2026 Healthcare Private Equity Outlook & Trends

Look ahead with our take on private equity M&A trends in strategic & private equity investing.

As we step into 2026, the healthcare private equity landscape is defined by both powerful momentum and meaningful constraints. Record levels of dry powder and a growing pipeline of high‑quality assets suggest increased deal activity, while stabilizing macroeconomic conditions and the potential for interest‑rate relief offer real tailwinds. Yet investors face an environment shaped by intensifying state and federal oversight, evolving reimbursement models, and disciplined pricing pressures—particularly for premium assets. At the same time, AI‑driven transformation is reshaping diligence, operations, and value creation across sectors such as infusion therapy, specialty pharmacy, behavioral health, value‑based care, and post‑acute services. Add in tighter credit markets and the expanding role of continuation funds, and 2026 becomes a year that rewards strategic focus, regulatory fluency, and operational agility.

Read on for the trends and factors we're closely tracking that will shape healthcare investment in 2026.

1. Mixed Signals: Navigating the Crossroads Ahead in 2026

BY ANGELA HUMPHREYS & RYAN THOMAS

As we ring in the new year, the healthcare private equity (PE) industry remains a study in contradictions. While 2025 began with many predictions for robust deal activity, the number of deals during the year remained relatively flat compared to previous years. Following the 2025 JP Morgan Conference, many investors were speculating on "when the dam would break" for deal flow. As one investor recently put it, "there was no dam to break." Despite deal volume falling short of expectations, overall deal value increased significantly, particularly in the latter half of 2025, with the year being defined by several mega-deals. This activity suggests that PE investors remained more disciplined and seemed committed to not falling victim to the 2021 feeding frenzy that led to a record number of deals with all-time high multiples.

Heading into 2026, we are cautiously optimistic as the healthcare PE landscape sits at a crossroads: PE firms are sitting on a record amount of dry powder and a backlog of portfolio assets, yet they face unprecedented regulatory headwinds from federal and state regulators and uncertainties around federal healthcare program reimbursement. PE buyers are also facing tough competition for the higher-quality assets, which makes it challenging to remain price disciplined and find a "good deal" in what should otherwise be a buyers' market. Those funds that lose out either have nothing to put their capital toward or spend a lot of time hoping to find "proprietary" opportunities, which tend to evolve much more slowly and with less quality control, which can easily lead to repriced or broken deals. This has been a big contributor to the lack of volume in the past 24 months.

Several factors, however, suggest that 2026 is well-positioned for a rebound in deal volume. Most notably, PE firms are holding a historic amount (over $1 trillion) of dry powder, and pressure to deploy and return capital has reached an alltime high. This unprecedented accumulation of uncalled commitments and "long-hold" portfolio companies have become a liability for funds that are facing pressure from limited partners to find quality investment opportunities and deliver a return on their investments. As a positive indicator, we are seeing many high-quality assets now being prepped for exit or already testing the market. We are also aware of many firms actively considering "continuation funds" to generate returns while maintaining their best assets and management teams, which is a trend we expect to continue in 2026. Stabilizing macroeconomic factors also serve as an encouraging catalyst for the 2026 investment outlook. Particularly, potential interest rate cuts by the Federal Reserve will facilitate new acquisitions and make leveraged buyouts a more attractive model in 2026. These all points at least, to a more active and optimistic deal environment in 2026.

On the other hand, the industry is facing increased regulatory scrutiny and potential policy shifts, adding uncertainty to the 2026 investment environment. States continue to introduce and pass "Mini-HSR" laws, requiring prior notice for certain healthcare transactions, and in some cases, specifically targeting PE investment in healthcare (i.e., in California). These laws directly challenge the traditional roll-up investment strategy and have significantly extended deal timelines and increased deal costs. Changes to federal healthcare program reimbursement introduced by the One Big Beautiful Bill Act (OBBBA), including Medicaid funding caps, also introduce headwinds for investors, particularly those with Medicaid-dependent assets. Medicare Advantage (and ancillary) markets remain challenged as well.

Ultimately, these mixed signals suggest that while 2026 is by most objective accounts poised for a rebound in deal volume given record-high investment capacity, regulatory headwinds and pricing pressures due to intense competition for quality assets, together with a continued deliberate buy-side approach, may lead to a more modest albeit steady increase in deal volume and value in 2026 than the "flood of deals" predicted in years past. 2026 ultimately may be defined by increasing deal activity for those who pivot away from sectors with high regulatory and reimbursement risk, and toward sectors with less headwinds and clear, predictable cash flows – with the winners having to pay up to play in 2026.

