Healthcare M&A 2026

Introduction

In contrast to 2024, a year in which early optimism ultimately gave way to a somewhat lacklustre reality for M&A, deal makers’ confidence heading into 2025 proved justified. According to LSEG’s Global M&A Review, worldwide M&A activity totalled USD4.6 trillion in 2025, an increase of 49% compared to 2024 and the strongest year for deal making since 2021. The healthcare sector was no exception to the overall strong year. While total announced healthcare deal volume slightly decreased in 2025, total announced deal value increased over 60% compared to 2024. Looking forward to 2026, healthcare M&A activity is poised to build on 2025’s growth, with technological advancement and structural pressures serving as key drivers. Yet, both external and industry-specific uncertainty could temper the pace of deal making.

Healthcare M&A in 2025

At the forefront of the strong year of healthcare M&A was a resurgence in “mega-deals” (defined as transactions with a value in excess of USD10 billion). Mirroring the broader global M&A environment, which experienced its most active year for mega-deals by volume in memory, the healthcare sector announced seven mega-deals in 2025, with an aggregate value of approximately USD110 billion. This represented a substantial increase from 2024, during which only three mega-deals were announced (one of which was subsequently terminated), totalling approximately USD43 billion in aggregate value. The rebound underscored a renewed willingness among large-cap acquirers to pursue transformative transactions and marked the highest level of mega-deal activity in the healthcare sector since the 2021 peak.

Despite the overall strength of healthcare M&A in 2025, the year was not without periods of uncertainty, particularly in light of the introduction of a new tariff regime and the prospect of drug pricing reforms. For example, the second quarter of 2025 saw a notable pullback of healthcare M&A deal value, with the quarter only representing 13% of the total value for the year. However, healthcare M&A deal volume during the second quarter remained steady, as companies opted for smaller, strategic add-on transactions. Despite some early turbulence, the healthcare sector rounded out the year on steady footing as the regulatory and macroeconomic environment stabilised. The fourth quarter of 2025 concluded as the strongest quarter of the year both in respect of deal volume and deal value, accounting for approximately 26% of deal volume and 36% of total announced deal value for the year. Certain subsectors exhibited particularly noteworthy M&A activity – notably, pharmaceuticals, biotechnology and healthcare equipment and supplies.

Pharmaceuticals and biotechnology

The pharmaceuticals and biotechnology subsectors continued to exhibit significant M&A activity in 2025, with companies deepening and diversifying their portfolios by acquiring late-stage assets in the face of looming patent cliffs. The subsectors saw a combined 1,668 deals announced in 2025, accounting for 60% of overall healthcare M&A deal value for the year.

For example, Johnson & Johnson started 2025 off strong with the announcement of its acquisition of Intra-Cellular Therapies Inc for USD14.6 billion in January 2025, which added the rising antipsychotic star drug Caplyta to its portfolio, a once-daily pill for treating adults with schizophrenia and depression tied to bipolar disorder. The transaction, which closed in April 2025, also provided Johnson & Johnson with several other drugs in the development pipeline, including a potential treatment for anxiety, psychosis and agitation tied to Alzheimer’s disease.

Novartis AG also remained active in 2025 with its acquisition of Avidity Biosciences Inc for USD11.6 billion announced in October 2025 and which closed in early 2026. Novartis AG also announced a USD10 billion share buyback programme in July 2025, which is expected to run through 2027, signalling the company’s confidence in its strategic outlook and ability to manoeuvre the patent cliff as the company faces key patent expirations for drugs such as Entresto, its top-selling heart failure treatment, and asthma drug Xolair.

Other notable transactions in the space included Sycamore Partners’ acquisition of Walgreens Boots Alliance Inc for USD12.8 billion announced in March 2025 and closing in late August 2025, and CapVest Partners’ USD11.7 billion acquisition of a majority stake in STADA Arzneimittel AG from Bain Capital and Cinven, both of which retained a minority interest.

As companies continue to look for creative ways to allocate risk, bridge valuation gaps and align incentives to bring healthcare M&A transactions across the finish line, one tool that pharmaceutical and biotechnology deal makers utilised in 2025 was the contingent value right (CVR), a financial instrument entitling the target’s shareholders to receive additional future payments if specified post-closing milestones, such as regulatory approval or sales targets, are achieved. For example, Pfizer’s acquisition of Metsera for up to USD9.7 billion announced in September utilised CVRs by committing to pay up to USD20.65 per share upon the achievement of three specified clinical and regulatory milestones (in addition to a USD65.60 per share upfront payment). Other notable transactions utilising CVRs as part of the deal consideration included Roche Holding AG’s acquisition of 89bio for up to USD3.5 billion announced in September 2025 and Novo Nordisk’s acquisition of Akero Therapeutics for up to USD5.1 billion announced in October 2025.

