But first let’s define the baseline for “coming back.”
You see, the pandemic shaped dealmaking well past the point when the world began to return to normal. First, there was the huge surge in activity toward the end of 2020 and through 2021 as buyers emerged from hibernation. Then, there was the natural post-surge falloff in 2022, followed by further retrenchment in response to soaring inflation and the increase in interest rates to get it – inflation – under control.
By our estimation then, the impact of COVID didn’t completely play itself out until the end of 2024. So, recent deal volumes should arguably be compared to pre-pandemic activity. And based upon annualized first half data collected and analyzed by The Braff Group, health care services transaction volume is poised to finally eclipse pre-pandemic numbers.
While post-2023 market conditions (when activity began to tick upward) haven’t been all sunshine and roses – stubbornly high interest rates, inflation remaining above the Fed’s target of 2.0%, unrest in Eastern Europe and the Middle East, and economic uncertainty – buyer activity has nevertheless risen steadily.
Notably, this is despite the fallout from Medicaid cuts introduced in July 2025 (One Big Beautiful Bill) and the January 1 expiration of ACA insurance subsidies, without which recent gains would almost assuredly be higher.
From an M&A perspective, the second quarter of 2026 has set the table for a strong period of dealmaking in home health and hospice over the next 12 months.
As has become its custom, CMS recommended a bump in hospice payment rates and issued a final rule calling for an increase of 2.3%, making the sector the envy of buyers that have grown accustomed to annual cuts in other sectors.
Moreover, after a devastating proposed rule issued by CMS last year that initially floated a Medicare home health cut of 6.4% (the final rule was a somewhat more palatable cut of 1.3%), the proposed rule issued in July for 2027 recommended an increase of 2.4%.
The upshot is that many industry insiders believe that CMS may have concluded that it has finally battered home health enough, paving the way for greater payment predictability. Add to this the 6-month moratorium on new provider numbers (which many believe will be extended in November and may possibly last through the remainder of the Trump administration), it’s no surprise that aggregate home health and hospice activity is trending up after 4 consecutive years of declines and could very well spike – both in volume and valuation – through 2027.
It’s been a mixed bag for behavioral health. At the current pace the sector is poised to eclipse last year’s tally by 3.4%. But this comes as a function of big swings — both positive and negative — in two sub-segments.
At the current pace, substance use disorder deal volume is trending down 28%, predominately on the falloff of transactions in outpatient services and MAT. While we suspect there are many factors at play — notably the volume of attractive acquisition candidates — we suspect that buyers are taking a wait-and-see approach to assess the impact on beneficiary eligibility given the aforementioned changes in Medicaid that begin in 2027. The thinking could be that patients that tap into outpatient treatment and MAT programs may — and we emphasize may — be more exposed to losing coverage due to work requirements than patients in more acute residential settings.
While SUD deal volume is down, activity in autism services is trending up. In fact, at the current pace, dealmaking in ASD is up 58% vs. 2025 and 30% vs. the previous record tally in 2019. This one is a bit more difficult to explain. While the Medicaid policy exposure is likely low due to federally mandated Early and Periodic Screening, Diagnostic, and Treatment guidelines (EPSDT), rapid increases in spending and high-profile allegations of Medicaid fraud have put the segment, among others, under the glare of scrutiny. Buyers may be betting on the fact that such a vulnerable population will give regulators pause in enacting swift and draconian reimbursement changes.
At the current pace, home medical equipment deal volume is up 63.6% over 2025 and could post its highest numbers since 2022. Home infusion/specialtyRx is on pace to top last year’s tally by 32% and its highest output over the past 10 years. Moreover, health care staffing transaction volume is trending up 17.3% over the prior year. We note that all three sectors are largely immune from Medicaid coverage and ACA subsidy exposure which, as alluded to above, likely cut into the growth in other sectors we cover.
Aggregate outsourced pharma services deal volume is on pace to hit 200 transactions, 40% greater than 2025 and 18% more than the previous record set in 2024. While clinical services and supply chain are both up a healthy 25.3% and 14.8% respectively, the biggest mover is commercialization services which is trending up 113% over 2025 and 16.3% over the previous high mark notched in 2024. After a shaky 2025 characterized by regulatory and trade uncertainty, the gains in OPS across the board are largely due to an influx of new capital and investments in research and development.
See The Braff Report: 2026 Clinical Services Mid-Year Update and Outlook for a deeper dive in this sector.
