Private equity-backed Therapy Brands, whose collection of technology solutions aims to support the growing behavioral health industry, is evaluating a sale, according to four sources familiar with the process.
William Blair and Triple Tree are providing sell-side financial advice on the process, two of the people said.
Therapy Brands, backed by Lightyear Capital and Oak HC/FT less than three years ago, is marketing $50 million in 2021 EBITDA off of $125 million in revenue, the sources said. That’s up from just north of $100 million in revenue and adjusted EBITDA of approximately $35 million in 2020, some of the sources said.
While still in the early stages, sources speculated that Birmingham, Alabama’s Therapy Brands could fetch a multiple of EBITDA in the teens to as high as 20x, depending on which EBITDA figure buyers choose to underwrite when valuing the business.
Sources said the software platform’s end-market focus is likely to appeal to potential buyers as the broader behavioral healthcare space continues to see major growth. Demand for mental health services have been further accelerated by the covid environment, supported by underlying trends including the de-stigmatization of the industry, telehealth adoption and a push to improve patient access to care.
At the same time, sources said buyers when valuing the company are likely to factor in the integration of the various businesses that now make up Therapy Brands – which lists 19 brands on its website.
Therapy Brands through its multiple subsidiaries provides integrated vertical payments and software solutions for professionals in the behavioral and mental health market. Its offerings range from practice management software with integrated billing to data collection software and telehealth tools.
Through its collection of brands, Therapy Brands serves over 14,000 providers that specialize in psychotherapy, applied behavioral analysis, substance abuse, and other mental and behavioral health services, Lightyear states on its website.
The healthcare software company’s investor base looks poised to make out well on a potential exit, having grown significantly since Lightyear and Oak HC/FT made a majority investment in the company.
A Wall Street Journal report ahead of the July 2018 deal placed Therapy Brands’ pro forma EBITDA and 2018 revenue at approximately $18 million and $45 million, respectively.
With the transaction, Lightyear, a financial services-focused private equity firm, became the company’s lead investor, followed by Oak HC/FT, a venture-growth equity firm investing in healthcare and FinTech.
Previous investors, Providence Strategic Growth, Providence Equity’s growth equity arm, and Greater Sum Ventures, retained a significant minority investment at that time, the announcement said.
Aside from building out its umbrella of businesses, Therapy Brands in February 2020 brought on Kimberly O’Loughlin to succeed Shegun Otulana as CEO of the business. Otulana founded Therapy Brands as TheraNest in 2013.
Ross Crowley, founder of Therapy Brands’ early investor GSV, remains chairman of the company, according to his LinkedIn profile.
Crowley, interestingly, is also the founder of GSV portfolio business Ministry Brands – which provides cloud-based technology for faith-based institutions. Not unlike the Therapy Brands playbook, Ministry Brands grew rapidly through a similar premise – with an aggressive acquisition strategy that fueled its expansion in just 21 months to include a collection of 25 brands.
Also a former Providence Strategic Growth portfolio company, Ministry Brands scored Buyouts’ 2017 Deal of the Year Award for large market transactions. Sources familiar with the deal pegged Providence’s exit as having generated a net IRR at around 1,200 percent, with a 12.1x multiple.
Lightyear Capital declined to comment, while representatives of Oak HC/FT, Providence, GSV, Therapy Brands, William Blair and Triple Tree did not return PE Hub‘s requests for comment.