Stakeholders in the behavioral health industry can expect dealmaking to accelerate into and throughout 2025.

Behavioral health deals in 2024 – while decreased in quantity – already represented a significant increase in value over the previous year, according to a new PwC Health Research Institute report.

The substantial sum of available corporate and private equity capital, lengthening hold periods, increased certainty regarding the next administration and the possibility of further interest rate cuts are all expected to drive increased health care dealmaking in the coming year.

“​​The Trump administration’s stance on antitrust issues will be closely monitored in the first months of the administration and investors are cautiously optimistic that the administration will relax enforcement actions and have a more deferential view towards markets,” the report’s authors wrote. “Provider reimbursement will be another topic of interest, as certain segments have not clawed back to pre-pandemic operating margin levels and reimbursement disparity across specialties continues to gain the attention of lawmakers.”

Sixty-seven deals were completed in the 12 months ending on November 15, reaching a value of $400 million. Deal volume declined year-over-year, with deals in this period representing only 19% of those completed in the year prior. However, the value of these deals increased dramatically in 2024, growing by 324% year over year.

Along with shifts in deal volumes, the PwC report expects that the type of deals will continue to evolve. Analysts expect deals to focus on technology and other sectors that limit direct exposure to regulatory changes.

Payers are also shifting priorities, focusing on expanding the “payvider” model, which combines payer and provider functions. Health insurers will also focus on rate setting, program enrollment incentives and potential funding changes, especially in Medicaid, in 2025.

To adapt to the current dealmaking environment, parties looking to complete deals should plan for varying economic scenarios, according to the report. Investors should structure deals flexibly, adapt to longer hold periods and infuse funding through preferred vehicles instead of traditional leveraged buyouts.

“Adapting to the current financing and valuation environment requires investors to double down on value creation initiatives, particularly by investing in and leveraging AI solutions within labor-intensive sectors,” the report read. “Despite these challenges, we expect deal activity to increase from the broader sector tailwinds.”

Tailwinds include opportunities for continued provider consolidation, investment in solutions targeting employer-sponsored insurance programs and the potential for AI and other technological solutions to ease administrative functions.

The report’s findings align with previous predictions for 2025 that bode positively for behavioral health dealmaking due to lower interest rates, decreased inflation and mitigated staffing shortages.