¹The Braff Group began covering Outsourced Pharma Services (OPS) in 2025. Since our transaction data begins in 2021, we report on OPS separately from the other health care services sectors above
Based on a preliminary review of The Braff Group’s proprietary transaction database through Q2 2026, the sector is on pace for nearly 40% more M&A activity than in 2025 and 18% more than in 2024, the previous banner year holder.
Moreover, Q2 2026 deal flow was just a tad below the record set in the second quarter of 2024.
So, what happened in 2025?
As Pitchbook put it,
“A lack of new capital flowing into early-stage biotech and flattening Big Pharma research & development (R&D) spending have slowed demand for outsourced services, with contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs) being most exposed to the downturn. [At the same time, 2025 brought significant regulatory and trade uncertainty.] [Taken together,] weaker demand likely led sellers to hold out for an improved funding environment (which 2026 appears poised to deliver).”
In short, with both funding and R&D coming back, so has M&A activity in OPS.
While on an aggregate basis, 2024 was a record year for OPS, if we focus on deal activity related to Clinical Services—the arm of OPS that includes clinical trial sites (and SMOs), CROs, and FSPs—2023 was its banner year. Then came the biotech funding slowdown, which disproportionately impacted the segment.
As a result, Clinical Services deal activity fell 34% in 2024 as buyers gravitated toward Commercialization and Supply Services businesses, which were generally viewed as less dependent on clinical trial activity and biotech funding.
But the tide has begun to turn. After stabilizing in 2025, Clinical Services M&A activity has picked up meaningfully in 2026, particularly among sites, niche CROs, and specialized FSPs. Through 2ndQ, transaction activity is trending roughly 25% ahead of 2025 levels.
Several factors appear to be fueling renewed momentum in Clinical Services.
Taken together, these trends are restoring investor confidence in the Clinical Services segment. Buyers remain selective, but high-quality clinical trial sites, niche CROs, and specialized FSPs with differentiated capabilities, strong customer relationships, and a track record of execution are once again attracting significant interest.
While we are bullish about the entire OPS market, and in particular, clinical services, if 2025 has shown us anything, external market forces can easily disrupt a sector. So, if you’re growing (but are past the hyper-growth stage – greater than 20% – that many companies experience at some point in their growth trajectory), depending on your personal goals and objectives, you may want to contemplate an exit over the next 12-24 months.
Editor’s Note: Experience has shown that more value is lost getting the timing wrong in a transaction than any other variable. Check out our Viewpoints publication – When is the Right Time to Sell – to begin to get a better sense of where you might be today. Self-serving as it may seem, helping prospective sellers pinpoint their optimal exit conditions is one of the most valuable services we offer – at no charge. It’s never too early to begin a discussion with an experienced M&A advisor like, you know, The Braff Group.
As we laid out in our broad health care services roundup entitled “In 2024 We Predicted a Banner Year in Health Care Services M&A in 2025: Here’s What We Got Right and What We Didn’t Anticipate,” there were a variety of macroeconomic issues impacting mergers and acquisitions activity across all industries—health care in particular.
Among them were the following:
Given that, depending on the segment, 25-50% or more of individuals receiving some form of behavioral health care are covered by Medicaid, buyers’ evaluations of go-forward risk due to changes in eligibility standards – primarily a new work requirement – weigh heavily on demand and valuation. This is particularly noteworthy because the actual impacts will likely not become clear until at least mid-2027 after the guidelines become effective January 1st of that year.
Many individuals receiving behavioral health services are generally excluded from the work requirement. But it is feared that, in some cases, the administrative burdens required to obtain these exclusions may result in otherwise appropriate individuals losing Medicaid coverage. What makes it even murkier is the fact that each state has the authority to determine how it will adopt these requirements. Even murkier still is how the loss of ACA subsidies will impact those receiving care under these plans. With so many unknowns, it’s no wonder that buyers interpret the risk of reduced utilization differently both individually and across segments.
Based on nearly eight months of feedback from buyers, below is our impression of how buyers – rightly or wrongly – are assessing this risk. For context, we include Medicaid home health.
One more thing.
