Panelists at Datasite’s healthcare M&A webinar last year looked forward to rising deal activity in 2025 and, at the halfway mark, that optimism looks well founded with both deal volumes and closures rising.

But will the trend continue, or have the turbulent markets of the last few months created headwinds for further growth? Crucially, how have the eventful first months of the Trump presidency shaped the market?

Six months after the last healthcare webinar, our panelists reconvened in June 2025 to assess the M&A landscape and prospects for the future.

A healthy start to 2025

Deal activity in the healthcare sector picked up in the first half of 2025 with global deal kick-offs rising 2% and closure rates staying stable, according to Abby Roberts, Senior Director at Datasite Insights. The performance in North American matched the global 2% rise in deal kick offs but showed even greater strength in deal closures, which rose four percentage points.

Significantly, however, timelines extended with deals taking an average of 22 days longer than in the same period in 2024.

Additionally, the rise in activity was heavily skewed towards the first three months of the year with signs of slowing activity in the second quarter. Panelists were unanimous in attributing the slower growth in Q2 to uncertainty in the market.

The trigger point was identified as Trump’s ‘Liberation Day’, when he announced sweeping tariffs on imports across all sectors and most countries.

“Markets were very happy after the election,” said Jay Liebowitz, Managing Director at Centerstone Capital. “What happened on Liberation Day impacted the markets, making people confused and everybody re-evaluate.”

Tony Crisman, Managing Director and Head of Healthcare at investment bank Stout, agreed that uncertainty had an impact, but said the highest quality assets were still coming to market and achieving high valuations comparable to those seen at the market high of 2021-22.

A poll of the webinar audience found 47% placed tariffs as the biggest possible headwind for healthcare M&A, followed closely by the wider uncertainty in the market about policy. Panelists agreed that tariffs arose persistently in deal discussions, but they argued the healthcare sector was mainly a domestic industry and while supply chains in equipment and pharma would be affected by tariffs the sector overall was less impacted than many others.

In reality a more significant factor for healthcare M&A could be cuts to Medicaid that will take effect after the Trump administration’s ‘Big Beautiful Bill’. Possible changes to the reimbursement system that channels Medicaid cash to healthcare providers could also be an issue for some healthcare businesses.

Christopher Olson, partner at law firm McDermott Will and Emery said: “Potential Medicaid cuts or work requirements and complex verification systems, all that can lead to administrative challenges,” adding that in healthcare, businesses dependent on Medicaid reimbursement were becoming less attractive. “We are seeing buyers take a step back from those areas, given the uncertainty,” he said.

Getting deals sewn up

Crisman mentioned the highest quality assets were still commanding high interest and attractive valuations in early 2025, and suggested this was due to scarcity and limited exposure to Medicaid, regulatory or tariff risks.

Crisman said sellers should be thinking more carefully about the indications of interest they get from buyers and assess not just who is initially offering the best valuation, but who is well-placed to complete a deal because it makes strategic sense and offers operational efficiencies or growth potential.

“That results in getting a buyer who has a high degree of conviction and who can get the deal done,” he said.

“It also helps to have your ducks in a row,” said Olson. “There’s always going to be an uncomfortable due diligence process with the buyers going through years and years of records. Having all that cleaned up and ready to go is very helpful.”

That preparation includes having a clear understanding of regulatory and policy factors that could impact the asset, Olson said, and highlighted legislative trends at state level as significant in shaping deal flow in the future.

“Some states require you to get approval before a transaction can close [in healthcare] and can impose conditions for after the deal. Other states just require notice,” he said.

One crucial factor could be requirements in some states to divulge the identity of controlling owners in a healthcare acquisition, a factor that could be an issue for some private equity buyers. Such strictures, already in place in a number of states, were likely to be adopted more widely, he said. Anticipating and preparing for these hurdles at the outset is essential to avoid deals being hampered by delays or unexpected costs later in the process.

Subsectors to watch

Digital healthcare emerged as a key theme for the webinar audience, with 45% placing it at the top of their list of subsectors likely to see rising activity, with value-based healthcare second at 24%.

Panelists meanwhile suggested that digital capabilities were also part of the development in other sub-sectors of healthcare.

Liebowitz highlighted opportunities in consumer healthcare, notably businesses on the edge of the healthcare market such as med spas or businesses focused on longevity. Some of these are driven by digital technology but are also attractive because of their business models. “The unifying theory behind all those is that, more than anything else, they are cash payment and subscription-based businesses,” he said.

Crisman suggested that the evolution of value-based care also depended on the technology that supported it. “Strategies around value-based care, rather than directly in it, are probably more investible,” he said, arguing that supporting technologies such as telehealth or other tech or AI-enabled services were the real key.

Uncertainty need not be an obstacle

Asked to offer a final word on the healthcare M&A market, Olson returned to the issue of regulatory uncertainty. “Businesses that can adapt are going to be best positioned for long term success. You need to stay on top of the policy and regulation changes at state and federal level and employ consultants to help you with that.”

Crisman meanwhile struck an optimistic note on the outlook for deal volumes and values. “We are going to continue to see things move up in the back half of this year with ‘A’ assets testing the market and attractive valuation following, given the amount of capital in the market.”

Being ready for when opportunity knocks is vital, Liebowitz said. “If you are thinking of selling there is no downside to getting the work done upfront. There is uncertainty but it won’t last forever, and we all stand to benefit from being in a position to hit go because you have everything prepped.”