Detox & Recovery
Safe place for a fresh start
Arena’s investments often help businesses that contribute significantly to their communities but that have limited funding options from traditional lenders, and that was the case when Arena helped fund the merger of two entrepreneur-led behavioral health facilities in Pennsylvania. The two businesses offered similar residential detox programs for both men and women, and each was successful on its own, but because of their small size, their access to traditional lending sources was limited—and that’s where Arena was able to step in and lend a hand.
The newer, smaller of the two companies was founded in 2017 and located in northeastern Pennsylvania. It operated a 34-bed detox center for women and men and was planning to add 16 more beds at the time of the merger. Its facility covered 16,000 square feet and included, besides residential areas, a fitness center and a “tranquility room” and several meeting rooms used for group therapy sessions, all on a four-acre plot of land.
The older company, based just northeast of Philadelphia, was founded in 2013. It operated seven facilities around Pennsylvania that provided in-patient and out-patient addiction services for adults as well as an in-house urology lab used to assess patients for drug and alcohol relapses. This company’s treatment program incorporated a highly defined process of detox plus three-phase rehab that was developed by its senior management team.
Arena was introduced to the opportunity to help these companies merge by a family office whose members knew the head of our Corporate Private Investments team because he had previously backed another investment by that family. In fact, the proceeds from the family’s eventual successful sale of that investment had been used to create their family office, which then incubated the newer of the two treatment companies that would eventually combine.
Arena funded an $8.5 million first lien term loan to finance the buyout of the older company by the newer. Arena saw what was possible in this investment because while the businesses’ sizes were below the thresholds required for traditional financing of such an amount by leveraged middle-market lenders and business development companies (BDCs), we recognized significant value in the large and growing need for the services in the behavioral health sector that these companies provide. Arena can (and in fact is designed to) act on the fact that in many cases, investing is not as risky as a more “box ticking” review of the numbers might suggest, whether in the behavioral health sector or any other.
Once combined, the two detox and recovery companies became a full-service provider of behavioral health services with greater opportunities for additional growth.
Arena believes in the value of small businesses like these both as investments and as contributors to the economy and to society, and we are always on the lookout for new opportunities to provide funding to essential businesses that provide great benefit to communities.