With respect to the work requirements dictated in the OBBB, between 2018 and 2019, Arkansas and New Hampshire introduced their own such requirements to their Medicaid programs. The result? The very same fears mentioned above:
a substantial number of enrollees that dropped out of each program did so not because they weren’t working, but because of the administrative burdens and complex paperwork necessary to document employment status. Moreover, neither state reported any significant increase in employment as a result of their initiatives. In the end, Federal courts ruled that, among other reasons, the legislation was inconsistent with Medicaid’s core objective of providing medical assistance, and both programs were halted. Will the same befall work requirements contained in the OBBB? Unclear. But it would appear there is precedent.
As the chart below illustrates, recent trends in SUD transaction volume have been lackluster. The reasons are manyfold.
The sector has been consolidating for more than ten years, leaving fewer and fewer acquisition candidates. This is particularly the case in medication assisted treatment. Moreover, due to a variety of reasons including preparations for an exit, shifts in strategy, and pauses to integrate deals, the buyers that dominated the space in MAT between 2020 and 2023 have largely been on the sidelines. Add to that the challenging macroeconomic environment and concerns regarding Medicaid, the fall-off is not surprising. What was surprising, however, was the decline in outpatient addiction deal flow. With a decline from 16 to 12 transactions, the 2025 volume could simply be an anomaly. But with trends favoring lower cost non-residential services, we would have anticipated an increase.
The good news is that private equity sponsored platforms and large independent companies remain committed to the space. Moreover, they know that acquisitions are generally the fastest avenue to growth and, notably, the most expedient route to expand geographic coverage or fill in service gaps to be better positioned to negotiate potentially lucrative contracts with private insurers. As such, demand for sizeable opportunities or highly strategic add-on providers remains, but not necessarily from the serial buyers that once dominated the SUD M&A landscape. It’s coming from a different cohort of buyers, who are highly selective and focused on pursuing a limited number of strategic opportunities each year.
So, the buyers are out there.
But identifying them requires a more refined and strategic process.
While SUD deal flow has been tepid, the remaining behavioral health segments have performed extremely well.
Perhaps most noteworthy is the turnaround we’ve seen in autism services. Not necessarily in volume trends – strong as they are, the recent growth in autism deals has been outpaced by what we’ve seen in mental health and intellectual and developmental disabilities.
But the resurgence of private equity sponsored platform transactions is very telling.
While shy of the peak reached in 2019, platform activity over the past two years has been the highest we’ve seen since 2020. The pull-back between 2020-2023 was eminently predictable. During this period autism was reeling from continued bad press, pressure from private insurers, strains on staffing, and notably, hangover from the failure of several high-profile consolidators (see the Braff Report, “Autism M&A Roars Back”). But with much of these concerns largely in the rear view (except perhaps payor pressure), PE is back – a leading indicator that should propel the space for years to come.
Despite the uncertain Medicaid environment, the I/DD space reached a new high in transaction volume in 2025 with 31 deals, just eclipsing the 30 recorded in 2021. Perhaps most interesting is that unlike most of the sectors we cover where deal flow plunged in 2022 and 2023 due to high inflation and rising interest rates, I/DD pretty much kept pace – and even exceeded – pre-pandemic levels. The takeaway? Sustained confidence in the demand and coverage for, and support of, such critical behavioral health care services.
We’ve long reported that as vibrant as the M&A market has been for autism services and I/DD over the recent past, mental health has surged to the top of behavioral health investors’ wish lists. No surprise then that the 45-degree upward trend that began in 2017 has continued largely uninterrupted. There has been, however, a subtle shift in focus, as buyers are increasingly interested in providers that, in addition to traditional psychiatry, also offer interventional psychiatry including, among other treatments and medication management, transcranial magnetic stimulation (TMS), and esketamine/ketamine therapy.
Unless some unexpected development upends it, you can bet that mental health M&A will continue to put up strong numbers in the coming years.
When we add all the segments together, including at-risk youth and acquired brain injury, aggregate behavioral health deal flow in 2025 was up 17% over the prior year. Moreover, 2025 marked the second consecutive year of gains over 2023.
This trend becomes more impressive when we compare it to all the other health care service sectors we cover – excluding behavioral health – which have been flat over the past three years.
As mentioned earlier, over the past year, we’ve summed up the market as a standoff between unfavorable macro and micro economic conditions and pent-up acquisition demand born of the slowdown between 2022 and 2024.
While below its peak in 2021, M&A demand for behavioral health has clearly overcome the headwinds that have held other sectors largely in check. Given increased utilization that is expected to continue well into the future, it remains one of the most sought-after sectors in health care services.
We expect more of the same in 2026.
