Q3 2025 Private Equity Update

Q3 2025 Private Equity Update

Middle-market Healthcare M&A activity in Q3 2025 is improving and investor sentiment remains optimistic heading into year-end. With improving macroeconomic conditions, easing interest rate pressures, and greater political clarity following the summer policy cycle, many expect an acceleration in deal flow as high-quality assets re-enter the market.

The slowdown in overall platform transaction volume has remained most pronounced in multisite provider groups, which historically represent a large share of healthcare services M&A. However, PE-backed strategic acquirers are still actively pursuing add-on acquisitions, both small and large, as a key growth strategy for growing their platforms. Persistent labor challenges, reimbursement pressure, and uncertainty surrounding proposed federal changes to Medicaid funding and site-of-service policies have created a more cautious environment for many provider platforms, although are somewhat alleviating compared to the first half of 2025.

However, certain verticals including behavioral health (specifically autism therapy), home health (private pay models), hospice, and outsourced services continue to outperform, with deal activity in these segments meaningfully higher year over year compared to the first nine months of 2024.

Healthcare investors remain highly engaged but increasingly selective, focusing on platforms with resilient margins, diversified payor exposure, and strong organic growth levers. The relative scarcity of institutional-quality assets has limited volume but is also contributing to healthy valuation levels for differentiated businesses.

Looking ahead, Provident expects a notably stronger close to 2025, as a backlog of sponsor-owned and founder-led businesses come to market amid improving financing conditions. Investors are likely to remain most active in sectors less exposed to Medicaid and wage volatility — such as outsourced services, healthcare IT, and pharma services, and payor/employer tech, positioning the healthcare M&A market for a robust finish to the year.

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