Following a top-heavy 2025, macro tailwinds are increasing for the middle market, which had a tepid end to a promising 2H25.

“Over the last couple of years healthcare M&A has been relatively muted – pressured by higher rates, valuation gaps, and regulatory uncertainty. We’re now seeing that start to change,” said Matt Bennett, partner at Invidia Capital Management. “Financing markets have improved, bid-ask spreads are narrowing, and the policy backdrop is becoming clearer and more predictable; this is giving both strategics and sponsors more confidence to transact.”

North America Healthcare M&A in 2025 saw a 30% increase in deal volume from 2024 at USD 247bn but the deal count saw a decline with only 1,104 deals inked, a lowest count since 2016, according to Mergermarket data.

“The end of 2025 marked the return of transactions valued at USD 1bn-plus with volatility and macro uncertainty becoming less of a concern for the market, and while megadeals and high-quality assets continue to keep pace, healthcare M&A continues to be a tale of two markets as other pockets of dealmaking remain slower,” said Erik Kistler, managing director at Houlihan Lokey.

In the sector – comprising pharma and biotech, healthcare services, information technology and medtech – the largest deal in the space is a pending USD 25.7bn sale of Exact Sciences to Abbott Laboratories, according to Mergermarket data.

Financial sponsor buyout activity doubled by deal volume in 2025 to USD 38bn as compared to USD 16.4bn in 2024; however, 2025 saw a 9% fall in deal count, according to Mergermarket data. The top buyout deal is a pending acquisition of Hologic by Blackstone, TPG Capital, ADIA and GIC for USD 19.4bn. This deal is among the largest healthcare take-privates in recent years and underscores private equity’s conviction in high-quality diagnostics, said Bennett.

Overall, 2H25 fell short of expectations, said Trey Marinello, managing director at Houlihan Lokey. “For the third year in a row, post-Labor Day M&A process launches underwhelmed with companies taking a wait-and-see approach,” he said, adding many intend to pause until 1Q26.

“Other macroeconomic factors that will influence dealmaking this year include monetary policy easing and stabilizing interest rates, the abundance of capital from both private equity and private credit and technological disruption including artificial intelligence,” said Marinello.

Active subsectors for M&A

However, this 2H slowdown could bode well for an active beginning to 2026 with a number of subsectors within healthcare likely to see an uptick in deal flow, according to dealmakers. “The first half of this year is expected to outpace [1H25] in closed M&A volume materially, with the market weighted towards high-quality assets” said Chris Dorn, managing director at Fifth Third.

The first half of 2026, “should see a more meaningful acceleration, particularly in the middle market. As capital becomes more available and the new administration’s approach to healthcare regulation continues to clarify, we can expect to see a sustained pickup rather than a short-term bounce,” said Bennett.

Employer-sponsored healthcare, healthcare technology (HCIT), tech-enabled services and pharma services remain white-hot categories, according to dealmakers. Recent payor/employer deals include InTandem Capital Partners’ acquisition of Phia Group and Stone Point Capital’s acquisition of The Difference Card.

Interest in companies supporting clinical trials and manufacturing of drug production for trending therapies (including GLP-1s and targeted biologics) is high along with diagnostics/imaging, contract manufacturing and specialty services, said Bennett.

Patent cliff dynamics and increased balance sheet firepower continue to drive deal activity for biopharma players, which are executing bolt-on transactions in the USD 1bn to USD 10bn zip code, said Michael Allwin, head of biopharma investment banking at Truist Securities. Oncology as well as inflammation/immunology are two broad segments that continue to be in favor for M&A as biopharma looks to diversify, he said.

Neurology, central nervous system (CNS), oncology, and cardio/metabolic categories are among other active hotbeds for M&A, said Arda Ural, Americas life sciences leader at EY. For the first time, the neurology/CNS category exceeded the value invested in oncology, which has historically been the leading therapeutic area attracting capital, said Ural.

Across healthcare services, deal activity for post-acute and infusion/specialty pharmacies are seen as highly attractive, while deal flow for physician practice management platforms, which historically has driven the bulk of healthcare M&A, largely remains on pause unless the distributors are in the mix or there is a real ambulatory surgery center (ASC) angle, said Kistler.

Additionally in the provider space, academic health systems are actively pursuing mergers with community hospitals to expand referral bases and improve access to high-quality tertiary and quaternary care, said Adam Sorensen, EY-Parthenon Americas health integration & divestiture leader.

Recent deals among healthcare services include Partners Group’s acquisition of St. Croix, Carlyle’s acquisition of Tarrytown, and Cardinal Health’s acquisition of Solaris Health.