For buyouts, high-margin assets with seasoned management teams will continue to command premium multiples, defining the 2026 exit environment. The other winners in 2026 could be those looking to find good deals in the disfavored markets and sectors, as history has also shown out-sized performance for investments made in such periods, given the inevitably cyclical nature of the regulated healthcare markets. Regardless, there is certainly plenty of opportunity to make 2026 a very active deal year – at least for those who are not faint of heart.

2. Steady on the Rails: Infusion Platforms Continue Their Forward Momentum

BY SHANNON WILEY

Infusion companies promise to be a continued bright spot in transactions in 2026, supported by strong market fundamentals such as robust growth in specialty and biologic therapies, an aging population, and the shift of infusion care from hospital to outpatient and home settings. While the frothiness of the last 18 months is settling for the sector as a whole, premier assets or those with synergies for the acquirer will likely gain competitive interest and pull high multiples. Strategic and financial buyers continue to show interest in omnichannel platforms, home infusion business, and AIC only models. The sale of AOM and Soleo Health in 2025 demonstrates that home infusion holds its own among infusion assets of interest. However, companies looking for valuations heavily weighted on prospective EBITDA may find the market more challenging in 2026.

Looking ahead, 2026 likely will see a handful of solid ambulatory infusion companies being traded, creating the opportunity to expand to omnichannel for existing strategics with a home infusion focus or a solid platform for PE expansion. Favorable macroeconomic conditions, as described above, are expected to benefit infusion players that can demonstrate durable reimbursement and growth prospects. Infusion assets, particularly those other than home infusion, remain fractionalized and ripe for value creation through operational integration, geographic expansion, and technology adoption. Also, given the PE infusion platform transactions in 2024 and 2025, we expect to see continued strategic roll-ups and bolt-on deals.

3. Life in the Fast Lane: AI Poised to Transform Healthcare PE in 2026

BY EMILY BURROWS & TATJANA PATERNO

The pace of artificial intelligence (AI) development and penetration accelerated dramatically throughout 2025, setting the stage for 2026 to mark a pivotal year of disruption across the healthcare sector. This technology is expected to be not merely an enhancement but a catalyst for unprecedented business transformation. Disruption of this magnitude creates vast opportunities for agile investors and companies, enabling scalable efficiencies, innovative care models, and market expansions on a scale previously unimaginable. As PE firms navigate this evolving landscape, those attuned to AI's potential will be best positioned to capitalize on emerging trends, driving higher valuations and strategic pivots in portfolio companies.

Healthcare PE investors have sharpened their focus on AI-driven value creation, a trend that is expected to intensify in 2026. For healthcare services businesses, AI applications will span multiple fronts: enhancing operational efficiency by automating routine tasks traditionally handled by humans; elevating patient experiences through personalized, datadriven engagement strategies that boost satisfaction and adherence; bolstering data analytics capabilities to generate superior enterprise value; and unlocking novel revenue streams via predictive tools and precision medicine. This momentum is likely to fuel a surge in M&A activity, particularly add-on acquisitions where larger PE-backed platforms integrate nimble AI startups focused on diagnostics, value-based care, patient engagement, and supply chain optimization, among others—areas projected to drive broader sector growth and higher exit multiples.

Regulatory scrutiny will shape how AI shows up in healthcare PE in 2026, driving tighter diligence and more adaptive deal terms. The Food and Drug Administration (FDA) oversight of AI/machine learning (ML)-enabled devices is now routine— roughly a thousand clearances and approvals were listed in the FDA's public database by mid‑2025—with growing emphasis on change control, real‑world performance, and mitigation of bias and data-quality risks. Agencies are also seeking public input on post‑market monitoring in clinical settings and pushing greater transparency for generative tools, including in behavioral health. In M&A, expect deeper IP and data‑rights audits, compliance‑linked earn‑outs, and careful antitrust work in already concentrated areas. From a transactional perspective, successful deals will prioritize interoperability standards and cybersecurity protocols to ensure seamless integrations and minimize post-closing liabilities.

While history is yet to be written, healthcare stands to benefit tremendously from continued adoption and strategic leverage of AI, particularly within the PE ecosystem. PE firms that can capture the promise of AI will stand to benefit the most in this rapidly evolving landscape.

4. Value-Based Care Gains Speed in 2026

BY JUSTIN BROWN

Value-based care (VBC) is set to expand in 2026, propelled by policy and payor momentum, growing provider participation, and rapid technological advances. This trajectory will likely accelerate investment not only in sophisticated VBC platforms with demonstrated performance but also among providers with emerging VBC operations and the population health enablement companies and technology developers that support them.

