Outlook 2025: Healthcare & Life Sciences

As we head into 2025, we're seeing many reasons for continued strengthening in the M&A and private capital markets. Over the past year, there has been steady improvement in the rate environment, the GDP outlook, consumer spending and financial health, and corporate earnings.

Against this backdrop, we believe 2025 will see ongoing growth across several areas of healthcare and life sciences, and we're excited for the opportunities to come. See our perspectives on the overall M&A and private capital markets.

Healthcare & Life Sciences: A Growing Need

Despite some pockets of softness in 2024, many healthcare and life sciences segments are performing well. Investors continue to prioritize multiple areas of the industry, including those that offer high-quality, differentiated businesses with long-term demand drivers, defensible market positions, nondiscretionary demand, and recurring revenue.

Heading into 2025, our senior professionals are excited to see the industry gain M&A momentum. Below, we share the trends behind this activity, key areas particularly well positioned for success, and recent clients that exemplify the industry's investment potential.

Medical Products & Devices: Ubiquitous and Critical

Medical products and devices are ubiquitous across the healthcare system, playing critical roles in many different types of care. In this large global market, investors can create value by helping smaller businesses increase commercial penetration, expand product and portfolio breadth, and optimize both owned and outsourced manufacturing.

The market encompasses many exciting categories with a range of ways to participate. From consumables and highly sophisticated devices to contract manufacturing organizations and other outsourced services to the medical products and devices landscape, the sector holds strong investment opportunities.

Within consumables, recent Harris Williams clients Irrimax and EHOB are prime examples of the sector's potential for innovative businesses and their investors. Irrimax is a leading infection control specialist while EHOB is a best-in-class provider of pressure injury prevention solutions.

And throughout the medical device contract manufacturing organization (CMO) subsector, growth will continue as original equipment manufacturers (OEMs) focus more on their core competencies and new product development, leading to an expanding need for outsourced development, pre-production, manufacturing, and post-production services. The most sought-after CMOs are providing these capabilities from concept to finished goods and partnering with OEMs for their most complex products. Exemplifying these characteristics is TEAM Technologies, Inc., which offers end-to-end outsourced design and manufacturing services to medical device and pharmaceutical OEMs, with a growing specialty in advanced medical devices that are critical to the healthcare system. Harris Williams advised Arlington Capital Partners on their acquisition of TEAM Technologies.

HCIT: Expanding Challenges, Accelerating Adoption

Demand is growing for a wide range of HCIT solutions as healthcare organizations focus on delivering higher-quality health outcomes, lower costs, a better patient experience, improved clinician well-being, and health equity. Adopting these solutions is essential to achieving those goals, and we expect investor interest to remain strong.

The pharmacy landscape, for example, continues to evolve and become more complicated, making technology investment a higher priority. Leading technology companies are establishing a strong advantage by bringing efficiency, integration, and coordination to pharmacy providers. The IT solutions that can connect the entire life of a prescription will be especially sought after.

Meanwhile, across post-acute care, software is proving to be vital to decrease healthcare costs, strengthen provider coordination, and improve patient outcomes. Given historically low technology investment in the market, software adoption among providers is accelerating.

Finally, several themes are generating a greater need for healthcare education, leading more healthcare institutions and providers to optimize healthcare education through technology. A range of tech solutions are helping these organizations enhance required training and development, ensure that providers stay current with standards of care, and better manage complicated compliance and training workflows.

"With more healthcare companies turning to tech solutions to create competitive advantages, a variety of HCIT businesses are increasingly on investors' radar," says Cheairs Porter, a group head and managing director. "Leading solutions in the space, especially those differentiating themselves through data and AI, are well positioned for growth going forward." Porter says recent clients that exemplify this opportunity include Kodiak Solutions, VMG Health, LOGEX, and MediQuant.

Outsourced Pharma Services: Growth in a Dynamic Time

While the outsourced pharma services space has yet to see a full recovery from recent temporary slowdowns, its long-term fundamentals remain strong, as does investor appetite for quality businesses. An aging population, increased incidence and diagnosis of chronic diseases, and a looming patent cliff will continue to drive pharma and biotech companies to innovate to survive and thrive. And pressures on pharma revenue—while disruptive—are creating opportunities for outsourcers who bring more value to the table.

Illustrating this opportunity is the outsourced commercialization services subsector, which helps pharmaceutical manufacturers more completely realize a drug's commercial potential over its full product life cycle. In this category, we worked with IntegriChain which exemplifies the evolution from offering point solutions to becoming an integrated service provider that can do more for the commercial and brand teams in pharma.

Payer Tech & Services: Reducing Healthcare Costs, Improving Employee Satisfaction

Across the employer health landscape, investors are looking to back innovative, high-quality platforms, including self-insurance enablement platforms, third-party administrators, cost containment solutions, and direct-to-employer provider organizations. Although all these business models are unique, they share a common goal of improving access to quality care while helping employers take control of rising healthcare costs. 

Investors are recognizing the need for these solutions, and we’re seeing the private equity community allocate more dollars and time toward employer health. Several examples of recent transactions in the space are Allied Benefit Systems, Lucent Health, Premise Healthcare, S&S Health, and Vālenz® Health.

Providers: Upside Ahead

While many provider segments have seen challenges in 2024, strong demand drivers, stable reimbursement outlooks, and a growing set of high-performing platforms are all leading indicators of an upcoming resurgence in provider M&A.

Across the provider landscape, value-based healthcare is an especially prominent area of investor interest, encompassing a variety of models that focus on quality of care, provider performance, and patient value. Among these models, provider groups that pair preventative care with complementary support for underserved patient populations offer particularly strong M&A opportunities.

In addition, the consumer health and wellness space remains attractive to investors, with resilient consumer demand for services and products related to health, wellness, fitness, sleep, and mindfulness. Buyers are prioritizing best-in-class businesses with consistent and strong performance, a proven ability to recruit and retain talent, strong clinical quality, and a clear road map to growth.

"This sector has seen plenty of change and a few challenges in recent quarters, but the fundamentals are healthy," says Geoff Smith, a group head and managing director. "The PPM model also remains critical, with growing demand from physicians and patients for the services it provides, such as operational support, access to resources, and in certain subsectors, a path to value-based care."

Within the provider ecosystem, the large and fragmented fertility services sector is well positioned for M&A. Recent client Genetics & IVF Institute illustrates the sector's investment potential, delivering a broad range of complementary products and services to patients that enable exceptional clinical outcomes.

Another area worth noting is behavioral health, with strong demand for a variety of treatments and a growing opportunity to help patients in need. Scaled and sophisticated multi-site providers like Caravel Autism Health—one of the nation's largest autism treatment providers—give more people access to care, ensure payers of strong value for money, and offer investors the chance to support resilient growth businesses.

Looking Forward

As we head into the new year, we anticipate resilient investor interest across several segments of the healthcare ecosystem. With its long-term demand drivers remaining strong and intact, we're excited to see M&A momentum build throughout key areas of the industry.

In 2025, we look forward to partnering with healthcare and life sciences investors and company leaders worldwide to help them navigate the M&A and private capital markets and unlock value in their businesses. 

Learn more about the Harris Williams Healthcare & Life Sciences Group.