This article is part of Bain's 2025 M&A Report.

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Once the frontrunners of M&A activity, healthcare and life sciences companies largely found themselves on the sidelines in 2024. While many other industries saw an uptick, would-be dealmakers in healthcare and life sciences were disproportionately dissuaded by the tougher regulatory environment, high interest rates, and unfavorable valuations.

Deal volume remained low (below the 10-year average), and deal value for the first 10 months of 2024 dropped by 28% compared with the same period in 2023. Clearly, the big return to normal hasn’t happened (see Figure 1).

Figure 1

But we know that participation in the M&A market has long been a strong predictor of success in this industry, with the most frequent acquirers—namely, those that make at least one deal a year—achieving 12.2% growth in total shareholder returns (TSRs) over the years 2012–2022 compared with 0.3% growth for companies that didn’t acquire (see Figure 2). This differential is larger than any other industry, highlighting the importance of M&A to TSRs in healthcare. So, staying on the sidelines is not a sustainable long-term strategy.

Figure 2

Given this reality, we saw healthcare companies that have historically been active buck the M&A slowdown trend by pushing ahead amid the market’s new realities. Gilead Sciences, Merck, AbbVie, Stryker, Boston Scientific, and Johnson & Johnson all stayed in the game.

Johnson & Johnson MedTech recently invested more than $30 billion in acquisitions to double down on cardiovascular. In 2024, it acquired Shockwave Medical and V-Wave on top of its earlier purchases of Abiomed in 2022 and Laminar in 2023. Gilead bought or invested in two biotech companies to bolster its innovation muscle. And Stryker maintained a consistently bold M&A strategy, using capital for targets in a variety of sectors and publicly announcing that M&A will be “the No. 1 use of our cash going forward.”

As others across the healthcare and life sciences subsectors watch these leaders achieve new revenue streams and gain access to much-needed innovation and technology to speed product development, more are likely to play catch-up.

Let’s look at the changes signaling a return to M&A.

AI is a disruptive technology that is no longer optional for healthcare companies

In pharmaceuticals, the rise of AI in drug discovery and diagnostics is reshaping the sector’s competitive landscape. The smart companies are getting out ahead of the massive change. They view AI-enabled platforms as key assets in M&A deals. Think of BioNTech’s acquisition of InstaDeep in July 2023 to strengthen its position in AI-powered drug discovery, design, and development.

Despite the need, larger pharma companies are not acquiring but rather opting to partner as the landscape evolves. That was the path taken by Bristol Myers Squibb in its collaboration with Owkin in 2022 and Tempus in 2023. Such arrangements require companies to rethink their strategies to integrate innovations and make choices regarding what capabilities they build, partner for, or acquire.

In medtech, companies continued to pursue M&A to advance the power of AI into personalized medicine, diagnostics and imaging, surgical robotics, and care delivery. Stryker’s purchase of care.ai is a great example—it accelerates Stryker’s delivery of AI-assisted virtual care workflows and smart room technology.

Despite the need, larger pharma companies are not acquiring but rather opting to partner as the landscape evolves. 

Blockbuster GLP-1 treatments bring opportunity and uncertainty

These breakthrough therapies are defining the future of chronic disease management, particularly diabetes management and weight-loss management. In late 2023, we saw incumbent pharma companies racing to acquire smaller firms in this space to expand their product portfolios. That was the case with Roche’s acquisition of Carmot Therapeutics and AstraZeneca’s licensing agreement with Eccogene. Additional players in GLP-1 will mean more splitting of the pie—and the potential to apply downward pressure on price.

Diabetes management is one of the largest profit pools in medtech. That’s why many companies are still evaluating the long-term implications of GLP-1s on their business, whether positive or negative, and determining how future M&A strategies could impact their current portfolios. While these therapies will deliver significant growth across subsectors, there is still a lot of uncertainty over whether or not supply will keep up with demand, which indications will get regulatory approval, and what payers will reimburse.

