Private Equity Health Care Acquisitions – February 2025

In light of continued investor interest in healthcare and the risks associated with private equity ownership of healthcare companies, the Private Equity Stakeholder Project is tracking private equity-backed healthcare acquisitions. Below is a list of private equity healthcare buyouts, growth investments, and add-on acquisitions completed during February 2025. We will continue to track acquisitions on a monthly basis.

See January 2025 acquisitions here.

Embattled Nautic Partners Acquires Autism Therapy Chain

Nautic Partners has acquired New York-based autism therapy provider Proud Moments ABA from another private equity firm, Audax Group. Proud Moments provides applied behavioral analysis (ABA) therapy in over 70 clinics across 12 states.[1]

The deal follows a trend of private equity acquisitions of ABA providers. According to a 2023 study by the Center for Economic and Policy Research:

“Autism services became a ‘hot market’ for PE acquisitions only after widespread health insurance coverage became available by the mid-2010s. This occurred through passage of state health insurance mandates, the Affordable Care Act (ACA) mandate for coverage in its marketplace health plans, and the Medicaid mandate for coverage in 2014 of medically necessary services in behavioral health, including people with autism. Between 2017 and 2022, private equity firms completed 85 percent of all mergers and acquisitions in autism services – a rate not found in any other segment.”[2]

Last year, PESP tracked 14 deals involving autism therapy providers. Because of private equity’s typical playbook that aims to make outsized profits over short time horizons, private equity investment in autism services come under scrutiny in recent years. Some families and clinicians believe that investors’ focus on profits has degraded the quality of care at private equity-owned ABA providers.[3]

Nautic’s Recent Healthcare Troubles
Nautic Partners is a frequent healthcare investor and acquirer of behavioral health and therapy providers, including Pyramid Healthcare, Nystrom & Associates, Genoa Healthcare, as well as creating Odyssey Behavioral Health as a platform company in 2015.

Nautic also owns VitalCaring Group, a home health and hospice company, alongside private equity firm Vistria Group. In December, the Delaware Court of Chancery found that the two private equity firms aided and abetted “egregious breaches” of fiduciary duty related VitalCaring, which they created after making an unsuccessful bid to acquire the plaintiff, Encompass Health.[4] Nautic and Vistria had secretly colluded with an Encompass employee to create VitalCaring as a competitor company, engaging in a series of deceptive steps to hide their involvement.[5]

In her judgement, the federal judge hearing the cases noted Nautic and Vistria’s unsuccessful growth strategy:

“As part of their ‘buy-and-build’ model for VitalCaring, Nautic and Vistria planned on multi-year growth through acquisitions and an exit after no fewer than five years. Nautic’s and Vistria’s internal underwriting models dated July 2021, October 2021, and May 2022 projected returns ranging from 3.1 to 5.5 times their initial investments upon a 2026 exit. In more recent June 2023 quarterly projections, Nautic projected meaningful growth for VitalCaring. These predictions have yet to come to fruition. The value of VitalCaring’s business has plummeted over the past three years.”[6]

Because VitalCaring has not yet turned a profit, the judge ordered for 43% of all profits and sale proceeds from VitalCaring to be paid to the plaintiff as a remedy, while Nautic and Vistria can keep the remaining 57%.[7]

The judgement against Nautic, alongside the insight about its buy-and-build strategy targeting 3-5x returns, raises questions about how it the firm will ensure that its growth and profit expectations do not damage the integrity of its future healthcare investments.

Resources

[1] “Audax Private Equity Completes Exit of Proud Moments,” businesswire, February 10, 2025. https://www.businesswire.com/news/home/20250210732137/en/Audax-Private-Equity-Completes-Exit-of-Proud-Moments

[2] Eileen Appelbaum, Rosemary Batt, Quynh Trang Nguyen, “Pocketing Money Meant for Kids: Private Equity in Autism Services,” Center for Economic and Policy Research, June 4, 2023. https://cepr.net/publications/pocketing-money-meant-for-kids-private-equity-in-autism-services/

[3] Bannow, Tara. “Parents and Clinicians Say Private Equity’s Profit Fixation Is Short-Changing Kids with Autism.” STAT, August 15, 2022. https://www.statnews.com/2022/08/15/private-equity-autism-aba-therapy

[4] IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE, ENHABIT, INC.; ADVANCED HOMECARE MANAGEMENT, LLC; and ENCOMPASS HEALTH CORPORATION, vs NAUTIC PARTNERS IX, L.P.; NAUTIC PARTNERS, LLC; CHRISTOPHER COREY; VISTRIA FUND III, LP; THE VISTRIA GROUP, LP; DAVID SCHUPPAN; TVG NP HOMECARE TOPCO, LP; and CHRIS A. WALKER, “MEMORANDUM OPINION,” Decided December 2, 2024. C.A. No. 2022-0837-LWW. https://courts.delaware.gov/Opinions/Download.aspx?id=372440 See page 67 of PDF for “aiding and abetting,” and pages 9-16 for the unsuccessful bid.

[5] Ted Bunker, “A Key Player Became ‘Voldemort’ in Healthcare Deal Deception,” Wall Street Journal, December 6, 2024. https://www.wsj.com/articles/one-main-actor-became-voldemort-in-healthcare-deal-deception-b9c8e3e8

[6] COURT OF CHANCERY OF THE STATE OF DELAWARE, MEMORANDUM OPINION, Decided December 2, 2024. https://courts.delaware.gov/Opinions/Download.aspx?id=372440 pg. 35 of PDF.

[7] COURT OF CHANCERY OF THE STATE OF DELAWARE, MEMORANDUM OPINION, Decided December 2, 2024. https://courts.delaware.gov/Opinions/Download.aspx?id=372440 pg. 107 of PDF.