Heading into 2025, many M&A experts expected behavioral health transaction activity to rebound. Recently released data further supports the notion that this prediction is playing out in reality.

Specifically, behavioral health dealmaking was up 35% in the first quarter of 2025, according to analysis by PricewaterhouseCoopers (Pwc). What’s more, PwC expects the M&A pace to be active in the second half of the year, driven by surging investor interest.

Much of the sector’s activity has been spurred by autism deals, which hit the highest quarterly volume since 2020, according to PwC.

Increased interest in addiction treatment and outpatient psychiatric platforms also picked up during the first half of the year.

Even while 27% of the overarching health care sector paused or revisited deals amid the roller coaster approach to tariffs earlier this year, behavioral health continued to be a hot subsector for dealmaking.

“Behavioral health M&A is brisk amid surging demand … ,” the report states. “Investors, particularly PE, can continue to pursue a roll-up strategy, given strong tailwinds.”

Per the report, health care platforms and tech-enabled services are one area that private equity dealmakers are leaning into right now. PE investors are currently holding onto investments longer and are taking a more disciplined approach to curb risk and preserve capital.

Across health care, there had been 445 mergers and acquisitions as of May 15, for a total of 1,265 deals throughout the prior 12-month period. This is a 7% decline from this time in 2024, but deal volume is still resilient, PwC analysts noted.

Much of the transaction trends in the health industry have been influenced by what the report describes as a “complicated macroeconomic and political environment.” These factors are anticipated to continue to have influence over deals across the health care space, as uncertainties around Medicaid cuts and other pending federal policies unfold.

“Broader regulatory uncertainty and pending federal initiatives, such as the ongoing reconciliation bill discussion, are clouding investor sentiment,” the report states. “Such outcomes will sway valuations and dealmakers can hedge policy risk via earn-outs and watch for distressed assets if Medicaid eligibility restrictions are enacted.”

Despite policy headwinds, value-based care remains an attractive factor in health care deals. However, investors are still placing favor on light-risk vs. full-risk providers, according to the report, but there may be new investment opportunities due to a downturn in risk-based provider performance.

New deal structures from investors are being propelled by high interest rates and longer holding times across health care. But prioritizing minority recaps and preferred equity can help bridge valuation gaps and “keep deal flow alive,” according to PwC.