Healthcare equipment and supplies

The healthcare equipment and supplies subsector also delivered a strong performance in 2025, accounting for 1,201 announced transactions and approximately USD110 billion in aggregate deal value, representing roughly 26% of total healthcare M&A market share for the year. Activity in the sector was characterised by a combination of large-scale strategic acquisitions and sustained mid-market deal flow, as companies continued to prioritise innovation and diagnostics capabilities.

The subsector finished 2025 particularly strong, witnessing the two largest healthcare transactions of the year in the fourth quarter. The most significant deal was Abbott Laboratories’ acquisition of Exact Sciences Corp, announced in late November 2025 and valued at approximately USD22.5 billion. The transaction underscores Abbott’s strategic expansion into cancer diagnostics, positioning the company to capitalise on the growing demand for early detection and personalised treatment solutions, and could help offset declining revenues from Abbott’s COVID-19 testing business with the addition of Cologuard, the well-known colorectal cancer screening test, to its portfolio.

2025 also saw significant private equity involvement in the subsector, highlighted by an investor group led by funds managed by Blackstone and TPG acquiring Hologic, Inc in a take-private transaction valued at approximately USD18.7 billion, the second largest healthcare M&A transaction of 2025. The deal reflected continued sponsor interest in scaled MedTech platforms. Notably, the transaction also utilised a CVR tied to the future performance of Hologic’s Breast Health business in fiscal years 2026 and 2027.

Factors in Favour of Healthcare M&A in 2026

Upward trend in deal activity and capital deployment

Healthcare M&A activity in 2026 is expected to build on the momentum from 2025, supported by improving financing conditions, renewed private equity participation and a strengthening pipeline of assets across healthcare services, biopharma and health technology. Mega-deals are expected to persist and IPO activity is anticipated to increase selectively. At the same time, certain digital health and technology-enabled healthcare companies have re-emerged as potential IPO candidates, with recent financing rounds supporting upward valuation momentum and contributing to a broader reopening of exit pathways for high-growth assets, including Virta Health (a provider of virtual care for metabolic disease reversal), Ōura (a wearable health technology company focused on sleep and biometric monitoring), and Devoted Health (a Medicare Advantage-focused payer integrating care delivery and technology).

Notably, the presence of mega-deals, such as Boston Scientific’s approximately USD14.5 billion acquisition of Penumbra, on top of other high-value deals near the end of 2025, signals a renewed willingness among strategic buyers to pursue large-scale transactions despite ongoing macroeconomic and regulatory uncertainty. Industry experts also predict that healthcare M&A will likely continue to prioritise platform-based technologies and ownership of supply chains, rather than expanding pipelines with purely IP assets. Relatedly, in connection with the emphasis on large-scale platform acquisitions, buyers are increasingly eyeing targets and structuring acquisitions with strong talent retention capabilities to improve future development and integration prospects.

Value creation through AI

Mirroring trends across other industries, AI is moving from the margins to increasingly becoming the centre of healthcare deal making as what was previously viewed as a prospective source of value is now being realised in operational and clinical settings. For example, in biopharma, AI-native drug discovery platforms are demonstrating materially higher Phase I success rates and early signs of improved overall probabilities of success, challenging long-held assumptions about the risk profile of early-stage assets. Similarly, in healthcare services, AI is being deployed across revenue cycle management, staffing and patient engagement.

Consequently, AI has become increasingly central to how buyers evaluate healthcare transactions. To stay ahead of technological changes, PE-backed healthcare IT platforms are expected to prioritise acquiring established AI-enabled, venture-backed healthtech targets to pair their existing infrastructure with emerging innovation rather than developing such capabilities in-house. For targets in this environment, AI has become a core element of what it means to be a competitive healthcare asset, thus expanding the universe of compelling targets and accelerating M&A across the sector.

Structural healthcare cost pressures encourage consolidation

Underlying much of the anticipated deal activity in 2026 are persistent cost pressures across the healthcare system. Elevated labour costs, ongoing medical inflation and reimbursement constraints continue to compress margins for providers and payers. In response, health systems are increasingly reconfiguring how care is delivered, with greater emphasis on outpatient expansion, physician alignment and shifts towards lower-cost site-of-care settings. These strategic adjustments are driving consolidation across fragmented sectors, particularly in outpatient and specialty care, and reinforcing the importance of co-ordination and operational efficiency by achieving scale through transactions.

