Healthcare M&A mid-year insight

Modern Healthcare – Thursday, August 7, 2025
By Baker Donelson, KPMG and Ziegler

The first half of 2025 revealed a mixed landscape for healthcare mergers and acquisitions. Sectors such as Life Sciences and Digital Health saw sustained momentum, yet overall deal activity was tempered by broader economic challenges and uncertainties, regulatory ambiguity and the residual impact of recent policy shifts. Still, beneath this cautious environment, strategic moves and forward-thinking collaborations continued to drive transformation across the healthcare industry. The resilience of certain healthcare sectors has provided a foundation for continued transactional activity, even as organizations adopt more selective and strategic approaches to dealmaking.

Life Sciences and Pharmaceuticals: The Undisputed Leader

Life sciences and pharmaceuticals once again dominated healthcare M&A activity, maintaining their position as the clear number one sub-sector for deal volume. With over 250 transactions in the first half of 2025, the sector’s strength was driven by continued innovation in cell and gene therapies, oncology and rare disease treatments.

Notable transactions included Eli Lilly’s announced acquisition of SiteOne Therapeutics and Sanofi’s announced deal with Vigil Neuroscience. The sector’s robust activity reflects several key drivers: the ongoing culture of portfolio rationalization among large pharmaceutical companies, forthcoming patent expirations incentivizing biopharma organizations to acquire smaller entities with promising drug pipelines, and the substantial amount of innovation occurring across therapeutic areas.

Investor groups remained highly active throughout the period, backing a diverse range of early and late-stage companies, including Persist AI Formulations, Somite Therapeutics and Stately Bio. This continued investment underscores the sector’s fundamental attractiveness to both strategic and financial buyers seeking to invest in healthcare innovation.

Digital Health: Technology Driving Transformation

Digital health maintained its position as the second-largest sub-sector by deal count, fueled by continued advancement in generative and agentic (autonomous) AI technologies. The sector experienced a steady stream of both strategic and financial buyers targeting platforms that enhance care delivery, data analytics and patient engagement.

Major transactions in the first half included Madison Dearborn Partners’ acquisition of NextGen Healthcare, Capital Rx’s acquisition of Amino, and Quantum Health’s acquisition of Embold Health. These deals reflect the sector’s critical role in enabling value-based care and operational efficiency, with many organizations seeking to integrate a variety of solutions into more comprehensive suites of technology.

The appetite for digital health assets has been particularly strong among larger health tech companies looking to provide integrated solutions to payors and providers. This consolidation trend is expected to continue as healthcare organizations increasingly demand unified platforms rather than disparate solutions.

Hospital and Health Systems: Mixed Signals

The hospital and health systems sector presented a complex picture in the first half of 2025. While hospital M&A activity slowed in the first half of 2025 compared to the first half of 2024, deals in this sector included consolidations involving very large health systems.

Notable deals included Northwell Health’s acquisition of Nuvance Health in May and Prime Healthcare Services’ acquisition of multiple Ascension hospitals in March. These transactions reflect the ongoing trend of smaller, financially challenged systems merging into larger, better-capitalized entities.

The sector faces particular challenges from the One Big Beautiful Bill Act, which became law on July 4, 2025. Health systems are actively reforecasting to understand the impact on their revenue base from Medicaid eligibility restrictions and the potential end of premium tax credits for Affordable Care Act plans on December 31. These policy changes may drive further consolidation as systems seek to maintain financial stability through scale and diversification.

Physician Practices: Private Equity’s Continued Focus

Physician practice transactions remained a cornerstone of healthcare M&A activity, with concentration in high-growth specialties such as oncology, musculoskeletal, cardiovascular, and primary care. The first half of 2025 featured a blend of platform-building deals and smaller add-on acquisitions, often backed by private equity.

Significant transactions included a number of “second/third bite” private equity transactions (aka “exits”), such as General Atlantic’s acquisition of U.S. Urology Partners (from NMS Capital), Cencora’s (formerly AmerisourceBergen) acquisition of Retina Consultants of America (from Webster Equity Partners), and Cardinal Health’s acquisition of GI Alliance (a “third bite” from Apollo Global Management, which purchased from Waud Capital Partners in 2022). Some of the other major deals were Banner Health’s acquisition of Village Medical clinics, and a series of pediatric and specialty practice rollups by Pediatrica Health Group. The sector’s resilience is underpinned by ongoing demand for specialty care and the continued pursuit of scale and integration benefits.

This activity reflects both the fragmented nature of physician practice ownership and the operational and financial benefits that can be achieved through consolidation, including economies of scale and other improvements resulting from professional management by seasoned corporate executives.

Medical Devices: Tariff Concerns Weigh on Activity

Medical device M&A volumes decreased compared to the first half of 2024, with some market participants attributing this decline to expectations that tariffs (and related uncertainties) will have an outsized impact on the sector given the global manufacturing and supply chain networks for many medical devices.

Despite these headwinds, notable transactions occurred, including Boston Scientific’s acquisition of Bolt Medical, Montagu Private Equity’s acquisition of Tyber Medical, and Merit Medical Systems’ acquisition of Biolife Delaware. The sector continues to benefit from ongoing advances in device technology, regulatory tailwinds and the need for portfolio diversification among both strategic and financial buyers.

Healthcare Staffing Resilience

Healthcare staffing transactions remained active despite broader market challenges, with both consolidation among established players and new entrants capitalizing on persistent workforce shortages. Major deals included GHR Healthcare’s acquisition of Barton Healthcare Staffing, All Star Recruiting Locums’ acquisition of Integrity Healthcare Locums, and SimpliFi Managed Services’ acquisition of TOTAL MSP.

The sector’s fundamentals remain strong, driven by ongoing demand for clinical talent and the need for flexible staffing solutions across all care settings.

Looking Ahead: Second Half 2025 Outlook

Policy Implementation: As healthcare organizations fully digest the implications of the One Big Beautiful Bill Act and other policy changes, we may see increased M&A activity as health systems seek to adapt their short-term and long-term strategies to optimize their operations for the new regulatory environment.

Interest Rate Environment: Any continued moderation in interest rates could provide additional momentum for deal activity, particularly among private equity investors who have been more selective due to higher financing costs.

Regulatory Clarity: Greater clarity around antitrust enforcement and regulatory priorities under the current administration may encourage larger, more strategic transactions that have been on hold.

Technology Integration: The continued advancement of AI and other healthcare technologies will likely drive further consolidation in the digital health space, as organizations seek to build comprehensive platforms rather than specific solutions.

Conclusion

The first half of 2025 demonstrated both the resilience and adaptability of healthcare M&A markets. While overall volumes remained constrained by macroeconomic and policy uncertainties, strategic buyers and investors continued to identify and pursue opportunities that align with fundamental healthcare trends: demographic shifts, technological advancement, and the ongoing need for operational efficiency and care integration.

As we move into the second half of the year, healthcare organizations that have maintained financial flexibility and strategic focus will be well-positioned to capitalize on opportunities as market conditions continue to evolve. The emphasis on partnerships, technology integration, and operational excellence established in the first half is likely to continue driving transactional activity for the remainder of 2025 and beyond.

For more, check out Modern Healthcare’s Mergers & Acquisitions database.

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