Mergium tracked 35 pediatric therapy deals through Q3 2026. Dr. Luis Lopez on late announcements, longer PE holds, strategic buyers, and state Medicaid risk.
Key Takeaways
- Deal volume slowed, and the count is still moving: Mergium recorded 35 transactions through September against 44 a year earlier, and its first-half total has already grown from 22 to 27 as late announcements surfaced.
- State rules are changing diligence more than destinations: Buyers kept acquiring in states tightening Medicaid ABA rates and enrollment, and Lopez says the risk now shows up in projections, billing reviews, and deal structure.
- Sponsors are holding longer as strategic buyers gain share: Mergium identified no new private equity buyouts in the third quarter, and Lopez ties slower sponsor exits to financing costs and valuation gaps.
- Quality is outranking scale heading into 2027: Lopez expects an active but selective market and advises owners to strengthen margins, payer mix, and records rather than wait for better conditions.
In July, Mergium Advisors counted 22 pediatric therapy acquisitions in the first half of 2026. By October, the same six months held 27.
The five additional deals were not new activity. They were transactions announced or identified after Mergium published its midyear report, Dr. Luis F. Lopez, President of Mergium Advisors, told Acuity in an interview, and the revisions reach back further than June. The first quarter, which stood at nine transactions in the firm’s May update, now stands at 13.
“This reporting lag is common in the pediatric therapy M&A market, particularly because many transactions involve privately held companies that do not immediately disclose acquisitions,” Lopez said. Some sales are announced weeks or months after closing, he added, and others come to light only through later company announcements or industry reporting.
That lag is the first thing to know about the third quarter. Mergium’s Q3 survey, dated October 19, identified eight transactions between July and September, down from 13 in the first quarter and 14 in the second. Lopez said the firm considers the count preliminary and expects it “to increase, although it is difficult to predict the final number with confidence.”
For that reason, he puts more weight on longer stretches of time. “Ultimately, we believe the direction of transaction activity over time is more meaningful than any single quarter’s preliminary count,” he said. Over the first nine months of the year, Mergium identified 35 announced transactions involving providers of applied behavior analysis and occupational, physical, and speech therapy, a total the firm describes as consistent with its average for the same period since 2020.
Pediatric Therapy M&A Volume Through Q3 2026 Trails a Strong 2025
The average leaves out the comparison closest at hand. Mergium counted 44 transactions in the first nine months of 2025, which puts 2026 about 20 percent behind. Its figures for the same period in earlier years, which Lopez provided to Acuity, were 31 in 2020, 44 in 2021, 36 in 2022, 29 in 2023, and 32 in 2024. If the third quarter fills in the way the first half did, the gap with 2025 will narrow.
Lopez accepts the comparison and disputes the reading of it as a retreat. “I would characterize 2026 more as a normalization of M&A activity following a particularly strong 2025, rather than a significant cooling of investor interest in the sector,” he said. “The more concerning development would be if transaction volume fell materially below historical levels for a sustained period. We are not seeing that in the current data.” That volume has held up through Medicaid reimbursement pressure, regulatory scrutiny, clinician shortages, and rising labor costs, he said, suggests buyers still see long-term potential in the sector.
Private Equity Holding Periods in Pediatric Therapy Lengthen as Strategic Buyers Gain Share
Private equity-backed operators were the buyers in 21 of the 35 transactions, or 60 percent, below the roughly 65 percent Mergium recorded at midyear. The larger change is in who else is buying, and who is not. Mergium’s buyer-type chart shows strategic acquirers holding a markedly larger share of 2025 and 2026 deals than in earlier years, while secondary buyouts, in which one sponsor sells to another, account for a thin slice of 2026. As of the report’s date, Mergium had not identified a single new private equity buyout in the third quarter, after the three platform formations it reported at midyear and ten across 2025.
Lopez traces both patterns to how long sponsors are holding what they already own. “Private equity firms are generally holding portfolio companies longer than the traditional five-to-seven-year investment horizon, and this is not unique to pediatric therapy,” he said. Higher financing costs have reduced purchasing power, he said, and sponsors are reluctant to sell below their return targets. Some of the delay is deliberate. “In other cases, sponsors are deliberately extending their holding periods to create additional value through acquisitions, operational improvements, de novo clinic development, or geographic expansion before pursuing a sale,” he said.
