Global Healthcare M&A and Capital Markets Q1’25 Review

The global healthcare market witnessed slowdown in deal activity in Q1’25 as dealmakers continue to navigate the current challenging market environment. Private equity (PE) players remained cautious, focusing on bolt-on acquisitions to enhance portfolio value, while strategic buyers prioritized mid-market transactions over megadeals. Trade tensions, particularly resulting from evolving U.S. policies, introduced uncertainty across boardroom discussions, leading to a “wait and watch” stance from investors. Additionally, pricing pressure of pharma companies and reductions in reimbursements posed new valuation challenges.

The sector witnessed few 'big ticket' agreements, mostly in the pharmaceuticals and biotech sub-sector given their significant war chest, which drove investors’ confidence. However, lack of mega deals resulted in subdued y-o-y figures owing to a strong base effect. Nonetheless, dealmakers continued to amend their strategies to bridge the valuation gaps and conducted deeper analyses of the targets, thereby extending duration of negotiations and due diligence.

Key M&A sentiments observed during Q1’25:

• Moderate valuations and heightened boardroom CEO confidence across healthcare subsectors steadied deal volumes though lack of mega deals muted y-o-y growth (high base effect).
• Portfolio realignment is happening among the strategics to divest non-core or under-performing assets; the proceeds of which are expected to be used in ramping of R&D, technology, and scale.
• Rapid paradigms shift towards utilizing data and actionable insights to implement person-centric network/product strategies across sub-sectors.
• Macroeconomic conditions and geopolitical tensions remained challenging, trade tensions and economic uncertainty influenced capital flows, with investors favoring a cautious approach.
• The increasing demand for GLP-1 medications may lead to more deals in the weight loss industry, as start-ups compete with Big Pharma
• Sponsors remained cautious amidst greater scrutiny and revised their expectations to factor in the changing deal making landscape with lower valuations and interest rates justifying ‘firepower’ deployment in 2025.