TPG steps up with $1.2bn deal for LifeStance Health

Showing its conviction around the future growth potential of the behavioral health company, TPG underwrote the deal in all equity in the midst of a downturn.

Breaking the M&A silence in the wake of the global health crisis, TPG agreed to acquire LifeStance Health using all equity with the ability to obtain financing down the line, according to people familiar with the matter. 

The deal assigns the national provider of behavioral health services an enterprise value of $1.2 billion, representing a high teens multiple of EBITDA, the people said. 

Summit Partners and Silversmith Capital Partners, which backed LifeStance in 2015 upon its formation, will remain minority investors in the company, one of the sources said. 

Proving that prized assets can still transact even while debt markets are largely shut down, TPG is providing a full equity backstop to support the deal. Under a full equity backstop, the sponsor commits to underwrite the full purchase price with equity and is able to obtain debt financing later. 

TPG, based out of Fort Worth and San Francisco, prevailed over other large buyout funds in the running, with around four finalists down to the wire, sources said. There were conversations earlier in the process among bidders evaluating a 364-day bridge loan, one of the people noted.

The deal is also emblematic of Jefferies’ retail healthcare franchise, with LifeStance one of the only bank-run processes to move forward as planned after the covid-19 crisis hit. Based upon PE Hub research and previous reports, the bank has not pulled a retail healthcare deal from the market. 

In the wake of the downturn, most leveraged buyouts and sale processes are indefinitely put on hold or shut down. Examples include Thoma Bravo’s Imprivata and CapVest’s Curium, as previously reported by PE Hub.  

Although first round bids for LifeStance were fielded in early March, only days before quarantines were put into effect in cities nationwide, the auction persisted, sources said. 

That’s largely because LifeStance remains uniquely positioned, as one of few behavioral health providers of scale that has an opportunity to execute significant M&A in an industry ripe for growth, the people said. 

LifeStance, based in Bellevue, Washington, provides behavioral health services for children, adolescents and adults suffering from a variety of mental health issues. Its services are offered in multiple settings, including acute inpatient, partial hospitalization, intensive outpatient, outpatient, community based and in-home. 

Importantly, sources said, the company also has a huge telemedicine component, which if anything, may be seeing an increase in demand during the current everything-remote environment.

Broadly, the disruption to the healthcare industry in the wake of the public health crisis has cast a light on the value of telehealth. Behavioral health, in particular, is viewed as a particularly applicable area of virtual health services. 

For TPG, this is the second situation this week in which the firm has illustrated its perseverance in the wake of the downturn. 

The buyout firm on Wednesday revealed plans to launch a new provider of developer and operations tools, or DevOps. The new company is called Digital.ai and is being formed after buying Arxan from TA Associates and marrying it with two existing portfolio companies, Collabnet VersionOne and XebiaLabs. 

TPG declined to comment. Summit and LifeStance didn’t immediately return a request for comment.     

Action Item: Check out TPG’s latest Form ADV  

Update: This report has been updated to say Silversmith Capital Partners. I previous version said SilverSmith.