More investment in specialty and scope deals

As healthcare companies continue to evaluate their portfolios, more than 80% of the deals have been scope—that’s a higher percentage than any other industry—and we anticipate the activity will continue at the same rate. Companies will keep their M&A focus on the strategic areas in which innovation and the potential for long-term growth align.

In addition to GLP-1s, pharma’s high-growth areas include immunology and oncology. In broader healthcare services, companies are doubling down on selected specialties by acquiring community oncology practices.

Medtech continues to see a steady flow of carve-outs as companies enhance their portfolios’ focus and improve their financial positions. For example, Baxter International sold its kidney care unit, Vantive, which was purchased by the Carlyle Group and Atmas Health.

Companies will keep their M&A focus on the strategic areas in which innovation and the potential for long-term growth align.

How can healthcare and life sciences companies best use M&A to advance their strategy?

While the overall healthcare sector remains slow to recover, we feel bullish on 2025. Historically active M&A players will step forward to acquire strategic assets and to capitalize on these key trends. The best will come out on top by building their muscles for scope deals, using generative AI to accelerate the deal process, developing their M&A strategy and diligence processes to consider evolving government regulations, and engaging their integration teams in diligence to help ensure seamless execution.

Build muscles for scope deals. The healthcare industry emphasis on scope deals requires an advanced M&A capability to validate value drivers. For example, they’ll need more complex synergy models, increased planning to meet regulatory guidelines, and new software and technology to support more sophisticated diligence. The needs are even more pronounced given the uncertainty with GLP-1s and AI. Planning for revenue synergies may be even harder, making it more challenging to forecast the deal thesis.

Use generative AI to accelerate the deal process. Just as generative AI is shaking up the industry itself, the emerging technology can give acquirers an edge in dealmaking (see “Generative AI in M&A: You’re Not Behind—Yet”). Generative AI enables healthcare and life sciences companies to get smarter more quickly on global trends, disruptive technologies, funding, and innovation. The frontrunners already are using it for faster, more complete screening and to identify assets at earlier stages.

Develop M&A strategy and diligence processes to consider evolving government regulations. In many areas of healthcare and life sciences, tougher regulations on pricing and changing government policies are a fact of life. This past year, serial acquirers have adjusted to this new reality by building a longer close period into their deal assessment and increasing attention to antitrust considerations early on. The new federal government administration in the US may consider alternative solutions and remedies, but it is too early to tell how that will impact dealmaking, particularly for megamergers. Moreover, it is unclear what impact potential tariffs will have on M&A, particularly for cross-border deals. To be successful, healthcare and life sciences companies must be ready to adapt their strategies, diligence processes, and deal models as new policies and regulations emerge.

Engage your integration teams in diligence to help ensure seamless execution. Given the continued high valuation for quality assets, the best acquirers are more bullish on cost and revenue synergies. The larger the deal, the more thoughtful they are about how to realize these synergies to make the deal economics work. While the diligence of innovative assets has historically been about the science (in many cases, leaving the asset largely untouched after acquisition), the higher valuations require acquirers to plan for more aggressive operational synergies while retaining the talent and innovative capabilities that are so important in these deals.

In this rapidly evolving industry, healthcare and life sciences companies that resist entering the M&A game risk falling behind competitors that take a disciplined, bold, and long-term approach to living with the new realities.

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Overview

• Looking Ahead to 2025: Preparing for What Comes Next

• Looking Back at M&A in 2024: Dealmakers Adapt as the Market Idles

• Generative AI in M&A: You’re Not Behind—Yet

• Where the Deals Are: 2024’s Top M&A Markets

• Ten Takeaways from Our M&A Executive Survey

Industry Views

• Aerospace & Defense M&A

• Automotive & Mobility M&A

• Building Products & Technology M&A

• Consumer Products M&A

• Energy & Natural Resources M&A

• Financial Services M&A

• Healthcare & Life Sciences M&A

• Machinery & Equipment M&A

• Media & Entertainment M&A

• Retail M&A

• Technology M&A

• Telecommunications M&A