One month after the initial agreement, private equity firm Onex Partners has officially completed its acquisition of a majority stake in Newport Healthcare, a leading behavioral health provider. The deal, announced by Onex Corporation, the parent company of Onex Partners, marks a significant expansion of Onex Partners’ investment portfolio within the healthcare sector.
Based in Toronto, Onex Corporation confirmed on Tuesday the successful closure of the Newport Healthcare purchase. Newport Healthcare specializes in offering comprehensive behavioral health services for teenagers, young adults, and their families across various locations in the United States, primarily on the East and West Coasts.
The acquisition sees Onex Partners V, a dedicated fund managed by Onex Partners, securing an approximate 60% ownership stake in Newport Healthcare. While the official financial details of the transaction remain undisclosed by Onex Partners, industry sources have indicated the deal’s value at around $1.3 billion, as reported by PE Hub. This substantial investment underscores Onex Partners’ confidence in the growing behavioral health market and Newport Healthcare’s position within it.
Founded in 2008, Newport Healthcare has established itself as a prominent provider through its two core programs: Newport Academy, focusing on adolescent behavioral health, and Newport Institute, catering to young adults up to age 28. Both programs are dedicated to treating a range of mental health challenges, including anxiety, depression, trauma, and substance use disorders (SUDs). This specialized approach aligns with the increasing demand for tailored behavioral health services for younger populations, a demographic increasingly affected by mental health concerns.
In addition to its individual programs, Newport Healthcare also runs the Center for Families. This center offers partial hospitalization programs (PHP) and intensive outpatient programs (IOP), alongside general outpatient care, for teenagers aged 13 to 17 and their families. This family-centered approach further distinguishes Newport Healthcare in the behavioral health landscape and likely contributed to its appeal for Onex Partners.
Onex Partners’ acquisition of Newport Healthcare represents a strategic move, acquiring the provider from the Carlyle Group (Nasdaq: CG). Carlyle Group, a global investment firm, had previously invested in Newport and was rumored to be considering a sale as early as April. Reports from PE Hub at the time suggested a potential deal could exceed $1 billion, even without a named prospective buyer. Carlyle Group has now fully divested its investment in Newport as a result of this transaction with Onex Partners. Jeffries, a multinational investment bank, managed the auction process for Newport, highlighting the competitive interest in the behavioral health provider.
Financial projections for Newport Healthcare indicate strong performance, with adjusted EBITDA expected to surpass $80 million for 2021. Trailing 12-month EBITDA was reported to be near the low $70 million range, according to sources cited by PE Hub. These figures demonstrate the financial health and growth potential that attracted Onex Partners to Newport Healthcare.
The private equity sector has shown significant interest in behavioral health throughout 2021, anticipating increased activity. This interest is fueled by the escalating SUD epidemic in the nation and the pandemic’s impact, which has driven a surge in demand for behavioral health services. The investment by Onex Partners in Newport Healthcare is a clear example of this trend, reflecting the growing recognition of the critical need for accessible and high-quality mental health and addiction treatment, especially for younger populations. Studies, such as findings from the Harris Poll, indicate that a significant majority of teenagers have experienced mental health struggles during the pandemic, further emphasizing the importance of providers like Newport Healthcare in the current climate.
This acquisition positions Onex Partners at the forefront of the expanding behavioral health market, leveraging Newport Healthcare’s established platform and reputation to address the increasing demand for mental health services for adolescents and young adults. The move is anticipated to strengthen Onex Partners’ portfolio and solidify Newport Healthcare’s growth trajectory within the behavioral health industry.
