating disorder and exercise addiction treatment.Eating Disorders and Exercise Addiction

National Mentor Holdings Vestar Capital Partners

Operates a national network of local health and human services

providers offering an array of quality, community-based services to

youth with emotional, behavioral and medically complex challenges

as well as their families.

Mental Health

Oceans Healthcare General Catalyst PartnersLouisiana based healthcare company that specializes in the

development and management of behavioral health services. Mental Health with a focus on geriatric patients

Pyramid Healthcare Clearview Capital

Residential and outpatient programs aid individuals in recovery from

alcohol and/or drug addiction, mental health disorders and

adolescent behavioral problems.


Methadone

Res-Care Onex CorporationOffers residential, therapeutic, job training, and educational support

services in the United States, Puerto Rico, and Canada.Mental Health

Sequel Youth and Family Alaris Royalty CorpDevelops and operates programs for people with behavioral,

emotional, or physical challenges.

Mental Health, Drug Rehab, Sexual Offender

Treatment, Therapeutic Foster Care, Aggression

Replacement Therapy

South Bay Mental Health

CenterH.I.G. Growth Partners

Provides community-based services to children, adults, and families in

Eastern Massachusetts.

Mental Health, Substance Abuse, Children's

Therapeutic Day Activity Programs, Trauma

SpringstoneWelsh, Carson, Anderson, &

Stowe

Develops and operates private hospitals that treat mental illness and

substance abuse, targeting underserved communities throughout the

United States.

Mental Health, Drug Rehab, Alcohol Abuse, Acute

Care

The Meadows of Wickenburg /

Remuda RanchAmerican Capital

Provider of inpatient eating disorder treatment programs in the United

States, having treated more than 6,500 patients through a

differentiated multi-disciplinary treatment model.

Trauma, PTSD, Sexual Addiction, Alcohol Abuse, Drug

Addiction, Codependency, Depression, Bipolar

Disorder, Eating Disorders, Work Addiction, Gambling

Addiction

ValueOptions Crestview PartnersDesigns behavioral health and wellness solutions to address

organizational and individual needs.

Benefit Management for Mental Health, Drug

Rehab, Alcohol Abuse

PRECEDENT BEHAVIORAL HEALTH M&A TRANSACTIONS

Recent M&A activity has provided an uplift in valuations with the overall comparable transactions being traded at a median multiple of 9.0x LTM EBITDA.

11

PURCHASE MULTIPLES OF COMPARABLE TRANSACTIONS

($ in thousands)

Source: SEC filings, Capital IQ, Wall Street research.

Enterprise Enterprise Value/LTM

Target Company Acquirer Date Value Sales EBITDA

Crider Health Center, Inc. Pathways Community Behavioral Healthcare Pending -- -- --

Partnerships in Care Limited Acadia Healthcare Company, Inc. Jul-14 $660,000 2.3 x 8.8 x

Family Help & Wellness Trinity Hunt Partners Mar-14 -- -- 6.5 x

Habit OPCO, Inc. CRC Health Corporation Feb-14 $58,000 -- --

Sequel Youth and Family Services, LLC Alaris Royalty Corp. Jul-13 -- -- 8.0 x

Eating Recovery Center LLC Lee Equity Partners, LLC Jan-13 $150,000 -- 11.5 x

Amicare Behavioral Centers, LLC Acadia Healthcare Dec-12 $113,000 1.8 x 9.0 x

Behavioral Centers of America, LLC Centre Partners Management LLC Dec-12 $149,885 2.5 x 13.5 x

Monte Nido and Affiliates Centre Partners Management LLC; Centre Partners Fund V, L.P. Dec-12 -- -- 10.0 x

Ascend Health Corporation Universal Health Services Inc. Oct-12 $517,000 2.6 x 8.6 x

Foundations Recovery Network, LLC Pritzker Group Oct-12 $73,000 -- 8.3 x

Timberline Knolls, LLC Acadia Healthcare Aug-12 $67,750 2.1 x 9.1 x

South Bay Mental Health Center, Inc. H.I.G. Growth Partners, LLC Apr-12 $45,000 -- 7.5 x

