Bass, Berry & Sims is pleased to share our second installment of Healthcare Technology M&A Pulse for 2026. This quarterly publication is designed to provide timely insights into the intersection of healthcare, technology and transactions, reflecting the evolving digital health landscape and the issues that matter most to our clients and industry partners.
Each edition will highlight notable trends and developments we see across healthcare technology and digital health, including transactional activity, regulatory and legal considerations, and emerging best practices. We will also feature perspectives from healthcare technology leaders, practical takeaways from recent deals and market activity, and updates on upcoming events and opportunities to engage with our team. We aim to offer thoughtful analysis and actionable insights that help you stay informed, anticipate change, and navigate an increasingly complex and dynamic market.
Dealmaker Insights
In this edition, we are pleased to feature insights from Dudley Baker, a Managing Director and co-leader of the Healthcare Technology practice at Houlihan Lokey and Christine Livingston, Director of AI and Data Analytics at Arsenal Capital Partners.
Dudley Baker is a Managing Director and co-leader of the Healthcare Technology practice at Houlihan Lokey, where he advises digital health and tech-enabled healthcare companies on M&A and capital raising. Houlihan Lokey’s Healthcare Technology practice has completed 20 transactions in the last 24 months, totaling more than $10 billion in aggregate enterprise value.
Which subsectors are buyers most aggressively pursuing right now, and why?
Buyers and investors are pursuing foundational, mission-critical layers of healthcare technology, specifically systems of record, infrastructure, payments, as well as focused solutions in post-acute care and Governance, Risk, and Compliance (GRC). The current M&A environment is heavily defined by a flight to defensibility.
While AI is driving innovation in point solutions and workflow automation, there is perceived disruption and the potential for AI to render some lightweight software obsolete. As a result, sophisticated buyers are targeting healthcare technology solutions that are insulated from AI disruption.
Healthcare’s regulatory moat and complexity have the potential to protect subsectors like niche GRC and systems of record, which both benefit from massive barriers to entry due to stringent regulatory oversight and data protection mandates. These solutions are difficult to replicate by generative AI because they require deep, specialized healthcare architecture, not just good code. Healthcare operators have limited patience for another rip and replace cycle, with the potential to require years of optimization, limiting the growth potential for new entrants with unproven technologies at scale.
Finally, the “Flight to Quality” continues to dominate healthcare technology M&A. While financial sponsors hold record dry powder, the market is defined by selectivity as buyers are bypassing average assets and aggressively competing for a small number of Tier A platforms.
How are private equity sponsors approaching add-on strategies and exits amid heightened payer scrutiny and AI acceleration?
The calculus for add-on M&A has shifted in this era of AI acceleration. Strategics, and their sponsors, are raising the bar for subscale add-ons, pivoting toward a “build” mentality for smaller, easier to build point solutions and added functionality, while simultaneously paying premiums for scaled, highly defensible platform assets.
Historically, strategics and sponsors have used add-on acquisitions to bolt on new features or capabilities to their portfolio platforms. Today, the bar for acquiring smaller, subscale targets is higher. With AI-assisted coding dramatically lowering the cost and time required for software development, acquirers are attempting to organically build supplementary features rather than pay high multiples for standalone point solutions that have not achieved sustainable growth and cash flow.
Conversely, there is a premium being placed on scaled assets in healthcare technology that have achieved stand-alone stature and generate sustainable cash flow with defensible business models. In healthcare, distribution and customer acquisition, not technology, continue to be the strong impediment to growth. Healthcare providers are notoriously difficult to sell to, burdened by long sales cycles and tight budgets. However, once a technology is adopted, those provider relationships become incredibly sticky. Acquiring established companies with locked-in provider networks remains one of the most viable and rapid paths to scale.
Christine Livingston is the Director of AI and Data Analytics at Arsenal Capital Partners, a private equity firm that specializes in investments in middle-market healthcare and industrial growth companies, who recently joined us for a panel discussion on the impact of AI in healthcare investing at the Kayo Women’s Healthcare Private Equity Summit in Washington, DC.
Where are private equity-backed companies seeing the most meaningful AI value today?
The most meaningful AI use cases are not necessarily the broad, generic ones that appear on a standard “AI opportunities” list. The highest impact opportunities are closely tied to the company’s core business model: how the company operates, serves its customers, generates revenue, and improves margins.
