BY Darron J. Gill, Partner, Healthcare Advisory, & Britni Barsness, Director, Financial Due Diligence, KPMG
The question at the forefront of dealmakers’ minds: How will the macroeconomic environment, public policy, and innovation impact the healthcare and life sciences market in 2025? To understand what might happen in 2025, let’s first revisit how the HCLS deal market performed in 2024. KPMG’s annual investment outlook for Healthcare and Life Sciences (HCLS) (the Outlook), published each year in January, outlines key insights of the deal market to provide perspective on the uncertainty that has persisted in the economic landscape. The Outlook provides a detailed examination of several subsectors, as well as the overarching trends in the industry and the broader economy, that will shape 
the investment landscape for years to come. Over 500 respondents to KPMG’s annual survey of corporate and private equity dealmakers have provided their predictions on what is to come and on how they will be approaching the M&A market, which is integrated into this report with analysis from several of KPMG’s industry leaders in HCLS.
2024 Summary
The HCLS marketplace began seeing improvements driven by declines in inflation and interest rates in the latter half of the year. Other factors, including consumer spending, low unemployment, and the “soft-landing” of the economy generated more confidence in the macroeconomic climate. As is typical of presidential election years, Q3-24 brought mixed reactions from HCLS dealmakers, fueled by uncertainty surrounding foreign policy (such as tariffs) and hope from others for reduced regulations and tax cuts.
Deal volumes and trends for 2024 varied among subsectors, with corporate acquisitions and biopharma seeing increased acquisitions in early 2024, and hospitals and health systems experiencing the highest level of deals in Q3-24 when compared to the previous three years. Overall, deal volumes dropped from 2023 levels (see Exhibit 1), with life sciences transactions at 898 and healthcare deals at 845 for the YTD period.
Healthcare
Healthcare deal volume declined in 2024, compared to 2023, by 9.3% and 16.9% in the US and Texas, respectively. In line with the trend across the US, hospitals and healthcare systems continue to focus on scale and flexibility through acquisitions and will look for ways to gain share in the Texas region. However, it is likely that strategic buyers, as opposed to financial buyers, will largely drive the dealmaking in the hospital and health system subsector, as financial buyers continue to make fewer acquisitions in this space due to the capital requirements and challenges to maintain or increase margin. Healthcare IT and tech-enabled services have become increasingly desired by financial buyers as deal makers look to diversify portfolios and be at the forefront of healthcare innovation. As such, there was an increase in deals focused on improving efficiencies and RCM technology combating many challenges in the industry.
Texas-based deals in hospitals and health systems included the acquisition of San Antonio Rehabilitation Hospital, LLC by Methodist Healthcare Systems in October. Cardinal Health completed an acquisition of The GI Alliance Management, LLC (based out of Southlake, TX) in November for approximately $2.8 billion. The acquisition of GI Alliance by Cardinal is indicative of the increasing trend to vertically integrate multiple different healthcare disciplines with ancillary services to offer a full spectrum of patient care. For example, the combination of urology, gastroenterology, oncology, etc. is combined with specialty pharmaceutical services creating a “one-stop-shop” for the patient.
Looking at 2025, the healthcare space will continue to face challenges in M&A, similar to those in 2024. Declining margins, staffing shortages, and economic uncertainty are all headwinds for the healthcare market. However, the largest and most profitable healthcare institutions will still look for strategic ways to grow by entering new geographies, starting new ventures, and investing in modernized technology.
Life sciences
In 2024, many life science industry leaders expressed confidence in the near-term, driven by innovation in companies, organic growth, and GenAI investment. Dealmakers mirrored this, as over 79% of respondents in the latest annual KPMG HCLS investment survey predicted they would execute more deals in 2025 than in 2024. These expectations were driven by a competitive environment for subsectors that continue to innovate at a rapid rate. Even with this positive outlook, concerns remain high in 2025 regarding the elevated cost of capital, the impact of the Inflation Reduction Act (IRA), and pacing of GenAI development. The uncertainty surrounding these factors persisted in 2024, causing a decline of 9.4% in deals from 2023.
Despite the challenges of the Life Science industry, companies with sufficient resources continue to prepare and defend against FTC objections and completed several large acquisitions during 2024. This demonstrates a continued appetite for inorganic growth within the life sciences industry, especially in precision medicine, including innovative cell-and-gene therapies and treatments for cancer and rare diseases.
Life sciences deal activity in Texas included the acquisition of Austin-based Imaware by SuperTruth in December. Imaware, Inc is a leader in home-based test products for men and women’s health, coronavirus, allergic diseases, autoimmune diseases, and preventative genetics. Neo Services, a Certified Service-Disabled Veteran-Owned Small Business (SDVOSB) based in Richardson, was acquired in another life sciences deal by a private investment group. Interest in the Neo Services acquisition was driven by the granting of a General Services Administration (GSA) Schedule Contract. This contract allows government entities at the federal, state, and local level access to their medical laboratory testing and services. In early 2025, a drug infusion company, Soleo Health, based out of Frisco, Texas was acquired by CourtSquare Capital Partners and Windrose Health Investors. Soleo aims to expand infusion drug offerings throughout the US.
Based on the results of the KPMG survey, companies and investors will continue to look for innovation opportunities and strategic acquisition opportunities to stay competitive in the rapidly innovative industry driving growth in this industry in 2025.
2025 the Year in Question
Industry leaders and dealmakers continue to display a positive outlook driven by the slowdown of inflation and the hope of continued interest rate reductions. KPMG research shows 76% of survey respondents expect to increase their dealmaking activity in 2025. While optimism for the deal market continues from 2024 into 2025, questions regarding various factors in public policy and economic improvement remain outstanding. Regulations on AI and innovation, tariffs, concerns regarding reimbursement and other initiatives from the new administration will all play a role in how strategic and financial buyers deploy capital this year. Currently, the deal market appears to be slowing until buyers and sellers can better understand how these
issues will ultimately affect the assets in question. Once the uncertainty is resolved, however, the 2025 deal market that many expected could come to fruition.
Valuations will also continue to play a large role in the outlook of 2025. In fact, 62% of respondents in the HCLS investment survey predicted an increase in industry valuations while 23% expected valuations to remain flat in 2025. Based on the survey responses and our market experience, we expect 2025 to be a highly competitive deal environment, especially for assets in the most desirable healthcare subsectors, but again—regulatory clarity is needed.