Policy and payor support for VBC continues to build. In just the last quarter of 2025, the Centers for Medicare & Medicaid Services (CMS) Innovation Center announced eight alternative payment models, including ACCESS (which offers new payment pathways for technology-supported chronic care management beginning July 2026), Ambulatory Specialty Model (a mandatory model for certain specialists beginning in 2027), and LEAD (a 10-year accountable care organization (ACO) program that follows ACO REACH). Commercial payors and contracted employers are also increasing their push for VBC contracts.

This momentum is drawing more providers into VBC arrangements. The growing use of episode-based models for highvolume and high-cost procedures or conditions—which require coordination among primary care providers and specialists and across sites of care—is creating additional opportunities for specialists, home-based care providers, and post-acute care providers to participate in VBC arrangements with payors and other providers.

Technological advances in AI, data infrastructure, and actuarial analytics are improving the predictability and scalability of VBC delivery and the underwriting of financial risk, while also easing administrative burden. These advances can improve care coordinators' ability to close referral loops, support adherence, and ensure that patients are receiving the right care in the right setting at the right time.

To succeed in VBC, providers need expertise in risk-based contracting, population health management, and high-value network formation, along with capital for VBC infrastructure and bearing financial risk. As participation expands—whether by choice or mandate—many providers will seek capital and strategic partners to help them execute.

5. Caution Ahead: Debt Markets Remain Costly & Selective

BY SCOTT REID

We anticipate the market for debt finance transactions in 2026 to be driven by two central issues: the cost of borrowed money and political disruptions. Debt remains expensive (at the end of December 2025, 30-day SOFR hovered between 3.9 and 4.0, which resulted in middle-market Term Loan B facilities with applicable interest rates between 7% and 9%) and market shocks caused by changing political priorities such as reduced federal research support for biomedical research and increased tariffs, add risk to new and existing investments. These issues will affect acquisition financings, refinancings of existing debt, and distressed financings throughout 2026.

Acquisition Financings: Any deal lawyer, banker, or fund manager will say that the acquisition market surged during the second half of 2025. However, because debt remains expensive, debt finance transactions did not surge at the same rate, with buyers instead opting for larger equity investments and increased seller financing. In leveraged transactions, leverage has tended to be lower (1x-3x), as opposed to leverage greater than 4x which is more common when debt markets are more favorable. In addition, buyers have relied heavily on seller financing in the form of seller notes, earnouts, and rollover equity interests. We expect these trends to continue in 2026. Sellers will push for additional rights and protections regarding the seller financing documentation, borrowers will prioritize contingent consideration debt baskets in their credit facilities to allow for continued focus on seller financing in future acquisitions, and lenders will tighten basket thresholds in loan documents.

Refinancings: Because debt remains expensive after a period in the early 2020's with historically low debt pricing, refinancing transactions will remain slow in 2026. Notable exceptions will be (1) refinancings due to 2021 financings maturing, and (2) down-market refinancings as part of distressed debt restructurings. Borrowers who refinance maturing credit facilities in 2026 will likely focus their efforts on preserving the favorable terms they were able to obtain in 2021's borrower-friendly market, and lenders in 2026 will strive to tighten some of the most borrower-favorable baskets, such as certain investment and restricted payment baskets. Unfortunately, we also expect to continue seeing an above-average number of distressed refinancings, especially among borrowers who over-leveraged while debt was inexpensive and borrowers in industries affected by policy changes. In these distressed refinancings, we expect to see borrowers refinancing debt down-market (e.g., from regulated banks to direct lenders) or exchanging portions of debt for equity instruments such as warrants.

Distressed Finance: The policy changes in 2025 sent shock waves through industries with complex international supply chains or disfavored focuses (e.g., vaccine research). Borrowers in these, and many other, industries bounced from amendment to amendment (or forbearance agreements) during 2025 while they tried to recalibrate projections and financial covenants to reflect the structural changes in their industries. We expect borrowers in these industries to continue requiring waivers and amendments from their lenders during 2026, and the question is whether any large lenders will make institutional decisions to withdraw from industries that have become political lightning rods or face regulatory headwinds. At this point, we have not seen major lenders force borrowers to refinance as part of a lender's broader strategy to exit a disfavored industry. As long as that remains the case, 2026 will likely consist of more distressed amendments and out-of-court restructurings where existing lender groups remain involved in the restructured capital stacks of borrowers, albeit with increased equity investments, increased monitoring rights, and reduced debt amounts. We also expect to continue to see lenders "take the keys" in the most challenging cases, perhaps leaving sponsors with a small equity upside, or otherwise force a sale process. But if lenders begin exiting certain industries, we will likely see a surge in distressed refinancings and bankruptcy filings as borrowers are forced to refinance with balance sheets that have not recovered from market shocks caused by policy changes.

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