After a year defined by conviction and selectivity, healthcare M&A enters the second half of 2026 with renewed confidence and a clear focus on quality, scalability, and operational value.

Dealmaking in the sector regained momentum in 1H26 as buyers grew more willing to transact despite persistent economic and regulatory uncertainty.

Deal volume surged 132% year on year to USD 212.8bn across 694 transactions, marking the highest half-year total since 2021. The rebound follows a muted 1H25, when deal volume fell 20% to USD 91.6bn.

The recovery has remained highly selective, with buyers concentrating capital in quality, scaled platforms with clean earnings and sustainable growth.

“The market was broadly in line with cautious expectations; it wasn’t a full rebound, but it also wasn’t a stalled market,” said Charles Hartman, healthcare M&A director at West Monroe.

The recovery was driven by strategic repositioning and a focus on operational efficiency, with buyers targeting assets that help reduce costs and improve performance, said Hartman. Many are prioritizing businesses that address provider burnout, revenue leakage, and payer cost management as healthcare organizations face pressure to do more with fewer resources.

Healthcare information technology (HCIT) remains one of the strongest beneficiaries of that shift and a sector standout, according to Ross Nelson, healthcare deal advisory and strategy leader at KPMG US. “As the industry increasingly leans on technology to drive efficiency and improve outcomes, companies in this space remain attractive targets,” he said.

The role of AI remains more nuanced. While there is significant activity in developing AI-powered tools, particularly for physicians, this has not yet translated into a wave of M&A transactions or partnerships for health systems, many of which are taking a watchful waiting approach while the technology matures, Nelson said.

Subin Baral, EY global life sciences deals leader, cited abundant capital and renewed executive confidence as continuing tailwinds supporting healthcare M&A activity.

Private equity remains active but disciplined, leaning into platforms where it can create value operationally rather than relying on leverage or multiple expansion, Hartman said. At the transaction level, tighter financing conditions are also reshaping deal structures, with seller notes, rollover equity, and, to a lesser extent, earnouts increasingly used to bridge valuation gaps, according to Kevin Taggart of Mertz Taggart.

In some cases, financing constraints are directly affecting pricing. Taggart said one recent letter of intent came in below an earlier indication of interest because the buyer was unable to obtain financing at the higher valuation.

Behavioral health continues to attract attention, though the market is increasingly bifurcated, said Taggart. Quality, scaled platforms with clean earnings are still commanding premium multiples, while smaller, reimbursement-exposed assets face compression. Outpatient mental health and substance use disorder treatment remain competitive, while inpatient facilities are slower, creating buying opportunities for disciplined investors.

Autism providers serving commercial payors continue to command strong valuations, while reimbursement-exposed Medicaid providers remain under greater scrutiny, Taggart said.

Founder succession is also becoming a meaningful driver of physician-practice transactions. Founder physicians nearing retirement are increasingly using MSO structures and profit interests to facilitate succession as fewer younger physicians are willing or able to buy into practices directly, said Gary Herschman of Baker Donelson.

Herschman also said physician groups are placing greater emphasis on post-transaction income sustainability and cultural fit than on headline valuation alone, while premier assets continue to receive relatively rapid lender underwriting.