Months after news broke that Eating Recovery Center (ERC) was potentially up for sale, Apax Funds and Oak HC/FT have joined forces to buy the treatment provider.
The two firms have acquired ERC for a reported $1.4 billion from CCMP Capital in a deal first reported Tuesday morning by PE Hub.
Denver-based ERC is one of the nation’s largest eating disorder treatment providers, operating around 30 centers across Colorado, California, Illinois, Texas, Ohio, Maryland and Washington.
ERC’s offerings include inpatient services, intensive outpatient programming (IOP) and virtual care. ERC also operates a division called Pathlight, which provides mood and anxiety treatment.
“Our new partners have the right culture, experience, and expertise to fuel our growth while allowing us to remain focused on providing the very best care to patients and their families,” Ken Weiner, ERC’s founder and current executive chairman, said in a press release. “With the support of Apax and Oak HC/FT, we will look to expand our services across the country.”
Sources familiar with the deal told PE Hub that ERC is projecting $91 million of pro forma mature EBITDA for 2021. The deal for ERC indicates a growing interest by private equity investors in the domestic eating disorder treatment market, which is estimated to be worth a billion dollars, according to research company IBISWorld.
Eating disorders — which is the second deadliest diagnosed behavioral health condition after opioid use disorder (OUD) — afflicts over 30 million Americans. Worldwide, twice as many people suffer from eating disorders as they did in 2000.
Along with the acquisition capital received from Apax and Oak HC/FT, the eating disorder treatment market — on the whole — has placed providers like ERC in a prime position to expand upon services going forward.
“We are thrilled to partner with Apax and Oak HC/FT on the next phase of our journey to expand access to mental health treatment in the U.S.,” Rebecca Steinfort, ERC Pathlight’s CEO, said in the press release. “In addition to growth capital, we believe our new partners bring the right digital DNA to accelerate the growth of our virtual care offering.”
CCMP purchased ERC for a reported $580 million from Lee Equity Partners in 2017. At the time, ERC had a pro forma adjusted EBITDA of about $45 million, as reported by PE Hub.
The M&A market for healthcare companies continues to strengthen in 2021 and ahead of the projected increases in US capital gains taxes. There is unprecedented capital in market, the lowest interest rates in US history and strong acquirer motivations for high quality healthcare companies. Across the continuum of care, buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
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