Sword bought Kaia Health for $285 million to shore up its position in the musculoskeletal market. In behavioral health, Spring Health scooped up therapist marketplace Alma. NOCD, also in behavioral health and focused on treating patients with obsessive compulsive disorder online, acquired a company in the PTSD space.
All these deals occurred in the past few weeks, signaling one thing:
We are having a “hot healthcare M&A winter.”
But why now? After so many years of conjecture in the news about the impending wave of digital health “point solution” consolidation, we had begun to lose faith that it would happen. In 2024, Rock Health reported approximately 120 total digital health M&A deals, a relatively low number given the size of the category. 2025 saw an increase to around 200. And this year, we expect to see a lot more.
So the theory has eventually proven correct, it just took longer than expected. As we’ll explain in this piece, market conditions are finally ripe for acquisitions, particularly for digital health companies focused on employers and health plans. Technology businesses without strong sales and marketing teams will also get scooped up. We might also see huge private equity plays. It’s still rumors, but another notable deal that could happen in the coming months involves private equity managing director Matt Holt pulling in $30 billion to combine a handful of companies in the New Mountain portfolio. That would represent the largest health-tech deal of all time.
A reminder on upcoming webinars: |
Webinar Topic | Timing | Registration |
|---|---|---|
Breaking Point: How Soaring Healthcare Costs are Reshaping Employer Strategies | Feb 9, 2026 11 AM ET | Subscribers can sign up here |
Hospitals as the new go-to-market, lessons from the trenches | Mar 3, 2026 12 PM ET | Anyone can sign up here |
So… why did it take so long?
First, we’ll get into the challenges that may have slowed down M&A, before positing a few reasons why it’s accelerating now.
Valuations were too high for too long: When investors were valuing care delivery startups at multiples in the 10x range or higher, these elevated valuations had a number of first and second derivative impacts that stymied M&A. Most obviously, high valuations made these assets too expensive to be bought by larger companies in the category (the most natural buyer for most of them). This created a narrower universe of potential acquirers that had both scale and an appetite for transformational deals, leading to some of the pandemic-era M&A we saw across Big Tech and healthcare incumbents. From the perspective of an acquirer, elevated valuations also made for a higher hurdle in justifying M&A, which is why many of the deals we saw during this time period fell in the transformational category. There was also an enduring impact—even when valuations rationalized, we saw many founders and investors anchored to legacy valuations, dampening the willingness of potential sellers
Uncomfortable board dynamics: Linked strongly to our first point is a more subtle one related to the board of directors. If an acquisition offer occurs for a startup, an associate or analyst at every venture firm is tasked with finding out, “What’s our return on investment?” There’s a “waterfall” of investors up and down the pref stack that will get varying levels of payouts or entirely lose their shirts, depending on the time they did the deal and the terms. The fund’s size also matters. To dig into why, check out this analysis from Health Velocity’s Saurabh Bhansali. All of that could squash a deal that might be a good outcome for a founder.
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