US Deals 2025 midyear outlook

Health services

Publication
4 minute read
June 18, 2025

Strong subsector growth demonstrates sector durability

Health services M&A has weathered a complicated macroeconomic and political environment. This year the market had 445 announced transactions through May 15, 2025, driving the last-twelve-month (LTM) volume to 1,265 deals (down 7% versus 2024’s 1,355) and disclosed value to about $64 billion (down 8% versus 2024 but still 2% above 2023). There was only one announced megadeal (greater than $5 billion). However, with a $17.9 billion headline price, the Walgreens Boots Alliance/Sycamore megadeal contributed about 28% of all disclosed value, cushioning the headline value decline.

Key takeaways:

Subsector winners: “Other Services” (contract research organizations, ambulatory surgical centers, home infusion, medical office buildings) leads with 454 LTM deals and more than $31 billion in value, followed by physician groups (413 deals with $11.3 billion of disclosed value) and labs/diagnostics (110 deals with $7.6 billion of disclosed value).
Behavioral health is back: Investor interest in autism, addiction and outpatient psych platforms has reignited. In the first quarter of 2025, behavioral health deal flow jumped over 35% year-on-year, with autism deals doubling to the highest quarterly count since 2020.
New money eyeing hospitals: General Catalyst’s proposed buyout of nonprofit Summa Health — the first venture capital (VC) acquisition of a hospital system — signals fresh, tech-oriented capital looking for digital turnarounds and could preview further VC interest in acute care assets.
Regulators raising the bar: The Federal Trade Commission lifted Hart-Scott-Rodino filing thresholds to $126.4 million but continues to challenge perceived anticompetitive hospital and payer combinations, extending timelines and diligence costs. Expect closer scrutiny of vertical integration and site-neutral reimbursement proposals through 2025.
Financing & valuations: High dry powder in private equity (PE) will still go to quality assets, and we anticipate a healthy level of deal volumes through the second half of 2025.
Public company valuations: Across seven tracked subsectors (home health/hospice, labs/imaging/pharmacy, skilled nursing facilities/assisted living facilities/long-term acute care hospitals, outsourcing, ambulatory care/rehab/dental, managed care, and acute care) there has been some EBITDA multiple compression compared to May 2024. Managed care companies now trade about 19% lower than a year ago due to higher medical-loss-ratio prints and political noise around Mergers and Acquisitions overpayments.

1,375

The three-year running average of the number of healthcare transactions. Although down from the boom years of 2020-2022, the activity within the diverse portfolio of subsectors demonstrates the continued durability of investing in this sector.

Looking ahead

The deal environment is a mix of persistent headwinds and emerging opportunities. We’re watching several key trends and dealmakers should be ready with strategic responses:

With high interest rates and elongated holds, full controlling-interest buyouts are becoming less frequent. Investors are leaning on minority recaps, preferred equity and other flexible structures to bridge valuation gaps. Investors should embrace these tactics to keep deal flow alive.

Broader regulatory uncertainty and pending federal initiatives, such as the ongoing reconciliation bill discussion, are clouding investor sentiment. Such outcomes will sway valuations and dealmakers can hedge policy risk via earn-outs and watch for distressed assets if Medicaid eligibility restrictions are enacted.

Insurers’ medical costs are overshooting projections and it’s unclear if the post-COVID utilization recovery has peaked. Meanwhile PBMs, particularly vertically integrated payers, face heavy scrutiny from regulators and Congress. This could drive a wave of divestiture activity across the pharmacy sector if proposed restrictions come to fruition.

VBC remains attractive, but investors favor lighter-risk plays over full risk-bearing providers. Rather than being exposed to the full risk of a clinic model, investors have recently preferred point solutions and benefits managers that enable value-based models without full exposure. However, the recent downturn in risk-based provider performance may drive opportunistic investment opportunities.

AI is on every company’s agenda and many organizations claim significant ROI from healthcare AI but lack data to illustrate the case. Still, pilots in areas like revenue cycle and diagnostics are receiving concentrated investments and warrant attention. Investors should be ready when use cases prove themselves, but be wary of overpaying for AI tech.

Behavioral health, revenue cycle management (particularly sub-specialty specific vendors) and pharma services remain active. Behavioral health M&A is brisk amid surging demand and outsourced pharma services continue to consolidate. Investors, particularly PE, can continue to pursue a roll-up strategy, given strong tailwinds.

Retail ownership of healthcare assets is another theme we expect to evolve. Will the Walgreens’ take private be a one-off megadeal, or will there be increased divestiture activity of retail-owned healthcare assets that were accumulated in the prior M&A uptick?

“Despite constant market shifts, healthcare deal activity has remained durable, with strong fundamentals and momentum signaling continued growth across diverse sub-sectors.”

Nick Donkar, Partner,US Healthcare Deals Leader

The bottom line

Dealmakers should balance caution with flexibility to navigate today’s headwinds and capitalize on health services opportunities in the coming months. Strong growth in subsectors like home health care and behavioral health signal the resilience of the sector.

Explore national M&A trends

About the data

LevinPro HC: The merger and acquisition data contained in various charts and tables in this report have been included only with the permission of the publisher, Irving Levin Associates LLC. All rights reserved.

S&P Capital IQ: Information provided by or through third parties is provided “as is,” without any representations or warranties by PwC or such third party. PwC and such third parties disclaim any contractual or other duty, responsibility or liability to client and any person or entity that receives such information.

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Health services

Strong subsector growth demonstrates sector durability

Looking ahead

The bottom line

About the data

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