Investors say there are still opportunities for mergers and acquisitions in digital health but admit economic uncertainty is slowing things down.
A tumultuous stock market, threats of tariffs and provider reimbursement uncertainty have impeded what was supposed to be an active year for M&A in digital health. Investors say there is still interest in digital health M&A but it won't be the frenzy that many predicted at the start of the year.
Related: Digital health investors predict uptick in M&A for 2025
Brad Kuntz, senior managing director at management consulting firm Stax, said potential acquirers are looking for clarity on several factors including interest rates and the extent to which businesses will be impacted by tariffs.
“Larger deals are sort of on hold or moving very slowly,” Kuntz said. “The idea being that if we can move slowly, hopefully we can get some of that clarity of information at some point.”
After an early wave of M&A activity in January, many larger deals are either on hold or moving very slowly, said Keith Figlioli, managing partner at healthcare-focused venture capital firm LRVHealth.
Initial public offerings are also largely on hold. Virtual musculoskeletal health company Hinge Health filed for a proposed initial public offering last month, but did not disclose any details about the timing of its IPO, pricing of the shares, the number of shares to be offered or the amount it seeks to raise.
Other potential IPO candidates are waiting until the markets clear, investors say. Steve Kraus, partner at venture capital firm Bessemer Venture Partners, said the market volatility caused by the tariffs is particularly challenging for a less established sector like digital health.
“The volatility is not helpful when and if you’re going trying to go public," Kraus said. "[Particularly because] our companies are more immature and are a little more volatile in the growth profile.”
Still, investors are trying to find opportunities within M&A. Figlioli said deals for smaller digital health companies will continue to occur. High-growth companies with a consistent financial performance track record will also still draw M&A interest despite the macroeconomic challenges.
Andrew Holden, a director on financial services firm William Blair’s healthcare IT team, has seen increased interest in acquisitions to bolster high-performing companies. His firm has helped close ten healthcare IT transactions across the U.S. and Europe this year.
Digital health companies are also still interested in buying smaller competitors. Abhinav Shashank, CEO and co-founder at healthcare data unicorn Innovaccer, said in an interview at the March Healthcare Information and Management Systems Society conference the company plans to make three acquisitions this year.
Value-based care technology platform Reveleer acquired technology company Novillus on Tuesday for an undisclosed price, which was its second acquisition since October. Jay Ackerman, Reveleer president and CEO, said the company was interested in pursuing add-ons as part of its growth strategy.
“With the market uncertainty valuation expectations are no longer out of whack, so it puts us in a good position to act,” Ackerman said. “We have good capital partners—both equity and debt—that put us in a position to play offense here.”