At Arsenal, we encourage our portfolio companies to “think big, start small and act fast.” That means identifying real transformation opportunities, then breaking them into targeted use cases that can be evaluated quickly, often within two to four weeks. The companies generating real value are those that connect AI directly to business operations and measurable outcomes, rather than treating it as a standalone technology initiative.
How do you identify AI champions within portfolio companies?
Adaptability and intellectual curiosity are, in my view, the strongest predictors of success. Given how fast AI is evolving, the best champions aren’t the ones with all the answers, they are the ones willing to keep learning, test ideas thoughtfully and lead by example. They do not necessarily need to be the most technical person in the organization. What matters more is that they are curious, engaged and practical about how AI can solve real business problems and create new opportunities. The strongest AI champions are comfortable testing new ideas, experimenting with evolving technology, asking good questions and helping others build confidence as AI moves from the trial phase into day-to-day adoption.
How do you deploy AI across portfolio companies with varying degrees of maturity?
There should be a common baseline across the portfolio. Every company needs some level of governance, including acceptable use policies, security guardrails, and a framework for evaluating opportunity and risk. Beyond that, the approach really depends on where each company is on its AI journey. Some companies are focused on basic AI literacy and identifying foundational use cases that help teams understand how the technology can improve existing workflows. Others are much further along and are starting to explore more sophisticated agentic workflows that will likely become new revenue streams. The goal is not to force the same solution across every company. It is to help each business move incrementally up the maturity curve, starting with the right guardrails, identifying practical use cases and then scaling initiatives as the organization is ready.
Market Signals
Q2 2026 Healthcare Technology Transactions
Healthcare technology dealmaking began in 2026 with a clear shift toward fewer but larger, more strategically focused transactions, and that dynamic carried through the second quarter. Total healthcare and other industries M&A deal value in Q1 2026 was up 50% year-over-year, even as deal volume declined 22%, and Q2 sustained the momentum with multiple billion-dollar transactions across health IT, digital health, and medtech. A common thread ran through the quarter’s marquee deals: buyers paid premiums for demonstrated AI execution and proprietary data assets rather than AI potential.
Deals involving AI-enabled platforms were again at the forefront of deal flow. In the healthcare experience management and AI analytics subsector, Qualtrics, backed by Silver Lake and CPP Investments, acquired Press Ganey Forsta, the healthcare experience management and analytics company, for $6.75 billion (announced October 6, 2025; completed May 18, 2026). The transaction united AI-powered experience management at scale with one of healthcare’s largest experience datasets, demonstrating the premium buyers will pay for production-grade AI deployed against proprietary data moats.
In the digital pathology and AI diagnostics subsector, Roche agreed to acquire PathAI, a Boston-based digital pathology firm (announced May 7, 2026), for up to $1.05 billion, $750 million upfront plus up to $300 million in milestones, with the deal expected to close in the second half of 2026, subject to customary closing conditions, including antitrust and regulatory approvals. The acquisition combines digital pathology with AI for cancer diagnosis and tailored treatment and extends a partnership between the companies dating back to 2021.
Medtech strategics were active across procedural subsectors. Medtronic closed its $585 million acquisition of CathWorks (announced its completion on April 20, 2026), whose AI-enabled technology assesses coronary blood flow to guide treatment decisions. In the neurostimulation space, ResMed completed its $340 million takeover of Noctrix Health (completed on June 1, 2026), maker of a neurostimulation therapy for restless legs syndrome. And in orthopedics, Johnson & Johnson’s DePuy Synthes agreed to acquire MinMaxMedical’s Gemtrack radiofrequency surgical-tracking technology (announced May 26, 2026), deepening its position in computer-assisted orthopedic surgery.
In the consumer telehealth and digital pharmacy subsector, CareTria acquired CaryHealth (announced May 6, 2026) to build an AI-powered, direct-to-patient digital pharmacy platform.
Mental and behavioral health technology continued to consolidate. Spring Health combined with Alma (announced January 29, 2026; completed May 1, 2026), pairing an AI-native mental health platform with a network of independent clinicians to create what the companies describe as a lifelong mental health platform. In behavioral health, Kipu Health acquired Team Recovery Technologies (announced April 23, 2026), expanding an AI-native EHR, CRM, and RCM platform serving more than 6,000 facilities.
