Healthcare M&A Update

Executive Summary

Healthcare M&A activity continued to moderate in Q1 2026, with transaction volume declining from the prior year as buyers remained highly selective across most segments. Strategic acquirers continued to lead deal activity, concentrating on assets in diagnostics, life sciences, and technology-enabled care delivery — areas where the strategic rationale for large-scale investment remains compelling. Financial buyers remained selective, concentrating on niche segments that present opportunities for economies of scale.²

"Healthcare M&A continues to draw strong capital interest, but the threshold for premium valuations has risen meaningfully," said Brad Scharfenberg, Vice President at PCE. “Buyers are prioritizing platforms with demonstrated operating leverage, defensible reimbursement models, and clear strategic fit.”

Valuation multiples continued to compress modestly, reflecting persistent buyer discipline and a preference for assets with durable margins and strong growth potential. Below, we explore key transactions, geographic distribution, and emerging trends shaping the Healthcare M&A landscape.¹

Market Dynamics

Ongoing macroeconomic uncertainty and a more cautious financing environment continued to weigh on deal volume in Q1 2026. Assets with revenue concentration faced sustained valuation pressure, as median TEV/Revenue declined to 3.04x—down from 3.22x a year prior and well below the 5.38x seen in Q1 2022. EBITDA multiples also continued their multi-year compression to 12.7x, as buyers gravitated toward assets with cost-efficiency, reimbursement stability, and exposure to outpatient and home-based care—areas viewed as lower-risk amid the evolving healthcare delivery landscape.¹

Buyer Landscape

Strategic Acquirers: Strategic buyers dominated the Healthcare M&A market with 881 deals (89.0% of total), pursuing a range of acquisitions across the healthcare landscape. Among the most notable, Abbott's $23.5B acquisition of Exact Sciences and Waters Corporation's $18.8B purchase of BD's Biosciences and Diagnostics Solutions reflect the continued appetite for large, capability-expanding deals in diagnostics and life sciences — though the broader deal mix spanned numerous subsectors and buyer motivations.¹

Financial Buyers: Closed 109 deals (11.0% of total), maintaining a disciplined, targeted approach to niche healthcare segments. With a more selective deployment of capital, financial sponsors pursued assets with recurring revenue and clear cash flow profiles — Kingswood Capital's acquisition of Quipt Home Medical, a respiratory and home medical equipment provider with a 72% gross margin and a growing patient base, is one example of the type of operationally grounded platform attracting private equity interest.¹

Industry Comparison

Healthcare M&A volume declined 19.4% YoY on an LTM basis through Q1 2026, yet the sector continues to outpace more cyclically sensitive industries in deal activity, representing approximately 6.9% of all LTM transactions across sectors. TEV/EBITDA multiples compressed to 12.7x—down from 13.0x in Q1 2025 and 14.9x in Q1 2024—while TEV/Revenue declined to 3.04x, the lowest level in the last four years. Despite the multiple compression, healthcare continues to attract sustained capital interest relative to other sectors, supported by its essential-service profile, non-discretionary demand, and long-term demographic tailwinds.¹

Geographic Expansion

Top U.S. States: California (140 deals), Texas (69), and Florida (84) led Healthcare M&A activity in the LTM period ending Q1 2026, driven by robust provider networks, favorable demographics, and concentrated innovation hubs. New York (53) and Pennsylvania (42) also ranked among the most active markets.¹

Cross-Border Trends: International acquirers continued to pursue U.S. healthcare targets to access leading innovation in life sciences and diagnostics, as evidenced by Novartis’s $12.2B acquisition of Avidity Biosciences and Swedish Orphan Biovitrum’s $1.5B deal for Arthrosi Therapeutics—reflecting sustained foreign interest in U.S. biopharma pipelines.

