Webster recaps Center for Discovery, combines with LA addiction-treatment company Cliffside Malibu

  • Merged company will be Discovery Behavioral Health
  • Webster invested in Center For Discovery in 2011
  • Cliffside’s Peloquin, former CRC Health/Acadia exec, will head new company

Webster Capital is scaling up and diversifying Center For Discovery, recapitalizing the behavioral health company as it concurrently merges with Southern California drug and alcohol addiction-treatment provider Cliffside Malibu.

Terms of the transactions weren’t disclosed. The combined company, to be renamed Discovery Behavioral Health, accounts for about $27 million of unadjusted trailing-12-month Ebitda, a person with knowledge of the matter said.

The pending Cliffside deal is valued at an Ebitda multiple just north of 7x, the source said, adding that the target’s unadjusted Ebitda is about $14 million.

Webster’s deal for Cliffside was initially disclosed within a pre-merger filing on the FTC website in April.

Founded in 2005 by Richard Taite, Cliffside treats individuals suffering from substance abuse and other mental health disorders. The provider runs detoxification and residential centers, sober living facilities and outpatient substance-abuse-treatment facilities in Southern California.

Cliffside is led by industry veteran John Peloquin, who was brought on as CEO in May 2017. Peloquin will lead the combined company.

Peloquin previously spent over a decade at CRC Health, helping lead it through Bain Capital’s eventual $1.3 billion sale of the opioid-treatment company to Acadia Healthcare in 2015. Peloquin post-transaction stayed on with Acadia as president of the CTC division.

For Center for Discovery, the acquisition creates a platform encompassing broader behavioral-health-treatment services, having historically specialized in eating-disorder treatment for adolescents.

The company is the largest treatment provider of such services behind Eating Recovery Center, the asset that scored a $550 million to $600 million valuation when CCMP Capital Advisors bought the asset from fellow sponsor Lee Equity Partners last year.

Further, the deal aligns with Center for Discovery’s strategy of buying out-of-network assets and bringing them in-network. Treatment services offered by Center for Discovery network today are mostly in-network, while Cliffside is largely private pay.

Post-transaction, Discovery Behavioral Health will have 42 residential treatment centers and 23 outpatient centers across 11 states.

Webster, whose investment in Los Alamitos, California-based Center for Discovery dates to 2011, retained Cain Brothers in early 2016 to weigh a possible sale of the company, Buyouts has reported. The sponsor ultimately opted to hold off in launching a process.

The Waltham, Massachusetts, firm also owns BayMark Health Services, which earlier this year became the largest network of opioid-treatment clinics in North America after buying Canadian Addiction Treatment Centers.

BayMark Chairman Jerry Rhodes, the former CEO of CRC Health and current CEO of Dental Care Alliance, joined the Cliffside board in July 2017.

Cain Brothers, a division of KeyBanc, offered buyside advice on the deal, while Cliffside turned to Nexus Health Capital for banking advice.

Action Item: Webster’s portfolio: http://www.webstercapital.com/portfolio.php

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