Deals across the industry

The UK healthcare industry in 2025 was largely shaped by two trends. Firstly, there was a marked increase in collaboration between public and private entities. Private investors saw openings to support innovation and alleviate systemic pressures within the NHS, particularly those stemming from resource constraints and service backlogs. This partnership-driven approach began to unlock new avenues for efficiency and better patient outcomes.

Secondly, investor strategy underwent a notable realignment in the broader care industry, with a growing emphasis on specialist service provision. This shift reflects a wider trend towards targeting niche segments of the market that offer higher growth potential, driven by demand for more tailored and complex ways of delivering healthcare.

Together, these dynamics indicate a maturing investment landscape, where capital is increasingly directed towards scalable, high-impact opportunities that complement public sector efforts and deliver sustainable growth.

Navigating rising people costs and strategic shifts in UK healthcare

Changes to National Minimum Wage and National Insurance during the year have intensified labour-cost pressures across the UK. The care industry was disproportionately affected due to its limited ability to pass these costs on to customers.

Coupled with increasing scrutiny over profit margins derived from government funding, these challenges have prompted private equity and venture capital firms to reconsider their plans. Many are now moving towards more specialised, niche offerings that bring more stable returns and attract less attention.

These dynamics are further supported by deal volumes across the UK healthcare industry being up year-on-year by c.7.5%. This was largely driven by trade buyers, private equity (PE) and venture capital (VC) investors, with the mix of trade, PE and VC volumes remaining consistent with prior years.

Trade transactions continued to account for approximately 60% of deal activity across healthcare services, such as clinics and specialist care. Notably, PE investment in this subsector saw a strategic shift, with platform investment volumes rising sharply from 39% to 69% of all PE activity. This increase suggests growing confidence in building scalable, standalone healthcare businesses, rather than pursuing smaller bolt-on acquisitions.

In parallel, VC activity remained robust across pharmaceuticals, biosciences and med-tech, with early-stage funding continuing to attract a lot of interest. This trend reflects a sustained appetite for innovation and implies long-term growth potential in these segments.

While med-tech remains a focal point for investment, deal volumes in more traditional medical devices and supplies declined by approximately 5%, indicating a shift in investment towards emerging technologies and next-generation solutions.

Healthcare outlook for 2026

The healthcare industry continues to offer a broad spectrum of M&A opportunities, catering to a wide range of investor risk profiles. While interest rates have now stabilised, they remain relatively high compared to recent years, creating a lasting need for more rigorous due diligence, and in turn, extended transaction timelines.

In response to these evolving market conditions, investors have adjusted their strategies, reflecting a more discerning and resilient approach to investing capital. Looking ahead to 2026, we have seen a particular focus on:

Medical devices and technologies: There is growing interest in technologies that support customers. Private providers are playing a greater role in supplementing NHS capacity in this space. Medical device manufacturers are increasingly adopting leasing models for high-value equipment, enabling NHS trusts to better align procurement with funding cycles. This shift supports more flexible budgeting and reflects a broader move towards service-led revenue models across the healthcare industry.

Occupational health and alternative therapies: Building on momentum from 2025, investors are targeting high-quality bolt-on acquisitions in occupational health and complementary medical services. This approach is expected to remain a priority in 2026.

Childcare consolidation: The buy-and-build strategies observed in late 2024 have continued into 2025, with consolidators actively expanding their portfolios. The use of continuation funds by PE-backed platforms signals sustained confidence in the sector’s growth potential. Part of this is due to the UK childcare sector undergoing a period of elevated profitability and evolving pricing strategies, driven by significant changes to government-funded childcare provision. The recent expansion of free childcare to up to 30 hours for those under the age of three has reshaped the financial picture for providers, prompting changes to fee structures and operational models.

Specialist care and education: Traditional residential care providers are increasingly pivoting toward specialist services, particularly for under-18s. This includes investment in special educational needs and disabilities (SEND) schools and integrated care settings, a trend expected to grow in 2026. Notably, the SEND sector itself is undergoing a structural shift, with education and care provision increasingly being separated into distinct operational models. This trend is being driven by widening deal multiples across the two segments, prompting investors and operators to reassess integration strategies.