Deals across the industry

While we have continued to see merger and acquisition (M&A) activity across the healthcare industry, it is fair to say that 2024 has been challenging across many of its subsectors.

With resources in the NHS significantly constrained, this opens additional opportunities for the private sector as a key part of the solution, harnessing the skills, innovation, resources and capacity available. The increased collaboration between the public and private sector is essential to tackle the backlog and drive innovation. The direction of travel for 2025 favours healthcare businesses that are digital and technology-enabled.

The ongoing higher cost of debt has eroded opportunities for “easy arbitrage” across many of the subsectors that have traditionally seen high levels of buy-and-build activity, leading to an element of uncertainty and an increased focus on wider strategic decisions driving investment and M&A. For some subsectors, such as children’s social care, this, combined with a growing scrutiny over the ability to generate additional profits from government funding, has resulted in further hesitation from private equity (PE) and venture capitalists.

However, despite this backdrop, we have seen some positive signs of activity, with M&A once again being back on the agenda for both trade and PE clients in the second half of the calendar year, including many large consolidators returning to the negotiating table.

Healthcare outlook for 2025

Given the breadth of the industry, healthcare presents a wealth of M&A opportunities to suit different risk appetites. With bank interest rates now appearing to stabilise, there is a renewed optimism that we will continue to see an increase in investment activity from 2025 and beyond, albeit with some headwinds caused by the recently announced changes to the National Minimum Wage (NMW) and National Insurance, along with an ongoing requirement for more robust due diligence.

In terms of new investment for 2025, we will continue to see a particular increased focus on:

Medical devices and technologies, as well as occupational health and wider medical services such as alternative therapies. Given the growing acceptance that areas of healthcare require increased private business intervention and corroboration to ease the burden on the public purse, we suspect these are likely to be common themes that continue.
Childcare consolidators returning to the market with buy/build and new PE-backed growth (ie new PE-backed platforms adding significant site volumes via acquisition).