Healthcare Private Equity: A Look Into 2026 — Session Recap

Speakers

Angela Humphreys, Chair, Healthcare Practice Group and Co-Chair, Healthcare Private Equity Team, Bass, Berry & Sims | Wyatt Ritchie, Group Head, Cain Brothers, a division of KeyBanc Capital Markets

At the 2026 Nashville Healthcare Council Sessions on September 14, Angela Humphreys and Wyatt Ritchie delivered a comprehensive look at the healthcare private equity landscape, covering M&A trends, sector dynamics, buyer psychology, and the regulatory environment shaping deals heading into 2027. The overarching message: the M&A market is open, but the bar is high.

Large Deals Are Leading the Way

Transactions above $5 billion are driving the market. Deal counts in that bracket rose 54.5% in 2025 and another 63.6% in the first half of 2026, with average transaction sizes up 60% year over year. Below that threshold, volume declined across every size category.

Corporate buyers represented 73% of first-half 2026 deal activity, prioritizing scale and strategic fit over diversification. Public markets are rewarding focus: S&P 500 companies with one or two reporting segments trade at a premium, while complex businesses trade at a discount, fueling spin-offs, carve-outs, and take-privates. GE’s three-way breakup created approximately $200 billion in incremental equity value and has become the playbook others are following.

Take-Privates and Private Equity Activity

Take-private deal value surged 68% in 2025, with average transaction size reaching approximately $3.2 billion — more than double the 2016–2024 average. Notable healthcare take-privates included Walgreens ($23.7B), Hologic ($18.3B), Select Medical ($3.9B), and Premier ($2.6B).

Private equity exit values rose 72% in 2025 on flat volume, though the pace moderated in the first half of 2026. The critical overhang: firms hold approximately 14,000 portfolio companies and liquidated only about 10% of that inventory in 2025. Both presenters reported significantly more pitch activity and sale preparation in the second half of 2026.

Secondaries: A Permanent Liquidity Tool

Secondary market volume hit a record $121 billion in the first half of 2026, up 19% year over year, with GP-led transactions representing the majority, up 35% to $65 billion. Single-asset continuation vehicles alone accounted for $34 billion, an 88% increase.

Wyatt noted that sponsors increasingly view continuation vehicles not as a fallback but as a strategic tool to extend their investment horizon in high-conviction assets while providing LP liquidity. Both speakers expect secondaries to remain a permanent component of private equity exit strategies.

Fundraising Bifurcation

Capital raised has remained relatively steady, but the number of funds raising has dropped sharply. LPs are consolidating relationships around larger, scaled managers with established track records. Specialized lower-middle-market and middle-market funds should remain well positioned, but generalist funds face growing headwinds.

Healthcare M&A: Resilient and Active

North American healthcare deal value rose 55% in 2025 to $383 billion and was up approximately 41% in the first half of 2026, even as deal count declined roughly 20%. Average deal size increased approximately 76% year over year. Private equity exit activity by sector told a clear story:

• Healthcare IT / HealthTech: Exit value up 87.2%, driven by artificial intelligence (AI)-related investment.
• Pharma services: Up 235.1%, fueled by biotech funding recovery and $300 billion+ in patent expirations through 2029.
• Medtech: Exit values more than doubled, though transaction counts declined.
• Healthcare services: Exit value declined 28%, reflecting the post-2021/2022 valuation reset.

Angela reported that middle-market platform activity is as busy as it has ever been in her practice, with momentum expected through the first quarter of 2027.

Sector Spotlight

• Payers: Payers are shifting from defense to offense. With Medicare Advantage and Medicaid changes stabilizing, payers are beginning to reconsider M&A.
• Providers: Health systems are aggressively moving care into ambulatory settings. Investor interest in physician MSOs is returning, but the bar is high — strong operational integration, physician alignment and organic growth are prerequisites.
• Healthcare IT: AI is the lens. Investors are diligencing whether AI is embedded in workflows, how interoperable the technology is, and whether it delivers measurable ROI.
• Office-based physicians: The sector may be turning after cooling post-2021, but many organizations carry problematic balance sheets. The consolidation thesis remains sound; the excess is still being worked through.

Buyer Psychology: Downside First

Buyer psychology has fundamentally shifted. Investment committees are underwriting the downside, not the upside. Pro forma earnings adjustments face intense scrutiny, and buyers want nearly every issue identified and resolved before closing. AI has become a core diligence item, and management teams must be prepared to articulate how AI may affect the business.

Action items for sellers: Start quality-of-earnings work early, get management in front of buyers before the formal process, build a data-supported commercial narrative, and proactively assess AI exposure.

Regulatory Landscape: More Activity Than Ever

Angela emphasized that there is more regulatory activity now than at nearly any other point in her career — and much of it directly affects deal timing and structuring.

At the federal level, the Centers for Medicare & Medicaid Services (CMS) has extended the home health 36-month rule to hospice and durable medical equipment (DME) providers. In addition, CMS imposed enrollment moratoriums in all these sectors, with only the DME moratorium having expired. This is requiring investors to build exit-strategy flexibility into transaction structures from the outset and could be a signal of things to come in other sectors.

Several congressional bills, including the Health Over Wealth Act, the Corporate Crimes Against Health Care Act, and the Take Back our Hospitals Act, continue to target private equity in healthcare, though none have gained significant traction.

On the antitrust front, the Federal Trade Commission’s (FTC) 2024 Hart-Scott-Rodino (HSR) Final Rule has been vacated, restoring the pre-February 2025 filing requirements, a positive development for dealmakers. However, the FTC’s new Healthcare Task Force signals more aggressive enforcement, including scrutiny of transactions below the HSR reporting threshold.

State-level activity remains the most significant deal-timing variable. Sixteen states now require healthcare transaction notice or approval filings, which can add 30 to more than 180 days to a closing timeline. In California, two attorney general settlements involving Aspen Dental and Carbon Health are prompting a nationwide reassessment of the “friendly-PC” model for physician practice management.

States also remain active on the noncompete front. Among others, this year Tennessee joined states enacting legislation targeted at noncompete reform (HB 1034, effective July 1, 2026), prohibiting noncompetes for employees earning under $70,000 and establishing rebuttable presumptions for time restrictions.

To stay up to date on these notice and approval filings, see Bass, Berry & Sims’ map here.

What is the Healthcare Private Equity Outlook for 2027?

The market is demanding, but it is also increasingly active. Capital is available, dry powder is plentiful, and deal pipelines are building. The lower-middle and middle markets, which have lagged the large-cap recovery, are expected to see increased activity in the months ahead. For well-prepared businesses, the combination of sector-specific tailwinds and elevated buyer standards creates significant opportunity.