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Join Glenn Hunzinger, US Health Industries Leader, and Dan Farrell, US Health Services Deals Leader, as they discuss why 2026 could mark a rebound year for health services dealmaking—driven by higher-quality assets, improving market conditions, and the growing role of technology and AI. They explore how investors are rethinking value creation, from tech-enabled care models to carve-outs and IPOs.
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We’ve summarized the full discussion in a short Q&A format so you can get the highlights in minutes.
Why this moment, and what’s driving renewed deal momentum
Q. Glenn Hunzinger
Why is this the moment for health services M&A to regain momentum, and what’s driving it?
A. Dan Farrell
2026 marks a turning point because the quality of assets coming to market has materially improved. Companies are showing cleaner earnings, stronger cash flows, and real technology enablement. At the same time, market conditions are stabilizing—interest rates are steadier, equity markets are reopening, and exit environments are improving. When better assets meet available capital, deal activity follows.
Where investors are focusing their attention
Q. Glenn Hunzinger
What types of assets and subsectors are attracting the most interest?
A. Dan Farrell
Investors are prioritizing subsectors that outperform despite regulatory pressure. This includes AI-enabled back-office platforms, tech-enabled care models, behavioral health, home-based care, and certain physician specialties. In many cases, AI is delivering measurable cost savings and margin improvement, moving from concept to real economic impact.
The role of carve-outs in shaping the market
Q. Glenn Hunzinger
How are carve-outs influencing health services deal activity?
A. Dan Farrell
Carve-outs are accelerating as health systems and large corporates divest noncore assets to focus on core capabilities. Businesses such as labs, diagnostics, home health, long-term care, and revenue cycle units are being separated and transformed into standalone platforms. This trend began in 2025 and is expected to continue into 2026.
IPOs, exits, and what changed from 2025
Q. Glenn Hunzinger
What’s changing around exits and the IPO market?
A. Dan Farrell
Assets with predictable, sustainable cash flows are finding renewed opportunity in the public markets. After a cautious 2025—when many deals stalled due to reimbursement and political uncertainty—the IPO window is reopening. As 2026 begins, buyers have more access to capital and more exit optionality, making this a payoff period for last year’s transition.
The key watchout for 2026
Q. Glenn Hunzinger
What’s the most important trend to watch going forward?
A. Dan Farrell
AI’s impact on valuations will be critical. Buyers are no longer viewing AI as an enhancement—they expect it to drive real margin expansion and growth. As AI scales across health services platforms, it has the potential to fundamentally reshape deal activity and long-term value creation.
Speakers
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Episode transcript
Find episode transcript below.
00:00:03:24 Hello, everybody. Happy holidays. Welcome back to PwC’s Next in Health. I'm Glenn Hunzinger, PwC’s US Health Industries Leader. And today, I am joined by my good friend Dan Farrell, who runs our Health Services Deals Practice here. Dan, thanks for coming on.
DAN FARRELL:
00:00:19:18 My pleasure, Glenn. Happy holidays to you.
GLENN HUNZINGER:
00:00:21:24 Thanks. So, read your thought leadership piece. Loved hearing and seeing your thoughts. It's going to be a buoyant year for health services. A little bit of rebound. Can you tell me a little bit about that? What do you think's going to happen? What do you think you're going to see? And sort of the why.
DAN FARRELL:
00:00:36:19 Yeah, sure. So, 2026 as you read in the Outlook, I think it's the year that M&A comes back with real momentum. What we're seeing now that's different is that the assets coming to market are quite simply, they're just better. They're cleaner on earnings. They have stronger cash flows and they're tech enabled. Just thinking about some of the recent deal conversations I've had, the deals that clients are excited about,
00:01:02:13 they're not necessarily the biggest ones, right. Instead they're the ones where earnings are clean, tech infrastructure is real. Reimbursement exposure is low. That's basically what's bringing folks back to the table, especially on the PE side. So overall 2026, we expect a lot more activity with a lot more quality assets in play. Your question around like what's driving that, right?
00:01:24:08 It's really two forces. The first is the market backdrop. It's just simply improving. We've got steadier interest rates. We've got reopening equity markets. We've got a more favorable exit environment. And when you take those forces alone, that's enough to unlock a lot of capital.
00:01:41:40 But the second and the bigger driver is really just structural. Investors are looking at subsectors that are outperforming despite all the regulatory noise. They're looking at one, AI-enabled back office platforms. They're looking at tech-enabled care models. They're looking at certain specialties.
00:01:59:04 I'm thinking like behavioral health, home-based care. Some physician specialties that have access to drug distribution channels. Those are always hot. But going back to the AI point, one PE investor that I talked to showed me before and after numbers from a portfolio company that had embedded AI into workforce scheduling.
00:02:19:24 And this wasn't theoretical, right. Like this was real. It was shaving millions off labor costs. And those are all real economic drivers. But if I had to sum it all up, I would say when assets are better and capital is available, deals are going to get done. And that's the environment we have right now.
00:02:36:04 It's great, now, it's tremendous to see. And as we spoke about just in the idea of the future, health has to be more efficient and technology as an enabler of it. Even in the simplest things, I think is just tremendous. And it's great to see that private equity is investing in sort of making those transformational journeys.