Data from outside the sector points the same way. Bain & Company’s 2026 Global Private Equity Report found that buyout holding periods at exit had stretched to around seven years, up from an average of five to six years between 2010 and 2021, with almost 40 percent of portfolio companies held longer than five years. Borrowing costs have not eased since. On September 16, the Federal Reserve raised its benchmark rate by a quarter point, to a target range of 3.75 to 4 percent, its first increase since 2023.
In pediatric therapy, the exit queue has been visible for months. Acuity reported in March that Butterfly Effects, 360 Behavioral Health, Mosaic Pediatric Therapy, and Bierman Autism Centers were positioning for sale. Mergium’s year-end 2025 data, which Acuity reported in April, showed 13 sponsor-backed pediatric therapy platforms held for more than seven years and another 22 for five to seven, and counted three secondary buyouts across 2025. Longer holds, in Lopez’s view, do not signal lost confidence; many sponsors prefer to strengthen a business before selling it.
He describes the rise of strategic buyers as part of the industry maturing, with established healthcare organizations moving in to broaden services and existing providers buying to expand or add specialties. “Unlike private equity funds, which generally operate within defined investment horizons, strategic buyers may have longer-term ownership objectives and can sometimes justify acquisitions based on operational synergies and strategic benefits beyond the target’s standalone financial performance,” he said.
Speech Therapy and School-Based Services Widen the Pediatric Therapy Acquisition Pool
The services data shows how far the market extends beyond applied behavior analysis. Of the 35 targets, 10 offered ABA only, 12 offered occupational, physical, or speech therapy without ABA, and 13 combined ABA with at least one of those disciplines. Speech therapy matched ABA as the most common service, at 23 targets each, followed by occupational therapy at 17 and physical therapy at 14. Pediatric counseling, a fifth category in Mergium’s chart, appeared at 12 targets. Counseling surfaced in two of the 11 deals Mergium tracked through April, when Lopez described it as an ancillary service worth watching.
Lopez does not read the split as a turn away from ABA. “I would not interpret these statistics as evidence that buyers are shifting away from ABA,” he said. The movement he describes runs toward it. “In fact, our conversations with owners of OT, PT, and speech therapy practices suggest that many are interested in expanding into ABA services.” Earlier this year he described the mirror image, ABA-only practices adding occupational, physical, and speech therapy. Both point to the same multidisciplinary model, which he said offers broader referral sources and more diversified revenue.
School-based services appeared at 22 of the 35 targets, second only to clinic-based care at 28, with home-based services at 14 and telehealth at 10. Many companies work in more than one setting. Lopez attributes the school figure to the economics of the model. District contracts can provide relatively predictable demand, and “a single district relationship may support multiple clinicians across several service lines,” he said, without the family-by-family patient acquisition that outpatient care requires. Defined calendars also make staffing easier to plan.
He cautions against reading a preference into the count. “I would also emphasize that this does not make school-based therapy inherently more attractive than in-clinic or in-home services,” he said. School-funded therapy also rests on different legal ground from insurance-funded ABA. Melmark President and Chief Executive Officer Rita M. Gardner told Acuity this month that comprehensive programs authorized under the Individuals with Disabilities Education Act predate the insurance benefit by decades and sit outside the CPT code framework.
Medicaid ABA Reimbursement and Enrollment Rules Now Shape Pediatric Therapy Due Diligence
Mergium’s geographic data counts the states where acquired companies operated, not only where they were headquartered. North Carolina, Virginia, Texas, Indiana, Oklahoma, New York, Michigan, Maryland, Florida, and Arizona led the list, and several of them spent 2026 tightening their Medicaid ABA programs.
North Carolina, the darkest state on Mergium’s heat map, now requires its Medicaid health plans to maintain closed networks for research-based behavioral health treatment under a budget law signed July 7. Since August 2, behavior analysts have had to enroll in NC Medicaid as in-state providers, with a limited exception for clinicians near the border, and behavior technicians without a qualifying certification face a November 29 deadline, after which claims for their services will not be reimbursed. The state’s four Standard Plans have also formed a joint fraud task force, and NC Medicaid now classifies in-state agencies enrolling to deliver the service without national accreditation as high categorical risk, a designation that brings fingerprinting for owners holding 5 percent or more and, since October 1, unannounced site visits, as Acuity reported this month. Indiana cut Medicaid rates for its nongroup ABA codes by 6 percent on April 1 and has scheduled a further 4 percent reduction for April 2027.
