With Dry Powder and Sunny Skies, Could 2025 Be Shaping Up for a Smooth Run?

In an almost unprecedented occurrence, the 43rd Annual J.P. Morgan Healthcare Conference began and concluded under sunny skies, fostering an overall sense of optimism among middle-market and lower-middle-market private equity (PE) investors and investment bankers. While the choppiness in deal flow over the past two years has left some cautious, the dry powder held by PE investors, the forecast of reduced regulation under a new Trump administration, and the continued stabilization of interest rates suggest that 2025 could be shaping up for a smoother run than recent years, at least in the latter half of the year. Anecdotally, we also saw greater banker process kick-off activity this year in San Francisco as compared to 2024.

Perhaps the only cloud on the horizon for investor optimism was a report released yesterday by the U.S. Department of Health and Human Services, the Federal Trade Commission (FTC), and the Department of Justice (DOJ). This report highlighted that the comments they sought last year supported concerns that access to care and costs have been magnified by consolidation and PE investment in healthcare. With President Trump’s inauguration just days away, however, many believe that PE may experience some reprieve over the next four years under a more “business-minded” administration.

Where will PE investors be focusing their attention—and dollars? It seems to be a continuation of last year’s trends. Below we’ve outlined what we learned at this year’s JPM event.

Continued Interest in Technology Solutions for Providers and Payers

Consistent with what we heard last year, PE investors remain highly interested in technology solutions selling to both payors and providers. Key areas of focus include revenue cycle management, overall practice management, remote patient monitoring, chronic care management, and other patient engagement solutions. According to most investors, the challenge lies in sifting through the abundance of companies to identify those that are truly effective. “We’re sorting through what’s out there—there’s just a lot of them,” one investor remarked.

Pharmacy Benefit Managers

Notwithstanding the general expectation that the regulatory environment will improve under the Trump administration, many investors expressed concerns about the ongoing FTC inquiries into the business activities of the three largest pharmacy benefit managers (PBMs), as well as the ongoing Congressional consideration of potential legislative changes. These concerns grew stronger when the FTC released its Second Interim Staff Report on Prescription Drug Middlemen, which focuses on the markups of generic specialty drugs—especially in the oncology space—on the second day of the conference. Stay tuned for nearly certain regulatory actions in 2025, which are likely to have significant impacts on the pharmacy, PBM, and pharma services sectors.

Infusion

Investors are also expressing sustained interest in the infusion space, particularly in search of exciting assets. There is palpable enthusiasm for the sector, especially given the scarcity of scaled assets and a growing interest in both tuck-in and organic growth strategies. Home infusion as a critical element of an omnichannel strategy is being discussed more frequently, alongside the ongoing interest in leveraging physician practices as an anchor for these strategies. Investors remain curious about how vertically integrated infusion assets and partnerships with health systems will perform in the marketplace.

A Potential Rebound for PPMs—at Least in Certain Specialties

While some have pumped the breaks on traditional physician practice management (PPM) roll-ups, recent announcements, such as Cencora’s acquisition of Retina Consultants of America and Cardinal Health’s acquisition of GI Alliance, have investors expressing renewed interest in specialties that include a drug or research component. Oncology, urology, and gastroenterology were all mentioned as areas of interest. More than one investor even queried whether a large device manufacturer might be the next non-traditional acquirer in the orthopedics PPM space. Interestingly, some investors expressed optimism that a new administration with a pro-business stance and reduced scrutiny of PE investments in healthcare providers could reset interest in PPM transactions by the end of this year, potentially at more favorable multiples. “It will work itself out by 2026—it has to,” one investor commented, while another noted plans to “double down” on primary care. The interest remains in PPM deals, particularly in more nuanced spaces like women’s health, indicating that opportunities still exist within the PPM market.

Care at Home

Several investors indicated interest in care at home, particularly those with existing platforms looking to expand their presence in established markets. Many discussions emphasized that both investors and payors feel more comfortable with the lowest-cost setting for a given patient or treatment. This theme was reflected in the growing interest in infusion, behavioral health, hospice, and home health and personal care services, as well as technology solutions supporting home-based care.

Investors flagged uncertainty regarding political discussions around Medicaid funding cuts or changes, although they also noted the strong value proposition of home-based care programs for both adult and pediatric populations. Payor consolidation remained a theme, with an interest in the pending DOJ challenge to UnitedHealth’s proposed acquisition of Amedisys.

Hospice transactions are expected to increase after a slower two years, although there is a strong consensus that valuations will not return to the elevated levels seen during the COVID-19 era.

Behavioral Health

We spoke to several investors who are also evaluating a number of behavioral health companies that offer technology solutions for virtual care, either exclusively or as a complement to in-person visits. Most of these companies are still in growth mode, and investors are particularly focused on scalability and the path to profitability when considering the recapitalization of existing venture-backed firms.

And that’s a wrap! Après JPM, we look forward to working with our clients to execute deals in 2025. The conditions appear favorable, and we believe the year is set to deliver a smoother run.