Home
/ Insights
/ Articles
/ Healthcare M&A for 2025: Key Trends and Strategic Considerations

Healthcare M&A for 2025: Key Trends and Strategic Considerations

Private equity (“PE”) investment in the healthcare sector is projected to maintain levels similar to those observed in 2024, with potential for increased activity in the second half of 2025. In 2024, Healthcare PE deal value reached $61.3 billion in 2024.¹ While declines in interest rates have long been anticipated and may encourage investment in 2025, recent tariff developments and concerns over inflation suggest that rates may not decrease as expected. As hold times reach record highs, it is increasingly important for firms to focus on value creation and meeting the increased demand for technology-enabled care solutions. Despite these opportunities, the sector is becoming increasingly complex, with heightened regulatory scrutiny, rising cost pressures and challenges in scaling innovations. Navigating these hurdles requires deep expertise and strategic planning.

This article outlines key trends shaping the healthcare M&A landscape in 2025, offering insights into how PE firms can position themselves for sustainable growth in this dynamic market. The trends are mainly driven by these key factors:

Interest Rate Environment: While declining interest rates are expected to stimulate market activity, we anticipate that deal-making will accelerate even if rates remain steady. Investors and businesses, having exercised patience for an extended period, are likely to move forward with their strategic plans. However, recent tariff implementations are introducing complexities that could increase costs for medical supplies and pharmaceuticals, potentially heightening inflation. These factors may, in turn, affect interest rate trajectories and add further uncertainty to the market.²
Regulatory Landscape: Proposed legislation in several states^3,4,5 coupled with federal initiatives to monitor quality of care under PE ownership,⁶ is poised to introduce new hurdles for deal-making in the healthcare sector. This intensification is underscored by recent developments, including two bankruptcy filings over the past year involving large, multi-state for-profit health systems,⁷ the bankruptcy of one of the country’s largest operators of skilled nursing facilities,⁸ and the passage of “An Act Enhancing the Health Care Market Review Process” in Massachusetts.⁹
Market Dynamics: The surge in available capital, combined with the need to achieve returns, is anticipated to stimulate market activity. Investments in strategic M&A, encompassing service line rationalization and resource optimization, are expected to enhance operational efficiencies and boost EBITDA. While recent tariff implications are impacting overall market dynamics, their effect on the US healthcare provider space remains relatively modest, though they contribute to a broader sense of uncertainty. Additionally, potential threats to Medicaid cannot be overlooked, as they pose significant risks to market stability. Collectively, these factors underscore the necessity for healthcare organizations to navigate a dynamic and unpredictable environment with agility and foresight.

Post-Acquisition Efficiency Gains Will Be a Key Driver of ROI

Why This Trend Matters
The focus on value creation post-acquisition is intensifying as PE investors face pressure to deliver higher returns in a challenging macroeconomic environment. In healthcare, this translates to optimizing workflows, focusing on integrated teams, breaking down silos, reducing operational redundancies, and addressing workforce challenges such as staffing shortages and burnout through a comprehensive workforce strategy. In 2025, we expect to see an increased reliance on tech-driven operational improvements and optimized integrations, such as automation in revenue cycle management, enhanced revenue recognition models and optimized organizational structures, including service-line rationalization, site consolidation and provider alignment.

How Firms Can Respond
While the potential for efficiency gains is clear, the complexities of unlocking these synergies often require specialized expertise. Firms that can identify and scale operational efficiencies across their portfolio companies will reach new levels of profitability and improve patient outcomes. FTI Consulting has expertise in operational integration along with proprietary tools that firms can leverage to identify opportunities and create a roadmap for optimal integration. An FTI Consulting team recently supported an organization through a comprehensive turnaround strategy, which included closing underperforming locations, consolidating and streamlining key positions, restructuring clinical staffing and provider compensation models, and accelerating the cash collection cycle. As a result of the successful execution of these initiatives, the organization achieved a significant improvement in performance, increasing its Adjusted TTM EBITDA from $4 million to $10 million.

From the Experts
FTI Consulting’s Physician Enterprise team lead, Jason Markham, shared that “By optimizing administrative processes, enhancing patient engagement, and building strategic relationships with stakeholders, practices can not only improve their bottom line but also provide better care for their patients. It requires diligence, targeted training, and a commitment to excellence, but the outcome is well worth the effort.”

