In the behavioral health industry, stakeholders can anticipate a surge in dealmaking activities as we move into 2025. A recent report from the PwC Health Research Institute revealed that despite a decrease in the number of deals in 2024, the value of these deals saw a significant increase compared to the previous year.
One of the driving forces behind this expected increase in dealmaking is the substantial amount of corporate and private equity capital available in the market. Additionally, longer hold periods, increased certainty regarding the next administration, and the possibility of further interest rate cuts are all factors that are likely to contribute to the uptick in healthcare dealmaking in the coming year.
The report highlighted that the Trump administration’s stance on antitrust issues will be closely monitored, with investors cautiously optimistic about a more relaxed enforcement approach. Provider reimbursement is also expected to be a key topic of interest, especially as certain segments have not yet recovered to pre-pandemic operating margin levels.
Despite a decline in deal volume, the value of deals completed in the 12 months leading up to November 15 reached $400 million, marking a 324% increase year-over-year. The report also predicts that the types of deals in the industry will continue to evolve, with a focus on technology and sectors that limit exposure to regulatory changes.
Payers in the industry are shifting their priorities towards expanding the “payvider” model, combining payer and provider functions. Health insurers are also focusing on rate setting, program enrollment incentives, and potential funding changes, particularly in Medicaid, in the upcoming year.
To navigate the current dealmaking environment, parties involved in deals are advised to plan for varying economic scenarios, structure deals flexibly, and adapt to longer hold periods. The report emphasizes the importance of investing in AI solutions within labor-intensive sectors to drive value creation initiatives.
Overall, the report’s findings align with previous predictions for 2025, suggesting a positive outlook for behavioral health dealmaking. Opportunities for continued provider consolidation, investment in solutions targeting employer-sponsored insurance programs, and the potential for AI and other technological solutions to streamline administrative functions are expected to drive deal activity in the industry.
