Q&A: M&A in the healthcare and life sciences sector

November 2025  |  SPECIAL REPORT: HEALTHCARE & LIFE SCIENCES

Financier Worldwide Magazine

November 2025 Issue

FW discusses M&A in the healthcare and life sciences sector with Frank Aquila at Sullivan & Cromwell.

FW: What is the current state of M&A activity in the healthcare and life sciences sector? How would you describe recent trends in deal volume and value?

Aquila: Despite broader market volatility because of economic and political challenges, healthcare and life sciences remain among the most resilient sectors for M&A. Deal activity has moderated from the highs of 2021-22, but volume and value are stabilising at levels above pre-pandemic norms. Strategic acquirers and private equity (PE) sponsors are active, particularly in specialty pharma, medical devices and technology-enabled services. With ageing demographics, innovation pipelines and the push toward value-based care, the sector continues to generate transactions. While capital markets dislocation has slowed large-cap deals, bolt-on acquisitions and carve-outs remain robust. The resilience of healthcare demand provides a strong foundation, and we are seeing selective but high-quality deal flow.

FW: What strategic priorities are driving acquirers to pursue transactions that support growth, unlock value and deliver long-term outcomes?

Aquila: Acquirers are laser-focused on transactions that enhance growth, efficiency and long-term resilience. In healthcare, this means acquiring capabilities that strengthen innovation pipelines, expand patient access and build scale in cost-intensive areas. For pharma, pipeline replenishment is critical given looming patent cliffs. For providers, integration of specialty services and digital tools is a priority. PE sponsors are targeting platforms with recurring revenue, clinical differentiation and potential for roll-ups. Across the board, the strategic rationale centres on creating synergies, improving outcomes, and positioning businesses to thrive under cost and regulatory pressures. The winners will be those who can both unlock short-term efficiencies and deliver sustainable, patient-centred value.

FW: How do you assess the rising interest in M&A involving AI diagnostics, patient engagement platforms and technology-enabled healthcare services?

Aquila: The acceleration of artificial intelligence-driven diagnostics, patient engagement platforms and technology-enabled services is reshaping the healthcare M&A landscape. Acquirers recognise that digital tools are no longer optional; rather, they are essential to improving care quality, reducing administrative burdens and expanding patient reach. We are seeing strong interest from both traditional healthcare companies seeking to modernise and technology players looking for healthcare footholds. The challenge is separating hype from scalable solutions. Diligence is critical to evaluate regulatory pathways, reimbursement models and integration risks. Done right, these deals offer significant upside in terms of efficiency and patient outcomes. I expect this segment to remain one of the most active growth areas in healthcare M&A.

“Despite broader market volatility because of economic and political challenges, healthcare and life sciences remain among the most resilient sectors for M&A.”
— Frank Aquila

FW: To what extent are regulatory developments shaping deal strategy? What impact do you anticipate from tariffs, pricing reforms and extended transaction approval timelines?

Aquila: Regulatory scrutiny is as intense as ever and is directly influencing deal strategy. Antitrust authorities are probing consolidation in payer and provider markets, while reforms around drug pricing and reimbursement add uncertainty. Tariff risks and supply chain pressures are further complicating valuations. Extended approval timelines mean parties must build more resilience into deal structures – whether through reverse termination fees, longer outside dates or more flexible earn-outs. For cross-border deals, Committee on Foreign Investment in the United States and data-privacy reviews are also increasingly material. While regulation is a headwind, disciplined structuring and early engagement with regulators can mitigate risk. Dealmakers who anticipate these hurdles rather than react to them will be best positioned to close successfully.

FW: What are the main obstacles dealmakers face in completing transactions in this sector? How important is it for businesses to adapt their approach to overcome these challenges and mitigate risks?

Aquila: The biggest challenges today are valuation gaps, regulatory delays and integration risk. Sellers want premium multiples based on long-term sector fundamentals, while buyers are cautious given capital costs and policy uncertainty. Bridging that gap often requires creative structures, such as as earn-outs, contingent value rights and minority investments. Regulatory timelines can test deal certainty, making risk allocation a focal point of negotiations. And post-close, integration is particularly complex in healthcare, given compliance requirements and cultural dynamics. Companies that approach these obstacles proactively by adapting structures, engaging early with regulators and planning integration from day one are far more likely to succeed. Flexibility and pragmatism are essential in this environment.

FW: How are acquirers approaching post-merger integration in the healthcare and life sciences sector? What best practices are emerging to ensure long-term value creation and operational success?

Aquila: In healthcare and life sciences, successful integration means more than just realising cost synergies. It is about aligning cultures, safeguarding patient care and ensuring compliance with a complex regulatory environment. Best practices include prioritising clinical continuity, integrating IT and data systems seamlessly, and engaging stakeholders early, especially physicians and frontline staff. Many acquirers are establishing dedicated integration management offices to track both financial and patient-outcome metrics. Increasingly, environmental, social and governance considerations such as equitable patient access and workforce wellbeing are also part of integration playbooks. The most successful integrations are those that balance operational discipline with a clear commitment to mission, ensuring value creation without compromising care quality.

FW: Looking ahead to 2026, how confident are you in the outlook for a strong M&A market in this sector? What key factors are likely to test the resilience and adaptability of dealmakers?

Aquila: I remain confident in the medium-term outlook for healthcare M&A. The sector’s fundamentals, ageing populations, innovation in therapeutics and diagnostics, and the shift toward digital and value-based care, are enduring growth drivers. In 2026, I expect deal activity to be strong, though shaped by ongoing regulatory oversight and macroeconomic dynamics such as interest rates and tariff policies. The key tests for dealmakers will be navigating political and pricing reforms, integrating technology effectively and managing cross-border complexities in an increasingly fragmented geopolitical environment. Those that remain disciplined, adaptable and patient-focused will continue to find compelling opportunities. In my view, healthcare M&A will remain among the most resilient deal markets.

 

Frank Aquilla is Sullivan & Cromwell’s senior M&A partner and has served the firm in numerous senior management positions, including as a member of the management committee, as global head of the M&A practice and as co-managing partner of the general practice group. As a leader in his field, he has advised numerous clients in many of the largest and most important global transactions that have been transformational across a range of business sectors‎. He can be contacted on +1 (212) 558 4048 or by email: aquilaf@sullcrom.com.

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THE RESPONDENT

Frank Aquila

Sullivan & Cromwell LLP

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