Biopharma pipeline repositioning and patent cliffs

In 2026, biopharma M&A will continue to be driven in part by the steady expiration of exclusivity across the industry. The looming “patent cliff” is expected to cause billions in revenue to dissolve as patent protection on numerous valuable drugs begins to slip. In 2026 alone, a cohort of established therapies will lose US exclusivity, including:

• Roche’s Xolair (as discussed above);
• Bristol Myers Squibb’s Pomalyst, a key multiple myeloma therapy;
• Johnson & Johnson’s Opsumit and Simponi, spanning pulmonary hypertension and autoimmune disease;
• Merck’s Januvia/Janumet, long a cornerstone of type 2 diabetes care; and
• Merck KGaA’s Mavenclad, a targeted multiple sclerosis treatment.

Many more patented therapies are set to follow the same path through the end of the decade.

In anticipation of the “patent cliff”, large biopharma companies are expected to turn to acquisitions and external innovation to both mitigate near-term losses and strengthen longer-term portfolios in key therapeutic areas. This shift comes as R&D has become less productive, making it harder for companies to replace the revenue they are losing from expiring patents. Rather than relying on single late-stage replacements, some buyers are attracted to differentiated earlier stage platforms at lower valuations. In so doing, buyers seek to preserve optionality and build pipelines that can withstand potential future waves of patent expirations.

Headwinds for Healthcare M&A in 2026

Geopolitical and trade risk

Geopolitics is increasingly shaping both risk perception and execution in healthcare M&A. The escalation of the Iran conflict has introduced a new layer of volatility, with disruptions to critical trade routes, supply side pressures on oil prices and, as a result, the reignition of inflation concerns across global markets. These risks have introduced a new layer of hesitation into an already prudent broader M&A environment.

Additionally, trade policy remains unsettled, and that uncertainty could be enough to slow momentum. Such volatility forces companies to reconsider pricing, sourcing and portfolio construction. Buyers could decide to hold off on pursuing acquisition opportunities until a clear approach emerges. However, having already exercised patience through a prolonged period of uncertainty, that restraint is now being tested and may ultimately reach a breaking point.

Potential regulatory scrutiny

Large and cross-jurisdictional transactions are facing closer examination, driven in part by a growing number of state-level regimes layered on top of federal review. So-called “baby HSR” laws in states such as Washington, Colorado and California, along with a wave of newly enacted material change notice requirements, are increasing pre-closing obligations and, in some cases, introducing approval thresholds. State-led Pharmacy Benefit Managers (PBM) reform efforts are increasing compliance complexity and legal uncertainty, while ongoing court challenges are delaying implementation and complicating market planning.

The pressure is particularly acute for private equity-backed transactions. At the federal level, policymakers are signalling a more aggressive stance. Recent legislative efforts, including the proposed Corporate Crimes Against Health Care Act of 2026, reflect growing concern over private equity’s role in the sector and would introduce stricter accountability measures for investors and executives.

At the same time, the pace of policy change and agency turnover have become sources of risk, making it more difficult for buyers to confidently assess future reimbursement, pricing and compliance dynamics. Federal priorities, state-level initiatives and ongoing legal challenges are creating a landscape that is at once difficult to navigate and even harder to predict.

Reimbursement uncertainty and policy volatility

Reimbursement is becoming an increasingly potent driver of healthcare M&A activity. Medicare drug price negotiations under the Inflation Reduction Act are set to compress margins on select therapies, even as the rapid rise of costly yet prominent treatments like GLP-1s places growing strain on payors. At the same time, potential changes to ACA subsidies and Medicaid eligibility threaten to increase coverage volatility and uncompensated care, adding further uncertainty to revenue forecasts. With reimbursement models evolving across both public and private payors, buyers are cautiously focused on how pricing, utilisation and policy changes could affect long-term returns. Uncertainty in reimbursement will make buyers more selective in identifying targets that limit their exposure to pricing pressure and reimbursement volatility.

Conclusion

The world is becoming harder to predict, and healthcare M&A this year may depend as much on external forces as on underlying strategy. Yet the strength of the 2025 market offers reason for optimism and momentum to carry into 2026. Even amid structural challenges and shifting conditions, M&A has proven to be a reliable tool in contending with these pressures. Whatever questions lie ahead, M&A will continue to be a central part of the healthcare industry’s answer.