Key Takeaways
- • Strategic buyers accounted for 51 per cent of healthcare private equity exits in the first three quarters of 2026, according to McDermott, Will & Schulte, reflecting the difficulty of exits and the importance of corporate acquirers.
- • Around 17 companies have signed confidential agreements with the US administration securing tariff exemptions in exchange for Most Favored Nation (MFN) pricing arrangements covering Medicaid, new drug launches and direct-to-patient offerings.
- • Policy and regulatory risk has become a tier-one consideration for healthcare investors, with delegates at HPE Europe in September citing trade realignment, supply-chain vulnerabilities, reimbursement and drug pricing as the most concerning areas.
- • Bid-ask spreads remain bifurcated, limiting sponsor-to-sponsor dealmaking, with private equity activity concentrated on take-privates and carve-outs.
- • Generics, medtech, innovative medicines in oncology and immunology, and wellness and longevity were identified as the most attractive life sciences subsectors.
Summary
McDermott, Will & Schulte, drawing on discussions with investors, operators and advisers at the HPE Europe conference, says European healthcare has shown resilience in a challenging private equity environment. Fundraising in the region has been more robust than in other geographies, and deal activity has remained relatively stable even as global volumes have declined since 2021. Pharmaceuticals and biotech, alongside healthcare services, were the most active areas for European healthcare M&A last year.
Dealmaking has become more demanding. Buyers face less visibility over competing bidders, auctions have broken down, and exclusivity agreements are often unavailable or prove meaningless. Building relationships with sellers and management teams has therefore become more important. The exit environment is also difficult: strategic buyers accounted for 51 per cent of exits in the first three quarters of 2026. Healthcare services, pharmaceuticals and pharma services are attracting strategic interest as companies enter new segments. The firm notes that strategic buyers can offer a lower cost of capital and synergies, but advises sellers to maintain multiple exit routes.
Policy has moved to the forefront of investment decisions. Due diligence increasingly breaks policy down into its commercial and operational implications and applies it across all workstreams. The firm highlights the US administration's Most Favored Nation policy, which benchmarks domestic drug prices against peer countries. Around 17 companies have signed confidential agreements securing tariff exemptions in exchange for MFN pricing covering Medicaid, new drug launches and direct-to-patient offerings. These agreements are time limited, and investors will need to assess further drug-pricing regulation and how pharmaceutical companies adjust pricing, launch sequencing and portfolio priorities.
On innovation, the majority of life sciences companies are developing AI tools for drug discovery and development, while new technologies are lowering manufacturing costs. Shortening clinical trial timelines is expected to be the next area of focus, with personalised medicine becoming more tangible. Transaction activity nonetheless remains constrained by divergent buyer and seller expectations. Private equity investors have concentrated on take-privates and carve-outs, and pharma services is showing signs of recovery. Looking ahead, generics remain a focus given drug pricing pressures, budget constraints and patent expirations, while GLP-1 drugs continue to affect certain sectors. The article concludes that investors must weigh the policy environment carefully when translating technological progress into investments.
Dealmaking has become more demanding. Buyers face less visibility over competing bidders, auctions have broken down, and exclusivity agreements are often unavailable or prove meaningless. Building relationships with sellers and management teams has therefore become more important. The exit environment is also difficult: strategic buyers accounted for 51 per cent of exits in the first three quarters of 2026. Healthcare services, pharmaceuticals and pharma services are attracting strategic interest as companies enter new segments. The firm notes that strategic buyers can offer a lower cost of capital and synergies, but advises sellers to maintain multiple exit routes.
Policy has moved to the forefront of investment decisions. Due diligence increasingly breaks policy down into its commercial and operational implications and applies it across all workstreams. The firm highlights the US administration's Most Favored Nation policy, which benchmarks domestic drug prices against peer countries. Around 17 companies have signed confidential agreements securing tariff exemptions in exchange for MFN pricing covering Medicaid, new drug launches and direct-to-patient offerings. These agreements are time limited, and investors will need to assess further drug-pricing regulation and how pharmaceutical companies adjust pricing, launch sequencing and portfolio priorities.
On innovation, the majority of life sciences companies are developing AI tools for drug discovery and development, while new technologies are lowering manufacturing costs. Shortening clinical trial timelines is expected to be the next area of focus, with personalised medicine becoming more tangible. Transaction activity nonetheless remains constrained by divergent buyer and seller expectations. Private equity investors have concentrated on take-privates and carve-outs, and pharma services is showing signs of recovery. Looking ahead, generics remain a focus given drug pricing pressures, budget constraints and patent expirations, while GLP-1 drugs continue to affect certain sectors. The article concludes that investors must weigh the policy environment carefully when translating technological progress into investments.
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