It’s poised to be a big year for mergers and acquisitions (M&A) in the healthcare industry.
Lowered inflation, the anticipation of more interest rate cuts, and the expectation that the Trump administration will ease up on antitrust regulations have created a more favorable dealmaking environment than we’ve seen since 2021’s boom, experts said.
“We do expect to see a tremendous amount more of M&A than we’ve seen in the previous years, but each subsector has a different flavor, and each subsector’s reasoning for having a boom in M&A is different,” Kristin Pothier, principal and healthcare and life sciences sector leader at accounting firm KPMG, told Healthcare Brew.
Where the action will be. One of the biggest subsectors for M&A activity this year will be pharmaceuticals, Pothier projected.
A number of big pharma companies have drugs with patents expiring in the next few years, she said. Because of that, the companies will be looking to acquire smaller players with promising drug candidates to replace that revenue.
For example, pharma giant Merck has made a series of deals as the patent for its blockbuster cancer immunotherapy drug, Keytruda, expires in 2028. Merck has made roughly $131 billion from Keytruda in the 10 years it’s been on the market, and it currently makes up about 46% of the company’s total sales.
The German drugmaker’s parent company, Merck KGaA, is reportedly in talks to buy Connecticut-based SpringWorks Therapeutics, which focuses on cancer and rare disease treatments, according to Reuters.
In addition, Bristol Myers Squibb and Pfizer’s blood thinner drug Eliquis, Pfizer’s breast cancer drug Ibrance, and Eli Lilly’s Type 2 diabetes and cardiovascular disease drug Trulicity all have patents expiring in the next few years.
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In addition to pharma, Pothier said she’s expecting more hospital consolidation.
As many hospitals are still operating at a loss post-pandemic, more financially stable systems may see the struggling hospitals as attractive targets for acquisitions, according to a January 2025 KPMG analysis.
At least two hospitals and one health system have already filed for bankruptcy in 2025, which creates more opportunities for deals as private equity firms or larger health systems look to buy them up, Nick Donkar, partner and health services deals leader at consulting firm PwC, told Healthcare Brew.
Plus, urgent care and physician practices tend to be fragmented in certain markets, so health systems are likely to buy those up to give themselves a larger regional footprint, he added.
Challenges remain. Despite the overall optimistic outlook, some challenges could stand in the way of getting deals done, the two experts warned.
For one, there aren’t many acquisition targets on the market that buyers feel confident could generate a quick return on investment, so there’s increased competition, Pothier said.
There also remains a lot of uncertainty around the potential changes taking place within government health agencies, Pothier noted.
“That’s just giving anxiety to many and so, therefore, it just slows down the dealmaking a little bit more,” she said.
And although expectations are high for a more relaxed antitrust environment, it’s still not certain what regulations will look like under the new administration, according to Donkar.
“The administration is there, and they tend to be more pro-business,” he said. “But I think that the jury is out relative to what that means specifically for the Trump administration.”