Lopez said buyers continue to pursue acquisitions in states facing reimbursement and authorization pressure. What that pressure costs sellers is harder to establish. “Pediatric therapy acquisitions are predominantly private transactions, and purchase prices, valuation multiples, and transaction structures are rarely disclosed publicly,” he said. In his account, buyers are building the risk into their work through more conservative projections, closer review of historical billing, and structures such as earnouts, seller rollover equity, and escrows, though without confidential terms Mergium cannot say how often those provisions appear.
“The key distinction is that buyers are not necessarily avoiding entire states because of regulatory headwinds,” he said. “They are evaluating whether an individual business can continue to generate sustainable earnings and grow profitably despite those challenges.”
Lopez named three regulatory developments weighing on buyers and sellers: Medicaid reimbursement changes, scrutiny of billing practices through audits and fraud enforcement, and state licensing and enrollment restrictions. The second has a federal record. The HHS Office of Inspector General’s audit of Colorado, released in February, found the state made at least $77.8 million in improper fee-for-service Medicaid payments for ABA, with every one of 100 sampled enrollee-months containing improper or potentially improper claims. In August, CMS published an ABA toolkit for state Medicaid agencies reporting that Medicaid and CHIP payments for ABA rose from about $1.94 billion in 2021 to $10.1 billion in 2025, with chapters on preventing fraud, waste, and abuse and a section on the corporate structures that own ABA provider agencies.
In diligence, Lopez said, buyers now check documentation, credentials, supervision, and medical necessity, and significant findings can lead to escrows, purchase-price adjustments, or a deal that does not close.
Licensing and enrollment rules cut both ways, he said. “Interestingly, these restrictions can have two opposing effects. They may increase the regulatory burden on existing operators, but they can also make established, properly licensed, and compliant providers more attractive acquisition targets by creating barriers to entry for new competitors.” Buyers still have to confirm that a target’s licenses, Medicaid enrollment, and payer agreements survive a change of ownership, and the transaction itself may now require state review: at least 15 states have healthcare transaction notice requirements, as Acuity reported this month, with pre-closing periods that in some states extend to 180 days or more.
“Ultimately, I do not believe regulatory scrutiny is eliminating buyer interest in pediatric therapy,” Lopez said. “Rather, it is making buyers more selective and due diligence more rigorous.”
Pediatric Therapy M&A Outlook for 2027: What Practice Owners Should Expect From Buyers
By number of locations, the largest target Mergium tracked this year was Golden Steps ABA, a provider with 45 clinics founded in 2018. Gemspring Capital lists a March 2026 investment in the company and says it delivers therapy across home, clinic, and school settings in more than 15 states. Lopez cautions against treating the deal as evidence that size alone commands a premium. A smaller ABA provider with strong margins, low turnover, and a clean compliance record, he said, may be more attractive than a larger platform struggling with staffing or profitability.
He reads the transaction as a sign that institutional capital remains interested in ABA, not as an indiscriminate appetite for large platforms. “Ultimately, buyers are not just looking to acquire more clinics,” he said. “They are looking to acquire better businesses.”
“Looking ahead to Q4 2026 and 2027, I expect the pediatric therapy M&A market to remain active, but increasingly selective,” Lopez said. Well-run practices should continue to draw competitive interest, in his view, while lenders stay disciplined with ABA businesses carrying meaningful reimbursement or regulatory exposure. Sponsors still have capital to deploy, he noted. “However, having capital available does not mean buyers will pursue acquisitions at any price.”
His advice to owners is about preparation rather than timing. “For practice owners considering a sale, my advice is not to try to time the market, but to focus on making their business as attractive as possible to buyers,” he said. Profitability, management depth, payer diversification, and clean financial records, he said, can do more for valuation than waiting for conditions to improve.
Mergium’s year-end count will show how many third-quarter transactions had yet to surface in October. Lopez expects the number to rise; the report itself says slightly.