In the AI-driven patient engagement and prescription subsector, Swoop acquired Nimble (announced May 26, 2026), adding prescription fulfillment and pharmacy connectivity to a platform serving roughly 16 million patients. Similarly, ModMed, backed by Clearlake Capital, acquired Bonsai Health (announced April 20, 2026), adding an agentic AI platform for automated patient reactivation and AI-driven self-scheduling to its AI-Powered Practice serving nearly 50,000 providers.
In the emergency and health data intelligence space, ESO acquired d2i (announced April 7, 2026), combining d2i’s emergency department and hospital performance analytics, spanning more than 450 hospitals and 10 billion data points, with ESO’s prehospital and EMS data to build connected intelligence across the full emergency lifecycle.
Revenue cycle management (RCM) remained a focal point for consolidation capital. The Carlyle Group acquired a majority stake in Knack RCM and EqualizeRCM (announced May 4, 2026) to create an AI-native, global, multi-specialty RCM platform spanning the U.S., India, and the Philippines and serving physician groups, durable medical equipment providers, and rural hospitals, and signaled its intent to pursue further RCM acquisitions. Separately, TELCOR acquired Sample Healthcare’s AI-powered RCM workflow platform (announced April 2026).
The quarter also brought further consolidation among AI-native RCM platforms. Innovaccer, a healthcare AI company, acquired CaduceusHealth (announced May 21, 2026), its fifth acquisition, expanding its Flow suite into a full-stack, AI-native platform that unifies scheduling, patient engagement, and end-to-end revenue cycle management for ambulatory care.
Relatedly, IKS Health, a leader in care enablement solutions supporting clinicians, staff, and patients, acquired ARAI Solutions (announced May 13, 2026), an artificial intelligence company whose biomedical knowledge graphs and clinical ontology add a reasoning layer to IKS Health’s agentic AI stack spanning autonomous coding, prior authorization, and denial prevention. One of the stated reasons for this acquisition was “reduced dependency on third-party AI infrastructure” in the areas of autonomous coding, clinical decisions, denial prevention, prior authorization reasoning and precision medicine.
Private equity sponsors drove a wave of go-private and platform transactions. The quarter opened with the completion of the largest medtech take-private on record: Blackstone and TPG closed their acquisition of Hologic (a global medical technology company focused on diagnostics, surgical solutions, and medical imaging) (announced October 21, 2025; completed April 7, 2026) for up to $79 per share in cash, a transaction valued at approximately $18 billion, with minority investments from the Abu Dhabi Investment Authority and GIC. Knox Lane agreed to take Cross Country Healthcare (a technology-driven healthcare workforce solutions and staffing company) private in a $437 million all-cash deal (announced May 6, 2026; expected to close in the third quarter of 2026), and AIP agreed to acquire Avanos Medical (a medical technology company focused on pain management and chronic care medical devices) for $1.27 billion (announced April 14, 2026). Sponsors increasingly favor taking public medtech and health tech companies private to accelerate innovation and pursue operational transformation free from quarterly earnings pressure.
Taken together, the transactions of Q2 2026 reinforce a conviction shared by strategic and financial buyers alike: AI is no longer a differentiating feature of healthcare technology but a foundational layer of its infrastructure. Consolidation across subsectors, experience management and analytics, digital pathology, procedural medtech, telehealth, mental and behavioral health, and RCM, signals a continued maturation of the market, with capital concentrating around scaled, high-performing platforms. Market sentiment remains cautiously optimistic, tempered by tariff-driven macroeconomic volatility, widening valuation dispersion, and an increasingly demanding regulatory and antitrust environment. It remains to be seen whether the pace and character of dealmaking established in the first half of 2026 will define healthcare technology M&A through the remainder of the year.
About Our Healthcare Technology M&A Practice
Bass, Berry & Sims provides a full-service, deal-focused approach to Healthcare Technology M&A, advising private equity sponsors, strategic buyers and rapidly growing companies across the entire transaction lifecycle. Ranked 4th in healthcare private equity deals (Pitchbook Q1 2026), we have served as lead counsel in over 500 transactions ranging from $20 million to more than $23 billion in the last four years. Our team combines M&A, regulatory, healthcare and technology capabilities to structure complex transactions involving healthcare technology and intellectual property assets, while helping clients navigate strategic growth initiatives, partnerships and regulatory considerations in a rapidly evolving market. To learn more, click here.