“We at DelMorgan & Co. believe that 2025 represents an inflection point for artificial intelligence in healthcare, as acquirers prioritize differentiated platforms that reduce costs, improve outcomes and reshape the patient journey.”
Executive Summary
The healthcare sector is undergoing a profound transformation driven by artificial intelligence (AI), which has evolved from exploratory pilot programs to a critical driver of operational and strategic value. Initially focused on diagnostics and digital health, AI is now reshaping clinical trials, provider operations and patient engagement at scale. Pharmaceutical companies, health systems and payers are facing mounting pressure to reduce costs while improving outcomes, creating a compelling case for AI adoption. Private equity sponsors, recognizing the unique blend of healthcare’s defensive fundamentals and technology’s growth potential, are channeling significant capital into the sector. AI-enabled healthcare firms, particularly those with proprietary datasets and scalable platforms, are among the most sought-after assets in 2025, commanding premium valuations in a dynamic M&A landscape.
Market Dynamics and Drivers
The convergence of escalating healthcare costs, workforce shortages and the demand for precision in care delivery is accelerating AI’s integration across the healthcare value chain. In clinical trials, AI platforms are streamlining drug development by enhancing molecule discovery, optimizing patient recruitment and improving trial monitoring, which together are reducing timelines and costs. These development-enhancing capabilities have positioned AI-driven research platforms as prime acquisition targets for pharmaceutical companies facing upcoming patent expiration dates. Within provider systems, hospitals are leveraging AI for advanced imaging, diagnostics and predictive analytics to minimize errors and optimize resource allocation, driving measurable improvements in patient outcomes. AI-powered patient engagement platforms are also gaining traction by personalizing care plans and boosting adherence, making them attractive to buyers seeking recurring revenue streams. The global market for AI in healthcare, estimated at $26.6 billion in 2024, is projected to reach $187.7 billion by 2030, reflecting a robust CAGR of approximately 38.6%, which further underscores the sector’s immense growth potential.
Regulatory and Policy Environment
The regulatory landscape is rapidly evolving to support AI’s integration while addressing inherent risks. The U.S. Department of Health and Human Services is developing updated guidance on AI use in clinical decision-making, emphasizing transparency and accountability to ensure patient safety. Compliance with HIPAA, robust data protection protocols and emerging AI governance frameworks remain critical components of due diligence for investors and operators. Concurrently, the Centers for Medicare & Medicaid Services is exploring reimbursement models for AI-driven interventions within value-based care frameworks, signaling long-term opportunities but introducing near-term uncertainty for business models. Navigating these regulatory dynamics is essential for stakeholders to assess risks and ensure sustainable growth in this rapidly evolving market.
Strategic Transactions and M&A Trends
Mergers & acquisitions has emerged as the preferred strategy for incumbents seeking to rapidly integrate AI capabilities. Pharmaceutical companies and health systems are prioritizing acquisitions of platforms with proprietary datasets, validated algorithms and proven outcomes to enhance innovation and competitiveness. Private equity firms are increasingly active, targeting AI-enabled healthcare companies for their blend of stable, recurring revenues and technology-driven upside. Platforms that demonstrate scalability across diagnostics, clinical trials or patient engagement are securing premium valuations, while those lacking clinical validation or regulatory alignment face heightened scrutiny. In Q2 2025, digital health venture funding reached $3.4 billion, with AI-enabled platforms for workflow optimization and clinical efficiency attracting significant capital. As macroeconomic conditions stabilize, transaction activity is expected to accelerate, driven by growing confidence in AI’s transformative potential.
Investment Outlook
The outlook for AI in healthcare remains exceptionally strong, with M&A activity poised to intensify through 2025 and beyond. Strategic acquirers are focusing on bolt-on acquisitions to enhance existing service lines, while financial sponsors are pursuing platform investments capable of scaling across multiple therapeutic areas and provider networks. Investors must carefully evaluate execution risks, ensuring target companies can deliver scalable, reliable AI solutions. Data governance, including compliance with evolving regulatory standards and robust security frameworks, is another critical consideration. Alignment with emerging reimbursement models and clinical validation requirements will further shape investment decisions. The sector’s structural shift toward AI integration positions early movers to capture significant value as adoption transitions from fragmented pilots to enterprise-wide solutions.
Strategic Recommendations
As AI becomes an integral component of the healthcare ecosystem, stakeholders must act decisively to secure competitive advantages. Companies with specialized expertise in diagnostics, clinical trial acceleration or patient engagement will continue to attract strong demand from both strategic and financial buyers. Investors should prioritize targets with differentiated datasets, scalable platforms and proven clinical or operational impact. Rigorous due diligence is essential to mitigate risks related to regulatory compliance, data integrity and execution challenges. Those who move swiftly to acquire or build AI capabilities will be best positioned to capitalize on the sector’s transformation, driving sustained value creation in an increasingly AI-driven healthcare landscape.
About DelMorgan & Co. (delmorganco.com)
With over $300 billion of successful transactions in over 80 countries, DelMorgan‘s Investment Banking professionals have worked on some of the most challenging, most rewarding and highest profile transactions in the U.S. and around the globe. In the upcoming year, we expect more high-quality deal execution for more clients and welcome the opportunity to speak with companies interested in potentially selling their businesses or raising capital.
