Healthcare dealmakers are “cautiously optimistic” about M&A activity for the rest of the year, as uncertainty related to US President Donald Trump’s Liberation Day tariffs linger.

In the year to date (YTD as of 24 June), the European healthcare sector saw an 87% spike in deal volume (EUR 31.8bn) but an 8% decline in deal count (418 deals), compared to the same period in 2024, according to Mergermarket data*.

However, looking at deals quarter by quarter, 1Q25 clearly had higher deal activity (231 deals) than 2Q25 so far (187 deals), the drop coinciding with the market turmoil and macro uncertainty that has prevailed since 2 April.

“Uncertainty and volatility never help, and there’s still next to zero clarity”, Andrew Murray-Lyon, Managing Director at DC Advisory, said.

Current sentiment is a far cry from the tangible optimism at the start of the year, when dealmakers at San Francisco’s J.P. Morgan Healthcare Conference talked about 2025 as “the year of the mega-merger”.

In 1Q25, “people were happier with the outlook for interest rates, inflation was more under control, and parties were coming to terms with valuation gaps. That environment has been replaced again with uncertainty that has caused a cooling of M&A activity,” Gareth Camp, Partner at Clifford Chance, said.

“There has been a slowdown, with some processes put on hold due to the need for further due diligence and to mitigate or address risks stemming from tariffs as well as non-tariff changes,” his colleague, Partner Torsten Syrbe, added.

High sponsor buyout activity

Amid all the uncertainty, however, there is deal momentum, DC’s Murray-Lyon said. Private equity firms are reaching out and engaging banks, albeit with longer lead times – a clear trend, he said.

“We’re getting calls a year in advance, while we used to get calls six months in advance,” Murray-Lyon said. Early engagement, process readiness, and more targeted marketing are all trends, he said.

There is a large backlog of PE deals from 2024, which could yet convert in 2025, and sponsors have money burning holes in their pockets, Murray-Lyon added. “2024 had more failed processes than I’ve experienced in a long time.”

Sponsor buyout deals worth EUR 29.6bn have been signed YTD25 in the European healthcare sector, a 276% increase compared to YTD24, according to Mergermarket data.

The largest European healthcare deal so far this year was a EUR 5.5bn funding round and capital restructuring deal for Ceva Sante Animale, led by existing investor, Temasek, and with participation by EMZ, Sagard, Tethys Invest and Merieux, among others.

KKR’s acquisition of Swedish Karo Healthcare from EQT at EUR 2.5bn was the third largest deal, after Sanofi’s EUR 3bn acquisition of its own shares from L’Oreal back in February.

Meanwhile, strategics are carving out non-core businesses – for example, as preparation for IPOs – which could be less affected by the dealmaking climate, Clifford Chance’s Syrbe said.

German Ottobock is planning to carve out and sell its Human Mobility unit, including its wheelchair business, ahead of an IPO that could take place as early as 2H25, as recently reported by this news service. Meanwhile, Dentsply Sirona is hoping to be third time lucky with the divestment of its Swedish incontinence care company Wellspect, expected in 2H25, as recently reported.

Subsectors of interest

There are “pockets of excitement” where high deal activity is expected, DC’s Murray-Lyon said.

Specialty distributors of medical supplies have been “on fire” – Asker Healthcare completed its IPO in March, and DCC’s Healthcare division was divested to Investindustrial, while Apax Partners-backed Palex Medical has been active on the acquisition front, Murray-Lyon said. Advent International-backed Mediq is expected to come to market, as reported.

Murray-Lyon also expects high deal activity in occupational health in the next 12 months, as private health insurance, whether paid for by individuals or employers, is on the rise, given the underfunded UK NHS, he said.

UK occupational health provider Health Partners Group launched a sale process earlier this year, run by PwC, as reported.

There is also more activity than expected in asset-heavy residential care and hospitals, more due to a backlog of deals rather than fundamental changes in the environment, Murray-Lyon said.

Hellman & Friedman’s EUR 2bn investment into Finnish healthcare services provider Mehiläinen alongside CVC was the fourth largest deal in YTD25, and UAE-based PureHealth’s EUR 1.3bn acquisition of a 60% stake in Hellenic Healthcare Group (HHG) was the fifth largest, according to Mergermarket data.

Contract research organisations (CROs) running outsourced clinical trials are facing a tough environment as their customers, often pharma and biotech startups, still struggle to secure funding. However, there are green shoots of recovery and long-term positive trends supported by AI and personalised medicine, Murray-Lyon said. Companies with clinical trials facilities and physical sites, and those in patient recruitment, are attractive targets, he added.

UK research site network for clinical trials, FutureMeds, is in an advanced auction process, as recently reported by Mergermarket.

The nutrition, wellness and preventative healthcare subsectors are interesting, and this is an area where we might see more sponsor interest, Clifford Chance’s Camp said. Providers in remote monitoring, health data, virtual GPs, nutritional supplements, and even cosmetics with a more science-based approach, such as Medik8, recently acquired by L’Oreal, make interesting targets, he added.

Pharma best performer

Among healthcare subsectors, drugs/pharmaceuticals have had the best performance by volume in 2025 so far, with EUR 13.4bn, accounting for 42% of the total healthcare volume. This is the highest volume seen since the COVID-19 pandemic, Mergermarket data shows.

In YTD25, 33 deals with disclosed deal volume with European targets in the drugs and pharmaceutical sector reported disclosed EV/EBITDA ratios, with a median EBITDA multiple of 13.78x. This compares to 117 such deals in full-year 2024, which had a median EBITDA multiple of 13.10x, according to Mergermarket data.

Within pharma, drugs in cardiometabolic, neurology, immunology, and oncology, including radiopharmaceuticals, remain popular among big pharma players, Camp said. We will continue to see M&A activity from large companies looking to secure key molecules, he said.

However, pharma is not spared from uncertainty, especially since Donald Trump announced that he also wants to impose import tariffs on pharmaceuticals. This could spur M&A for non-US companies wanting to secure a US-based manufacturing footprint, as reported.

Following a period of caution, we are seeing pharma companies prepare for the next round of investments, typically with a focus on the US, Europe, and also Saudi Arabia, Clifford Chance’s Syrbe said.

Stability and certainty are the ingredients needed for a strong dealmaking environment, Camp said. If the market is given the chance to normalise, people will adapt to the new environment and revisit deals, Camp and Syrbe agreed.

*Data excludes licensing deals.