The healthcare industry experienced robust deal activity in 2024. This was motivated by resilient demand and changes in patient needs. Subsectors that stood out in 2024 included specialty hospitals, contract development and manufacturing organizations (CDMOs), and the medical devices industry.
Consolidation and platform creation saw through large transactions such as Advent International's strategic push into active pharmaceutical ingredients (APIs) and CDMO platforms with Suven Pharmaceuticals and Cohance Lifesciences. Similarly, multi-specialty care (for example, Aster DM’s merger with Blackstone-backed CARE Hospitals) and outpatient services drew significant PE interest, driven by demand for accessible, affordable care. In medtech, we saw KKR buying Apax Partners’ stake in Healthium.
The success of these verticals was driven by increased demand for high-quality healthcare delivery, a shift toward localization of manufacturing, and favourable policy initiatives, particularly under the production-linked incentive (PLI) schemes.
Subsector trends and opportunities
Healthcare will remain in the limelight in 2025, especially with investment interest in areas like single-specialty hospitals, diagnostic chains, medical devices, and pharmaceutical manufacturing, which includes APIs and CDMOs. This sector will see growth because of higher healthcare consumption, cost-efficiency initiatives, and deepening technology integration. Rising government expenditure and policies will support domestic manufacturing and fuel APIs and devices further.
While single-specialty hospitals are in full swing in 2024, their asset-light models and niche high-value care delivery will most likely attract investor attention in 2025. Similarly, medical technology and digital health—fuelled by advancements in AI, telemedicine, and remote diagnostics—are expected to explode.
IPO versus PE funding
While PE funding will continue to be the dominant source of funds, 2025 may see a spurt in the number of healthcare IPOs. We have seen PE/VC investments worth $5.3 billion in 2024 and it is likely that $5-6 billion investments will be there in 2025 as well.
Dr. Agarwal’s Health Care and Indira IVF are planning for public markets debut. Diagnostics, health-tech platforms, and single-specialty chains, where businesses have matured enough to become scalable and profitable, are the obvious beneficiaries of public market listings. Companies with strong financials and clear value propositions can well look to ride investor appetite for growth-oriented healthcare opportunities.
New investment areas in 2025
As healthcare progresses, new fields are becoming exciting investment opportunities. Changing demographics and increased awareness about issues related to mental health, elderly care, and customized medicine will continue to focus the world's attention. There is also a great, largely untapped opportunity in the health-tech space: AI-driven diagnostics, precision medicine, and wearable health devices. Preventive healthcare will be another focus area that will attract investment attention with the adoption of technology and wellness-focused solutions.
Barriers to investment
Opportunities are everywhere, but for investors in 2025, regulatory uncertainties, longer approval timelines, and pricing pressures in core areas of the business create headaches. Increased competition for the best assets will cause investors to be pickier, and global macro trends like currency fluctuations and geopolitical risks will affect cross-border healthcare investments.
Valuation trends
Premium valuations were seen in the healthcare sector in 2024 due to strong fundamentals and high investor interest. In 2025, moderation in valuations may be seen as macroeconomic conditions stabilize. However, for high-quality assets, especially niche segments such as specialty care and med-tech, valuations are likely to remain robust. Equity research reports suggest a price-to-earnings ratio of 36 based on expected 2025 earnings for the pharmaceutical industry and a P/E ratio of 66 for the healthcare services industry.
Platform plays will dominate healthcare investments in 2025. We may continue to witness strategic consolidation across pharmaceuticals, diagnostics, and single-specialty care. This is being driven by the need for scale, efficiency, and creation of vertically integrated platforms that meet growing demand.
We expect balanced majority and minority investments; growth-stage companies will primarily drive deals. PE-led acquisitions will remain strong; however, strategic acquisitions will gain pace by domestic as well as global players. Global PE firms will still be active, but domestically, investors are likely to outpace their international peers, as they enjoy home advantage with better knowledge of local markets and quicker decision cycles.
2025: Year of trends and transformations
The definition of healthcare in 2025 will be by trends like higher digital integration, insurance penetration, preventive care, and increased value-based care models. The integration of healthcare delivery and technology will change patient care with more personalized, efficient solutions.
This year will lay the foundation for long-term trends around scalable health-tech adoption and deeper PE penetration into underserved areas like mental health and geriatrics. The year will also be characterized by the growing prominence of tech-enabled healthcare solutions combined with platform-based investments.
Meanwhile, regulatory reforms along with supportive policies will help the rising domestic investment shape a more resilient and innovative health ecosystem.
*Amit Varma is co-founder and managing partner of PE firm Quadria Capital. Views are personal.
