Healthcare M&A update: H2 2025

Here are some key takeaways from the report:

Public market performance

The BT Capital Healthcare Index indicated mixed performance in the healthcare market during H2 2025, dipping at first but stabilizing toward the end of the half. The S&P 500, in contrast, rose demonstrating the uncertainty that continues to shape the healthcare sector. The passage of The One Big Beautiful Bill Act (OBBBA) created the largest shift in Medicaid funding in a decade by reducing enhanced subsidies and adding new eligibility requirements, which increased long‑term financial pressure on managed care organizations.

The Rural Health Transformation Program provides some funding for technology‑focused rural health initiatives, but it replaces only part of the expected losses, leaving many rural providers at risk. At the same time, inflation driven by labor shortages, drug spending and higher energy costs continued to compress margins. Healthcare operators responded by accelerating technology investments and reshaping portfolios, including through M&A, to improve efficiency and focus on stronger‑performing assets.

Sector performance and valuation

In 2025, the BT Capital Healthcare Index outperformed the iShares US Healthcare Providers ETF (IHF) but lagged the S&P 500 Index. Long-term care led performance, supported by Brookdale Senior Living, Sonida Senior Living and Welltower.

Valuation trends softened in 2025, with EV/EBITDA and EV/revenue multiples declining after stabilizing in 2024. Long-term care continued to hold the highest valuation multiples across subsectors.

Healthcare providers and services M&A insights

M&A activity in the healthcare providers and services sector continued to decline in the second half of 2025, alongside lower median deal multiples driven by regulatory uncertainty, reimbursement pressure and increased antitrust scrutiny. In response, investors shifted toward healthcare software and services platforms, especially those offering AI-supported diagnostics, automation and operational efficiency. Operators with stronger balance sheets pursued technology-focused acquisitions, while others divested non-core assets, making carve-outs an important source of deal flow, particularly for assets less exposed to regulatory risk.

Despite broader macro challenges, ambulatory, behavioral and specialty care remained attractive as health systems continued shifting volume toward lower-cost outpatient settings. Joint ventures and private equity roll-ups remained common in these fragmented subsectors.

Looking ahead to 2026, ongoing investment in technology and portfolio restructuring is expected to support continued carve-out and bolt-on activity, although regulatory and financing headwinds may continue to limit overall deal volume.

U.S. M&A activity breakdown

U.S. healthcare M&A activity slowed in the second half of 2025, with fewer transactions completed compared to earlier periods. Even with the decline in deal count, overall deal value continued to rise, supported by several large, high‑impact transactions.

Most activity occurred in the healthcare services segment, which remained the primary focus for buyers. Healthcare facilities saw a moderate share of transactions, while managed care represented a smaller portion of activity.

Geographically, Florida led all states in deal count, followed by California, New York and Texas, with several additional states recording moderate activity.