GLENN HUNZINGER:
00:02:53:06 And I appreciate your insight, spending time with all the biggest to the private equity out there and the insights. The other thing that was interesting in the report was the continued focus on carve outs, which we're seeing across the industry holistically. If you're not the rightful owner of parts of businesses, you look to sort of unlock some of the value.
00:03:14:05 And I think that's been a great way to invest in a great way to the same point, transform. Can you talk a little bit about that and kind of what you're seeing, what you think there?
DAN FARRELL:
00:03:22:08 Yeah. Well, we started seeing this trend around carve outs, I would say it was early on, for health services, it was early on in 2025. And whether it was health systems or large corporates, essentially, what they were doing was shedding non-core assets. They were trimming down, focusing in on core capabilities and some of those divestitures.
00:03:40:20 Right, like in the areas of laboratories, diagnostics, home health and thinking long-term care, some revenue cycle business units, for example, which were parts of large health systems, they've turned into and are continuing to turn into large transformative deals.
00:03:55:14 So it's a definite trend that we expect to see continue into 2026.
GLENN HUNZINGER:
00:03:59:18 Yeah, that'll certainly help with some of the tailwinds there when we think about M&A and investing. And then what I was really encouraged to see in here was the IPO market. And maybe that goes to your point on the quality of the assets that are coming up. But, talk to me a little bit about that.
DAN FARRELL:
00:04:14:21 Yeah. Well, I think what's driving that is sustainable cash flows. Right now, just overall macro-economically. It's just a better environment for coming and going public. But I think particularly around certain health services deal assets, you see certain assets that have very strong, sustainable, long-term, predictable cash-flow models. And that's a recipe for success in the IPO market.
00:04:38:00 So, we saw a few clients just over the last couple of months take their assets public in health services. And I would think in 2026, it's a viable exit alternative for a lot of our PE investors.
GLENN HUNZINGER:
00:04:49:05 Yeah. And I think the interesting thing in your report was you're already seeing the momentum building. It's like the continuation of the momentum that we've seen throughout 2025 and accelerating. So just maybe hit on that point a little bit because I think it really provides the foundation that, listen, it's going to be a strong year as we go into 2026.
DAN FARRELL:
00:05:09:06 Yeah. And 2025 was an interesting year, right. And I would call it a bit of a transition year. Deals were getting done but buyers were definitely cautious. I mentioned before there was the reimbursement headwinds. Some political pressure. And spoke with one corporate development leader for with one of my larger — it's a Fortune 100 client. In 2025, they had more deals that were on ‘definitive hold’ than they did that were actually in diligence.
00:05:33:05 So that spoke a lot to the deal market in 2025. But those transition issues — basically, that just now in 2026 or as we pivot to 2026, it's basically just shifting the types of deals that are getting done, right. You have most buyers, PEs especially. They're avoiding the regulatory exposure, but they're moving more towards software,
00:05:55:20 AI-enabled delivery platforms, other buyers, for example, the large drug distribution companies, they're becoming incredibly influential when it comes to physician practice acquisitions and of course, as you mentioned, you have the corporate carve-outs.
00:06:08:16 So, now here we sit at the end of 2025, the IPO window's cracking open again. You've got basically more access to capital. So, 2026 is essentially the payoff period for a lot of that transition that we saw in 2025. We've got better assets, cleaner pricing and more exit optionality. Again, that's a recipe for success when it comes to M&A activity.
GLENN HUNZINGER:
00:06:31:07 Yeah. Your point on the distributor is really vertically integrated and going deep there. I thought it was an interesting one and certainly a big trend you call down and expect to continue. That's pretty interesting when you think about the dynamics of the broader world of health. Right. And we're seeing convergence not just outside the industry, but across the sectors in the industry. It's more and more of that continuing to happen.
00:06:52:05 So Dan, listen, super insightful. Everybody always likes to know what didn't you put down on a page. What's the watch out? What's the thing that you say this could be interesting to keep an eye on?
DAN FARRELL:
00:07:03:03 Yeah, that's a great question. I think personally and professionally, the most interesting thing to watch for in 2026 is going to be how quickly AI starts reshaping valuations and activity in health services. We're moving past the point at which AI is just seen as sort of a nice enhancement to a deal or a compliment to a portfolio company.
00:07:24:12 Buyers are now looking to AI to drive real margin improvement and growth. It's not just a case study anymore. And if we see that, I think we're going to see in 2026 a very active M&A market and health services for the foreseeable future. It has a chance to really be transformative. And I think the expectations are only getting higher and higher when it comes to AI.
GLENN HUNZINGER:
00:07:46:00 I love that. That's a tremendous watch out. And I think it's a good one because you just highlighted a couple examples where it's already existing. So, if we can get from seeing it in certain examples to a scale play, that would excite me, because I think our world of health could use that efficiency as we think about funding the next generation of innovation.
00:08:04:19 So, thank you for being here, Dan. Super insightful. Everybody, thanks for tuning in to PwC's Next in Health. For more on these topics and other insights across health industries, please subscribe to our podcast at pwc.com/US/ Next in Health podcast. Until next time, this has been Next in Health.
FEMALE VOICEOVER:
00:08:31:16 This podcast is brought to you by PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries, or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This podcast is for general information purposes only and should not be used as a substitute for consultation with professional advisors.
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