Q2 2025 Private Equity Update

Q2 2025 Private Equity Update

Despite a relatively slow quarter for middle-market Healthcare M&A, many investors are anticipating an active second half of 2025 as reduced macroeconomic and political uncertainty will allow high-quality assets to test the market. The slowdown in transaction volume was partially driven by a decline in multisite provider transactions, which historically make up a significant portion of healthcare services deal flow. Continued labor challenges and regulatory pressures combined with newly proposed federal changes to Medicaid funding to create a difficult transaction environment for many provider businesses. However, areas such as Behavioral Health, Home Health, Hospice & DME, and Outsourced Services have seen significantly elevated transaction volume in H1-25 compared to H1-24.

Healthcare investors remain highly interested in healthcare services businesses, but have continued to increase scrutiny and look for unique ways to invest in target end markets. The headwinds faced by some multisite provider groups have resulted in fewer high-quality assets coming to market and fewer notable transactions. Provident anticipates a strong rebound in impacted verticals as uncertainty fades and an increased supply of quality businesses approach the market.

Investors are likely to stay active in the near term, but are expected to allocate resources to sectors sheltered from macroeconomic and Medicaid risks, such as outsourced services, healthcare IT, and pharma services. The excess of investor dry powder and backlog of high-quality independent and sponsor-owned businesses is expected to drive a very active end of 2025.

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