Why I’m Very Optimistic About Healthcare M&A for 2025

Volume 11, Issue 20, October 22, 2024

By: Anna Elliott, CM&AA

As a Managing Director at VERTESS, which specializes in healthcare mergers and acquisitions (M&A) advisory, I've witnessed the industry's inherent cycles shaped by the likes of economic trends, regulatory shifts, and technological innovations. The latest analyses point to the likelihood of a significant rebound in healthcare M&A as we near the end of 2024 and move into 2025 — and I personally share this sentiment.

At VERTESS, we are seeing an uptick in new clients exploring exit strategies, recapitalization, and growth opportunities, alongside an increasing interest from various buyers and emerging investment groups. I do not believe this revival is a fluke. Rather, it's a culmination of a blend of factors redefining the strategic landscape for healthcare organizations.

Such a bounce back for the healthcare industry would be welcome news, considering the turbulent few years we are hopefully starting to put behind us. Regulatory uncertainties, volatile valuations, and the impacts of the COVID-19 pandemic — which still weigh heavily on some sectors — led to a noticeable slowdown in healthcare M&A activity. Additionally, the dual pressures of inflation and rising interest rates prompted many organizations to tread cautiously with their capital.

However, the following are five emerging indicators that suggest we are on the cusp of increases in strategic healthcare M&A transactions.

1. Market stabilization

Organizations are beginning to regain confidence in their strategic capabilities, which is helping stabilize the market. In addition, clearer regulatory guidelines, in areas such as telehealth and value-based care, are fostering a more stable environment that would appear ripe for M&A activities.

2. Consolidation trends

The healthcare sector continues to undergo a significant consolidation phase — and evidence points to this period continuing for some time, even with some consolidation efforts receiving increased scrutiny. Buyers are seeking opportunities to enhance their operational efficiencies and achieve economies of scale. 

3. Technological advancements

The pandemic further accelerated the adoption of digital health technologies, thus fundamentally reshaping our industry. Companies specializing in health tech solutions, including those using artificial intelligence and machine learning, are becoming highly sought-after acquisition targets, both because of their results to date and their perceived long-term value. The integration of innovative solutions represents an opportunity for traditional healthcare providers to improve patient outcomes and operational efficiency while differentiating themselves from competitors and potentially capitalizing on the continued movement toward value-based care.

4. Private equity involvement

The recent lull in M&A activity has resulted in private equity firms accumulating substantial capital reserves. We see that the firms are eager to invest and have a growing interest in doing so within healthcare. These firms, which are often focusing on long-term value, are well-positioned to drive a new wave of consolidation. In 2025, I expect elevated consolidation in more fragmented markets like home health, behavioral health, and outpatient services, to name a few.

5. Focus on value-based care

The ongoing transition to value-based care models is prompting some healthcare organizations to pursue partnerships specifically aimed at enhancing care coordination and improving patient outcomes — two key contributors to value-based care success. We are seeing how M&A can lead to innovative care delivery models that enable healthcare organizations in value-based care arrangements to meet the evolving expectations of payers and patients.

My Strategic Healthcare M&A Outlook

Recognizing that 2025 is likely to see a resurgence in M&A activity, I believe stakeholders across the healthcare spectrum should begin preparing now — if they haven't started already — to capitalize on the growth in transactions. Organizations must prioritize initiatives that support efforts to identify strategic partnerships that align with their long-term objectives, bolster their competitive positioning, and enhance patient care.

The cornerstone of successful healthcare M&A lies in meticulous due diligence and developing a concrete understanding of the strategic rationale behind potential deals. Healthcare executives would be well-served to collaborate with seasoned M&A advisors who can provide invaluable insights into market trends, help identify suitable targets, and facilitate negotiations that yield fair value for all parties.

When I read the tea leaves, I see a healthcare M&A landscape that stands on the precipice of revitalization, driven by market stabilization, technological innovation, evolving care delivery models, and other influences. As we approach the end of 2024 and transition into 2025, organizations that remain agile and proactive in their strategic planning will be ideally positioned to seize the opportunities that lie ahead. In this dynamic environment, the role of M&A advisory will be essential in navigating the complexities of transactions, helping ensure that healthcare organizations not only survive but thrive.

Anna Elliott,  CM&AA

With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.

Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.

As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.

We can help you with more information on this and related topics. Contact us today!

Email Anna Elliott or Call: (724) 900-1377