Healthcare deal activity cooled off in 2025, but the sector is poised to bounce back next year, driven by investments in artificial intelligence, an improved exit environment and policy shifts driving buyers to move quickly.
Healthcare merger and acquisition deal value hit an estimated $46 billion in 2025, according to a yearly PwC report published Tuesday, citing LevinPro data. That's down from $62 billion in M&A activity in 2024.
Deal value skyrocketed from $7 billion in the third quarter of this year to $22 billion in the fourth quarter. Major deals announced or closed in the fourth quarter include customer engagement company Qualtrics announcing plans to buy healthcare market research company Press Ganey Forsta for $6.75 billion. In November, healthcare investment firm Patient Square Capital closed its $2.6 billion acquisition of Premier Inc.
There were 1,373 health services deals in 2024, PwC reported last year. So far, there have been 910 M&A deals in 2025, with two weeks to go before the end of the year. PwC reported 1,506 health services deals in 2023, 1,708 in 2022 and 1,525 deals in 2021.
Despite a slight cooling in overall deal activity in 2025, the health services M&A landscape will regain strength in both value and volume of deals next year, PwC analysts say.
"While an uncertain U.S. regulatory and reimbursement environment remains the primary headwind, investors will benefit in 2026 from assets coming to market in high-quality, cash-generating subsectors with clear reimbursement visibility," PwC analysts wrote in the report.
Both strategic acquirers and private equity sponsors will continue to favor bolt-on acquisition deals, with an eye on smaller companies, as well as carve-outs to sell portions of the businesses that "demonstrate consistent earnings and measurable operational upside, while avoiding areas prone to shifting regulations and reimbursement," the analysts wrote.
“After a period of recalibration, we expect health services dealmaking to accelerate meaningfully in 2026," Dan Farrell, principal, U.S. health services deals leader at PwC, said in a statement. "High-quality, cash-generating assets with clear reimbursement visibility are returning to market, attracting renewed interest from both strategics and private equity. The investors who move with discipline and precision—focusing on targeted bolt-ons and carve-outs—will be best positioned to capture value amid continued regulatory uncertainty.”
Analysts predict that many trends that emerged in 2025 will continue to build in 2026. Private equity investors will continue to move away from reimbursement and regulatory exposure and toward software and services platforms that support care delivery. With this in mind, AI-based telehealth platforms, tools for revenue cycle management, workforce optimization, and utilization management and member engagement could be ripe acquisition targets.
Drug distribution companies are looking for partnership or acquisition opportunities with physician practices to enhance care integration and patient access to therapies. "These models reflect a focus on coordinated delivery, supply chain efficiency, and improved outcomes in complex, specialty-driven areas of medicine," the analysts wrote in the report.
Health systems and other healthcare companies will continue offloading noncore assets like labs, home health and revenue cycle units as they seek liquidity and strategic focus. These deals enable sellers, primarily health systems, to refocus capital on core clinical and mission-critical priorities.
Deal value declined in the third quarter of 2025 as the market faces ongoing regulatory headwinds and rate pressure. However, analysts note that certain high-growth subsectors—ambulatory surgery centers, home-infusion services and behavioral health platforms—are commanding strong multiples due to their perceived scalability and favorable reimbursement direction.
This past year saw the IPO window for health services companies beginning to reopen, which could be a strong tailwind in 2026. Digital health companies Hinge Health and Omada Health went public last summer, reviving the dormant digital health IPO market.
"Private equity investors are carrying a sizable backlog of high-quality assets, and improving market conditions—stronger equity valuations, greater stability, and a more favorable interest-rate outlook—are creating a pathway for renewed public-market activity," PwC analysts wrote.
It's expected that more health services organizations will revisit capital markets as a viable route to support growth and liquidity objectives next year.
PwC detailed some of the factors that will steer M&A decisions in 2026. Amid policy uncertainty, buyers are demonstrating disciplined capital deployment. Regulators and lawmakers are taking a hard look at private equity deals, physician practice consolidation and cross-market health system mergers.
Organizations are now focused on partnerships, joint ventures and targeted asset realignments to drive growth under tighter policy and reimbursement constraints, the analysts note.
With heightened federal activity and rapid policy shifts, proactive buyers need to move early to capture a competitive advantage.
"For example, the renewed debate over site-neutral reimbursement in 2025 illustrates the urgency for hospital and ambulatory operators to realign portfolios and cost structures ahead of potential pricing policy changes," Farrell wrote in the report.
Investors will increasingly treat AI as a core driver of margin expansion and top-line growth—not a bolt-on enhancement—shifting valuation premiums toward platforms with proven operations leveraging real data, Farrell noted in the report. "Tech-enabled care, behavioral health and physician specialty platforms could see some of the most aggressive capital flows in years as acquirers look to scale models that can grow without adding labor," he wrote.
AI is also reshaping how acquirers evaluate and scale assets—for both PE and strategic buyers. Sustainable value creation will depend on embedding AI capabilities that drive measurable productivity gains. AI’s influence on diligence and portfolio strategy is accelerating, the analysts noted.
Looking at the M&A market, mega-funds are returning to offense, so competition for high-quality assets is likely to intensify, according to the analysts. Larger private equity funds are taking on more risk to achieve higher returns.
"These well-capitalized entrants are bringing greater pricing pressure and accelerating deal timelines, challenging traditional mid-market investors to sharpen their sourcing strategies and differentiate through specialized sector insights and operational value creation—particularly in behavioral health, physician services, and tech-enabled care delivery," Farrell wrote in the report.