Notable Transactions

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

Emerging Trends

Key trends shaping Healthcare M&A:

1. AI and Digital Health Integration
   While total U.S. healthcare M&A deal value fell to $46B in 2025 from $62B in 2024, Q4 2025 saw a sharp rebound as buyers pursued scale and innovation. Over 950 deals closed in 2025, reflecting a selective but healthy market. Strategic acquirers appear confident in pursuing durable healthcare assets.⁶
2. Workforce & Cost Pressures Shaping M&A Logic
   AI adoption is reshaping healthcare delivery, driving M&A in Healthcare IT (HCIT) to four-year highs in 2025. Providers, payors, and investors are prioritizing digital tools for cost management, operational efficiency, and clinical innovation across documentation, diagnostics, revenue cycle management, and patient engagement.^{6 7}
3. Specialty Care Consolidation
   Physician practice management (PPM) roll-ups and platform build strategies continue to concentrate deal flow in high-density specialties. Cardiology, GI, dermatology, and behavioral health have predictable demand and favorable reimbursement which support consolidation and scale. 67% of healthcare M&A professionals cite specialty care as the most resilient M&A segment heading into 2026.⁹
4. Disciplined Capital Deployment and Creative Deal Structures
   As we move into 2026, the healthcare M&A market is set to maintain momentum and experience strategic repositioning, with several industry analysts forecasting continued growth shaped by evolving buyer preferences, regulatory scrutiny, capital market dynamics, and technological innovation. Valuation expectations have not fully reset on the sell side, making earnouts, rollover equity, and option-to-acquire structures increasingly common, especially in growth platforms and PPM deals where physician retention and post-close performance are critical.^{2 5}
5. Regulatory and Political Scrutiny
   Despite a more business-friendly regulatory environment in Washington, private equity–backed roll-ups, multi-state platform builds, and cross-border transactions continue to attract regulatory scrutiny. Antitrust review of provider consolidation remains a live issue in certain markets and specialties.For tech-enabled and AI-heavy platforms, regulators and counterparties are taking a much closer look at how data is used, how consent is handled, and how algorithms actually work.²
6. Shift Toward Outpatient and Value-Based Care Models
   Demographic trends, cost pressures, and patient preferences for outpatient care have accelerated portfolio rationalization and specialty expansion. Despite reimbursement and regulatory risks, demand for lower-cost, tech-enabled models positions healthcare for continued consolidation in 2026. Across survey participants, value-based care models capture 26% of responses as expected areas of M&A resilience, reflecting a market that remains active but cautious — deploying capital selectively based on cash flow visibility, regulatory risk, and execution certainty.⁹
7. Subsector Spotlight: Behavioral Health
   AI adoption among behavioral health providers rose from 17% in 2024 to 27% in 2025, with 65% of clinicians reporting that AI is helping them spend more time with patients. 80% of behavioral health organizations are reinforcing core systems to meet rising demand, and telehealth and digital therapeutics are now standard parts of care delivery. Workforce shortages and reimbursement shifts remain key headwinds, moderating near-term valuation growth even as capital interest in the sector remains strong.³
8. Subsector Spotlight: Healthcare IT (HCIT) & Digital Health
   42% of C-suite respondents identify HCIT and data platforms as the most durable M&A target in 2026, with corporate development teams reinforcing this perspective. This reflects sustained demand for software-driven assets that improve efficiency, enable interoperability, and generate recurring revenue, particularly as health systems and payors prioritize cost control and digital transformation.^{3 6}

Outlook for Next Quarter

Opportunities: Stabilizing economic conditions, moderating interest rates, and buyers returning to the market are expected to support growth in healthcare M&A activity and valuations, particularly in segments with scalable business models. Activity is picking up, lenders are more open for business, and sellers are coming to market.²

Risks: The 2025 healthcare M&A market reflected the impact of evolving macroeconomic and regulatory pressures — from elevated labor costs to shifting federal policy and reimbursement uncertainty — headwinds that remain present entering 2026. Further, the expiration of ACA-enhanced premium tax credits at the end of 2025 has caused average subsidized enrollee premiums to more than double in 2026.^{4 8}

Predicted Activity: Resilience in healthcare M&A will be driven by precision, not breadth, with capital flowing toward assets that combine clear demand, defensible economics, and realistic paths to scale. Buyers are spending more time underwriting integration, physician alignment, and post-close execution than debating headline multiples.^{2 9}

PCE Transactions

 

Served as advisor to Taylors Pharmacy on their acquisition by Revelation Pharma

Served as advisor to Physician Associates on their acquisition by Orlando Health

Served as advisor to HemaCare on a fairness opinion

Served as advisor to Rotech Healthcare, Inc. on a purchase price allocation

Served as advisor to Harbor Retirement Associates for credit facility to fund growth plans

Issued a fairness opinion related to the sale of Telligen to an ESOP

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