Healthcare M&A Deal Count Down But Market Seen as Having ‘Remarkable Resilience’
The number of healthcare mergers and acquisitions is down nearly 10 percent over the past year but several subsectors remain robust and experts say the right mix of caution and flexibility will serve ambitious leadership teams well going forward.
Figures compiled by PricewaterhouseCoopers show that health services companies announced 1,265 deals in the 12 months that ended May 15 of this year. That figure was down 7 percent from the previous 12-month window and a drop of 8 percent from the industry’s annual average from 2020 through 2022.
“Despite persistent macroeconomic and regulatory headwinds, healthcare deal activity continues to demonstrate remarkable resilience and adaptability,” Nick Donkar, leader of PwC’s U.S. Health Services Deals group, said in a statement. “Subsectors like behavioral health and 'other services' (contract research organizations, ambulatory surgical centers, home infusion, medical office buildings) are driving significant momentum […] This strength underscores the market’s fundamentals, and the strategic pivot investors are making to capture value amid evolving conditions."
Still, the drop in activity from last year shows that some buyers are holding off on deals. Sheon Karol, a senior advisor to New Jersey-based private-equity firm West Lane Partners LLC, said he’s seeing that happen in “pretty much every sector” and says it’s driven both by psychological and financial considerations.
Regarding the former, Karol said, greater uncertainty in the market and economy—be it around tariffs, taxes or other factors—is leading people to be more cautious. And practically, the unsettled environment is making planning far more difficult for leaders, particularly at middle-market companies with fewer levers to pull. That means they’re learning toward building up a cash cushion and not following through on deals they would otherwise sign.
The total value of the 1,265 transactions tallied by PwC was about $64.1 billion, which also was a decrease of about 7 percent from the prior 12 months. Worth noting about that statistic is that the nearly-completed purchase of Walgreens Boots Alliance Inc. by Sycamore Partners Management accounts for nearly $18 billion of the headline number; excluding that deal, the average deal size was nearly $37 million—16 percent smaller than the previous 12-month period.
Standing out in terms of subsectors, the PwC team says, are behavioral health segments such as autism and addiction treatment as well as broader psychiatric services. Early this year, the number of deals being signed was 35 percent higher than in the first quarter of 2024. In terms of the number of deals, the 413 involving physician groups stands out and suggests that the appetite for building referral networks and a more vertical business model remains strong.
PwC's Data and Takeaways
For a deeper look at PricewaterhouseCoopers' U.S. Deals 2025 midyear outlook for the health services sector, click here.
“Insurers’ medical costs are overshooting projections and it’s unclear if the post-COVID utilization recovery has peaked,” PwC’s experts wrote. “Meanwhile PBMs, particularly vertically integrated payers, face heavy scrutiny from regulators and Congress. This could drive a wave of divestiture activity across the pharmacy sector if proposed restrictions come to fruition.”
The higher regulatory risk is also an opportunity for buyers and/or investors, said West Lane’s Karol said. Tighter federal and state oversight, he said, can open doors for ventures focused on taking spending out of the system.
“There are opportunities for innovation-driven investment and M&A for companies that can contain costs,” Karol said. “That’s especially the case for behavioral health.”
About the Author
Geert De Lombaerde
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post for more than a decade and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.