Healthcare Technology Poised to Capture Growing Investor Attention

Why This Trend Matters
Technology adoption in healthcare continues to accelerate, with PE increasingly targeting tech-enabled businesses. In 2024, publicly recorded PE and venture capital investments in healthcare IT reached $16.9 billion, marking a 219% increase from 2023.¹⁰ This surge underscores growing investor interest in health IT and analytics vendors, particularly within physician practice management (“PPM”) investments.¹¹ A significant portion of health IT investment in 2024 was in seed and Series A funding, with seed funding outpacing Series A by 2:1, indicating long-term growth potential and future exits to PE and IPO as these organizations continue to mature.¹² Looking forward to 2025, areas such as telehealth, remote monitoring and AI-driven analytics are expected to dominate deal activity as firms look for scalable, innovative solutions that meet the growing demand for accessible and efficient care. However, potential shifts in coverage, including the expiration of the post-Covid Medicare coverage for telehealth, may constrain growth expectations.¹³ Amid this changing industry landscape, value will be realized for organizations that center on the patient, bring digitally enabled care to the forefront and drive differentiated, seamless experiences.

How Firms Can Respond
As firms look to invest in healthcare technology solutions, it is essential that they understand the unmet needs of patients, providers and health systems. By investing in health technology solutions that address these gaps and seamlessly integrate into the broader health IT ecosystem, firms can tap into significant growth potential. FTI Consulting’s Digital Health team has expertise in assessing digital market readiness and helping clients identify target companies, customers and growth opportunities for health technology portfolio companies.

From the Experts
For investors who have yet to build a presence in the health technology space, now is the perfect time to establish a health IT-focused investing strategy and position yourself at the forefront of the next wave of innovation and growth. Kendall Pelander, FTI Consulting’s Digital Health leader, shares that “We are seeing more and more investors prioritize building health IT portfolios, bringing in Health IT leaders to establish a fund, and adding portcos focused on virtual care access, AI-driven analytics, and technology enablement, particularly for specialty practices such as behavioral health and women’s health.”

Specialty Sectors Will Continue to See Activity

Why This Trend Matters
PE firms continue to invest in provider businesses and are increasingly concentrating on specialized services such as fertility clinics, behavioral health and outpatient infusion centers due to their fragmented markets and potential for consolidation. Rising costs and declining reimbursements are intensifying pressure on specialty providers.

Specialty services are expected to pique interest from PE because of their positive reimbursement trends as payors and the government look to incentivize lower cost settings and providing access for vulnerable populations. Specific programs provide them with the potential for higher, predictable reimbursement rates, such as the CMS Merit-Based Incentive Payment System (“MIPS”). Since 2024, CMS has expanded MIPS Value Pathways (“MVP”) to include more specialties, such as gastroenterology, urology, and women’s health. This expansion increases opportunities for quality care improvements and revenue growth.¹⁴

How Firms Can Respond
Central to achieving meaningful growth, firms must identify opportunities for efficiency gains, adopt a long-term view into their value creation strategy, and remain flexible to the changing demands and opportunities within the industry. By focusing on scalability, integrating innovative care models and aligning services with market demands, investors can drive measurable outcomes that not only improve financial performance but also deliver long-term value in these high-growth sectors.

From the Experts
Highlighting the evolving dynamics in specialty healthcare, Tom Kelly, leader at FTI Consulting in healthcare financial advisory and operational business transformation services, shares that “Specialty healthcare remains an attractive space for PE, but unlocking its full potential requires more than just consolidation. In our experience, the firms that achieve long-term success are those that prioritize efficient scaling through operational improvements, strategic payor relationships, and smart integration. As reimbursement models evolve and cost pressures mount, those who stay ahead of industry shifts with a proactive and data-driven approach will create the most sustainable value.”

Final Thought
As the healthcare M&A landscape evolves amid shifting regulations, rapid technological advancements and mounting market pressures, organizations must adopt tailored strategies that address their unique challenges and objectives. Partnering with experts who bring a nuanced, industry-specific perspective can be critical in mitigating risks, streamlining integrations and unlocking long-term value. By aligning strategic and operational priorities, healthcare organizations can better navigate these complexities and position themselves for sustainable success.

Footnotes:

1: “Capital IQ Transaction Screening Report,” S&P Capital IQ (December 13, 2024); FTI Consulting analysis.

2: “Fed seen resuming rate cuts in June as consumer confidence takes a dive,” Reuters (February 25, 2025).

3: “Senate Bill 351 (SB 351),” California Legislature (February 12, 2025).

4: Hanson, J., Tabke, Greenman, Reyer, Lee, K., Liebling, Fischer, Bierman, “HF 4206,” Minnesota House of Representatives (March 14, 2024).

5: “SB 951,” Oregon State Legislature (March 4, 2025).

6: “S.4804,” United States Congress (July 25, 2024).

7: Mathewes, Francesca, “Unpacking 3 major healthcare private equity bankruptcies,” Becker’s Hospital Review (February 7, 2025).

8: Ibid.

9: Williams, Dennis, Richmond, Will, Kluka, Kelly. “Massachusetts Gives Private Equity in Health Care New Burdens,” Bloomberg Law (February 3, 2025).

10: “Pitchbook Healthcare IT Data,” Pitchbook (January 15, 2025); FTI Consulting analysis.

11: Ibid.