Of all the strange numbers we saw this past year, deal activity for providers that focus on serving Medicaid beneficiaries was the most counterintuitive. As we laid out in our broad health care services roundup entitled, In 2024 We Predicted a Banner Year in Health Care Services M&A in 2025: Here’s What We Got Right and What We Didn’t Anticipate, the One Big Beautiful Bill (OBBB) included wholly unanticipated changes to Medicaid eligibility that various pundits estimated could kick up to 7 million people out of the program. But with each state determining how to implement the new guidelines, and the changes not going into effect for two years, the resulting impact is still very much in question. And with that much uncertainty in the air — uncertainty that likely won’t become more definitive until at least mid-2027 when the first wave of changes gets phased into the populace — buyers tend to get skittish. So, as we saw in certain behavioral health segments, we would expect deal flow to come down.
But as illustrated below, Medicaid home health actually set a record of 28 deals in 2025 just edging out the previous record of 27 set in 2024.
So, what gives?
Well, the numbers are deceiving.
If we look at quarterly numbers, an entirely different story emerges.
As the chart illustrates, 23 of the 28 transactions – more than 80% — were completed in the first half of the year before the OBBB was enacted July 3rd. And after? Deal flow plummeted, reflecting buyer concerns.
It remains to be seen how this all plays out. With respect to Medicaid eligibility, one of the key components of the bill was the introduction of a work requirement to maintain eligibility. Between 2018 and 2019, Arkansas and New Hampshire introduced their own work requirements to their Medicaid programs. The result? A substantial number of enrollees that dropped out of each program did so not because they weren’t working, but because of the administrative burdens and complex paperwork necessary to document employment status. Moreover, neither state reported any significant increase in employment as a result of their initiatives. In the end, Federal courts ruled that, among other reasons, the legislation was inconsistent with Medicaid’s core objective of providing medical assistance, and both programs were halted. Will the OBBB’s work requirements meet the same fate? Unclear. But it would appear there is precedent.
In Medicare home health, where (a) every summer there’s a five-alarm fire drill between CMS’s proposed and final rule, (b) a 6% cut is estimated to have a net impact of minus 1.3%, and (c) an on-again, off-again temporary behavioral adjustment that gets larger every year, buyers have been whipsawed back and forth on go-forward profitability — and valuation. What’s more, the expansion of the Home Health Value-Based Purchasing Model to all 50 states — a model that can increase or decrease a provider’s reimbursement by as much as 5% — has given them another thing to worry about and scrutinize. So, in addition to buyers being skittish on Medicaid (see above), they’re a bit shaky on Medicare. So, no surprise then that deal flow in the sector has fallen.
The good news is that after more than 30 years of consolidation, there is not an abundance of sizable independent acquisition candidates available to acquire. So, despite the reimbursement unknowns, if you’re looking to acquire a home health agency, the supply and demand curve favors attractive sellers.
Moreover, regarding go-forward reimbursement risk, as evidenced by CMS’s slowing down the implementation of various provisions that would lower payment rates, speculation is growing that future cuts may be more moderate.
Given the reimbursement and eligibility uncertainty regarding Medicare home health and Medicaid respectively, we would expect that buyers would gravitate to the comparatively more stable hospice segment. And here, just like in Medicaid, the numbers seem to belie the conditions on the ground with hospice deal flow down vs. 2024. In this case, however, the explanation is somewhat clearer. The number of independent providers with a census north of 100-150 — the target zone for many acquirers — is a key limiting factor. Moreover, as a result of CMS’s Provisional Period of Enhanced Oversight, which has focused on hospice providers in select states, we have seen a slowdown in deals due to protracted due diligence and deal abandonment.
Despite the above, demand is unquestionably there. No surprise then that over the past year, valuations are approaching the peaks seen between mid-2020 and mid-2022.
What’s more, just like we saw in the Medicaid figures, the quarterly numbers may be a better indication of market sentiment. In this case, we note the substantial rise in hospice transactions in Q3 and Q4.
Insulated from legislative and regulatory risk, the macroeconomic environment plays a comparatively greater role in private duty dealmaking. So, with inflation well below the peaks in 2022 and interest rates easing at the end of 2024, the rise in deal volume in 2025 played out true to form.
When we put it all together, aggregate home care and hospice deal flow has been essentially flat over the past three years and somewhat below pre-pandemic volume.
That said, we remain generally bullish on the space for several reasons, some of which have been alluded to above.