Sonora Behavioral Health Acadia Healthcare Company Mar-12 $90,500 2.1 x 8.3 x

Genoa Healthcare, LLC Beecken Petty O'Keefe & Company Dec-11 $93,000 -- 8.5 x

Pioneer Behavioral Health Acadia Healthcare Nov-11 $77,000 1.0 x 11.1 x

Behavioral Health Group, Inc. Frontenac Company Aug-11 $90,000 -- 9.0 x

MeadowWood Behavioral Health System Pioneer Behavioral Health Jul-11 $28,091 2.0 x 14.8 x

Pyramid Healthcare, Inc. Clearview Capital Jul-11 $35,000 -- 7.0 x

Youth and Family Centered Services, Inc Acadia Healthcare Company Apr-11 $258,774 1.4 x 8.1 x

Psychiatric Solutions, Inc. Universal Health Services Inc. Nov-10 $3,015,220 1.6 x 9.8x

Res-Care Inc. Onex Corporation Nov-10 $538,071 0.3 x 5.7 x

AdvoServ, Inc. GI Partners Mar-10 $216,000 -- 7.2 x

Sequel Youth and Family Services, LLC Levine Leichtman Capital Partners Dec-09 $32,000 -- --

United Medical Corp., Five Facilities Psychiatric Solutions, Inc. Mar-08 $120,000 -- --

ValueOptions, Inc. Crestview Partners, L.P. Dec-07 $223,404 -- 6.3 x

Horizon Health Corp. Psychiatric Solutions, Inc. May-07 $419,218 1.5 x 11.4 x

Alternative Behavioral Services, Inc. Psychiatric Solutions, Inc. Dec-06 $210,000 1.1 x 9.5 x

Aspen Education Group, Inc. CRC Health Corporation Nov-06 $311,600 -- 10.7 x

Remuda Ranch Company Haven Behavioral Healthcare, Inc. Jul-06 $84,000 -- 10.7 x

National Mentor Holdings, Inc. Vestar Capital Partners Jun-06 $743,000 -- 9.6 x

The Meadows of Wickenburg, Inc. American Capital Mar-06 $90,000 -- 8.5 x

CRC Health Corporation Bain Capital Feb-06 $722,900 -- 11.0 x

Focus Healthcare, LLC Horizon Health Corp. Feb-06 $96,917 -- --

Lighthouse Care Centers, LLC Horizon Health Corp. Feb-06 $31,520 -- 9.5 x

KEYS Group Holdings, LLC Universal Health Services Inc. Oct-05 $207,000 -- 8.3 x

Ardent Health Services, Inc. Psychiatric Solutions, Inc. Jul-05 $571,604 -- 11.1 x

Sierra Tucson, Inc. CRC Health Corporation Jan-00 $130,000 -- 11.0 x

High of Entire Group: $3,015,220 2.6 x 14.8 x

Median of Behavioral Health Transactions: $125,000 1.8 x 9.0 x

Low of Entire Group: $28,091 0.3 x 5.7 x

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HW&Co. Confidential

HW&Co. Confidential

Harris Williams & Co. (www.harriswilliams.com) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.

Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

THIS REPORT MAY CONTAIN REFERENCES TO REGISTERED TRADEMARKS, SERVICE MARKS AND COPYRIGHTS OWNED BY THIRD-PARTY INFORMATION PROVIDERS. NONE OF THE THIRD-PARTY INFORMATION PROVIDERS IS ENDORSING THE OFFERING OF, AND SHALL NOT IN ANY WAY BE DEEMED AN ISSUER OR UNDERWRITER OF, THE SECURITIES, FINANCIAL INSTRUMENTS OR OTHER INVESTMENTS DISCUSSED IN THIS REPORT, AND SHALL NOT HAVE ANY LIABILITY OR RESPONSIBILITY FOR ANY STATEMENTS MADE IN THE REPORT OR FOR ANY FINANCIAL STATEMENTS, FINANCIAL PROJECTIONS OR OTHER FINANCIAL INFORMATION CONTAINED OR ATTACHED AS AN EXHIBIT TO THE REPORT. FOR MORE INFORMATION ABOUT THE MATERIALS PROVIDED BY SUCH THIRD PARTIES, PLEASE CONTACT US AT +1 (804) 648-0072.

The information and views contained in this report were prepared by Harris Williams & Co. (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The f inancial instruments discussed in this report may not be suitable for all investors, and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

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BEHAVIORAL HEALTH INDUSTRY OVERVIEW - … · BEHAVIORAL HEALTH INDUSTRY OVERVIEW September 2014 Investment banking services are provided by Harris Williams LLC, a registered broker-dealer