Experts predict increase in healthcare mergers and acquisitions in 2025
It is anticipated that there will be a significant increase in mergers and acquisitions (M&A) activity within the healthcare industry in 2025. Various factors like lower inflation rates, expectations of further interest rate reductions, and the potential easing of antitrust regulations by the Trump administration have created a conducive environment for deal-making, reminiscent of the booming M&A activity seen in 2021.
Kristin Pothier, the principal and healthcare and life sciences sector leader at accounting firm KPMG, suggested that there would be a considerable uptick in M&A transactions across different healthcare subsectors, each driven by distinct motivations. One of the primary areas expected to experience heightened M&A activity is the pharmaceutical sector.
Many significant pharmaceutical companies are facing the expiry of patents on key drugs in the coming years. This necessitates the acquisition of smaller companies with promising drug candidates to replenish the revenue streams lost from patent expirations. Merck, a leading pharmaceutical giant, has entered into several deals as it prepares for the impending expiry of the patent for its blockbuster cancer immunotherapy drug, Keytruda, in 2028. Notably, Keytruda has generated approximately $131 billion in revenue for Merck over the past decade, constituting about 46% of the company’s total sales. Reports suggest that Merck KGaA, the parent company of Merck, is in discussions to acquire SpringWorks Therapeutics, a Connecticut-based biopharmaceutical company specializing in cancer and rare disease treatments.
Moreover, other pharmaceutical companies, including Bristol Myers Squibb, Pfizer, and Eli Lilly, are also facing patent expirations for their key drugs in the near future. This impending loss in revenue is expected to drive increased M&A activity in the pharmaceutical sector as companies seek to secure new revenue sources through strategic acquisitions.
Aside from the pharmaceutical industry, Pothier also foresees a surge in hospital consolidation in the healthcare sector. Many hospitals are still grappling with financial challenges in the aftermath of the COVID-19 pandemic, making financially stable healthcare systems attractive acquisition targets for organizations seeking to expand their operations. The landscape of healthcare acquisitions is further influenced by the recent bankruptcies of at least two hospitals and one health system in 2025, presenting additional opportunities for acquisitions by private equity firms or larger health systems.
Despite the generally positive outlook for increased M&A activity, there are challenges that could impede the execution of deals in the healthcare sector. The scarcity of acquisition targets that offer a swift return on investment has intensified competition among buyers. Additionally, uncertainties surrounding potential changes within government health agencies and the evolving regulatory environment could slow down deal-making processes. Although there is optimism for a more lenient antitrust environment under the new administration, the exact implications of future regulations remain uncertain.
In conclusion, experts predict a significant rise in M&A transactions within the healthcare industry in 2025, driven by various factors specific to each subsector. Pharmaceutical companies and hospitals are expected to be the focal points of this increased deal-making activity as organizations strategically position themselves to navigate evolving market dynamics and capitalize on emerging opportunities for growth and expansion.
