Partner
HealthTech M&A 2025: Efficiency, consolidation & AI as growth catalysts
18 Nov 2025
Executive Summary
Healthcare systems worldwide are approaching a structural breaking point: spending continues to rise faster than outcomes, efficiency remains low, and innovation productivity in pharma is declining. At the same time, AI, automation, and digital health infrastructure are enabling new scale effects, accelerating consolidation and cross-border integration.
M&A activity mirrors this development. Deal volumes in 2024 and 2025 are rebounding from the post-COVID slowdown. Valuations are moving back toward 2020 levels, and investors are deploying significant capital into platforms focused on back-office automation, revenue-cycle management, and data-driven healthcare delivery. Private equity is driving a disproportionate share of the market.
The takeaway is clear: efficiency is no longer optional. It is the economic foundation required to maintain the viability of modern healthcare systems. Investors, operators, and innovators are aligned accordingly.
Key Insights
Defining Forces for Healthcare M&A in the Next Decade
- AI for efficiency: AI compresses cost, increases throughput, and improves economic efficiency across the healthcare value chain.
- Consolidation: Fragmented markets move toward larger, scalable economic units capable of absorbing fixed costs and deploying digital tools at scale.
Defining Forces for Healthcare M&A in the Next Decade
- AI for efficiency: AI compresses cost, increases throughput, and improves economic efficiency across the healthcare value chain.
- Consolidation: Fragmented markets move toward larger, scalable economic units capable of absorbing fixed costs and deploying digital tools at scale.
Drivers of Efficiency (Leveraging AI and Digitalization)
- Administrative & back-office automation: AI accelerates cash conversion, reduces denials, and increases throughput across providers and payers.
- Integration of international delivery systems: Digital tools and large datasets enable cross-border models and dismantle former structural barriers.
- Electronic/Digital CFO: Data-driven CFO tooling increasingly runs healthcare enterprises end-to-end.
- Quality standardization: Data allows outcome-based care — long considered the industry’s unrealized ambition.
Drivers of Consolidation
- After waves of digital disruption, markets consolidate again around holistic service offerings rather than isolated “one-trick” tools.
- Individual solutions are bundled into integrated service portfolios, increasing customer lifetime value.
- Fixed costs favor large units, pushing scale even in defensive market conditions.
- Financial sponsors drive platform strategies and multiple arbitrage via buy-and-build models.
- Fragmented markets move toward larger, scalable economic units capable of absorbing fixed costs and deploying digital tools at scale.
The Urgent Need for Change: Unsustainable Trends
Healthcare spending is rising at an unsustainable pace, with the US now allocating 18% of its GDP to healthcare in a near-linear upward trend, while Germany has reached 12% and continues to climb. Despite this growth, outcomes remain inefficient: the US invests 18% of GDP for an average life expectancy of just 78 years, whereas Switzerland achieves 84 years with only 12% of GDP, exposing a significant efficiency gap. At the same time, pharma productivity continues to deteriorate under Eroom’s law — the inverse of Moore’s law — where the number of FDA-approved drugs produced per USD 1 billion in R&D has collapsed from more than 65 in 1955 to just 0.5 in 2024. This reflects a broken economic model in which enormous upfront costs precede any revenue, slowing down innovation and reinforcing the broader funding challenge: while 18,000 diseases are known, only 3,900 have a cure.
The Hope: Reversing Negative Trends with Data, Digitalization and AI
The sector is optimistic that digitalization, advanced data models, and AI can reverse Eroom’s law, reshape drug development, and unlock new efficiencies.
Investors are actively funding these hypotheses – signaling genuine belief in the shift.
Current M&A Market Trends & Investor Confidence
- Healthcare IT stocks outperform the Nasdaq, demonstrating sustained momentum.
- After the post-COVID slowdown, 2023 saw near-complete recovery; activity accelerated in 2024 and 2025.
- Revenue multiples have returned to 2020 levels — clear evidence of investor conviction in digital health and HCIT.
- In 2025, ~75% of the top 10 transactions were private equity deals, especially in revenue-cycle management and back-office platforms.
- Deal count remains stable, but deal value is rising — larger bets on fewer, higher-quality companies.
- Europe gains traction, attracting substantial capital (including from US investors), indicating rising trust in European HealthTech innovation.
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