Executive Summary

The European healthcare technology (HealthTech) sector is undergoing a significant transformation, with corporate divestitures emerging as a critical strategic tool in 2025. This report analyses the prevailing trends, drivers, and implications of these divestitures, set against a backdrop of a cautious yet discernible rebound in the broader M&A market.

Key findings indicate that divestitures are primarily driven by a strategic imperative for portfolio optimisation, a profound shift towards digital transformation—especially propelled by artificial intelligence (AI)—and an adapting regulatory landscape. The market is increasingly prioritising quality over quantity, with larger, more transformative deals commanding premium valuations. This environment fosters a dynamic where companies shed non-core or lower-growth assets to reinvest in high-growth, technologically advanced areas, leading to greater specialisation and, paradoxically, consolidation within specific HealthTech verticals.

Dealmakers face challenges such as economic uncertainty and regulatory complexity but are presented with substantial opportunities for strategic growth and value creation by focusing on efficiency-enhancing and AI-driven solutions.

1. Introduction: The Strategic Imperative of Divestitures in European HealthTech

The European healthcare technology sector is a vibrant and evolving landscape, characterised by rapid innovation and a growing strategic emphasis on corporate restructuring. Within this dynamic environment, divestitures are no longer merely reactive responses to underperformance but have become proactive instruments for strategic portfolio management. Understanding the nuances of this market and the role of divestitures is crucial for stakeholders navigating the complexities of 2025.

Overview of the European Healthcare Technology Market in 2025

The European HealthTech market is poised for substantial expansion, demonstrating robust growth projections for the coming years. It is anticipated to achieve a Compound Annual Growth Rate (CAGR) of 12.2% during the forecast period from 2025 to 2032. A significant component of this expansion is the European digital health market, which is projected to reach an estimated USD 333.30 billion by 2034, exhibiting a CAGR of 10.25% from 2025. Notably, Europe accounted for the largest share of the global digital health market in 2024, contributing approximately 34.67% of the total revenue.

This robust growth is underpinned by several fundamental factors. Rising healthcare expenses and an aging population across Europe necessitate more efficient and cost-effective healthcare delivery models. Concurrently, continuous technological advancements, including the proliferation of artificial intelligence (AI), the Internet of Things (IoT), and robotics, are transforming healthcare practices and creating new market segments. Proactive government initiatives also play a pivotal role, with campaigns actively supporting digital healthcare solutions.

The European Union (EU) is instrumental in fostering this growth through comprehensive policy frameworks. Initiatives such as the Digital Decade and the European Health Data Space (EHDS) provide clear strategic direction, with ambitious targets like ensuring 100% of EU citizens have access to their electronic health records by 2030. Furthermore, substantial financial commitment from the EU, with over €16 billion allocated through programs like the Cohesion Policy and the Recovery and Resilience Facility between 2014 and 2027, has significantly enabled HealthTech advancements across member states. This public sector commitment establishes a stable and fertile ground for HealthTech development and adoption. The presence of such strong policy support and dedicated funding creates a more predictable growth trajectory for companies operating within this framework, which in turn can make their assets more attractive for divestiture or acquisition. Conversely, businesses not aligning with these strategic public priorities might find their assets becoming non-core. This dynamic underscores how divestitures in European HealthTech are not solely driven by market forces but are profoundly shaped by a top-down, coordinated EU strategy. Consequently, companies engaging in divestment or acquisition activities must meticulously assess how closely a target's offerings align with, or benefit from, these public initiatives, as this directly influences long-term value and market relevance. This also implies that robust regulatory compliance, particularly with frameworks like the EHDS and the AI Act, transforms from a mere cost factor into a significant value proposition for divested entities.

Defining Corporate Divestitures and Their Role in Strategic Portfolio Management

Corporate divestitures, encompassing various forms such as carve-outs, spin-offs, and outright sales of specific business units or assets, are increasingly recognised as essential strategic tools within the MedTech and broader HealthTech sectors. These strategic moves are meticulously designed to shed lower-growth businesses, thereby enhancing overall corporate growth rates, liberating capital for deployment into higher-growth opportunities, and ultimately improving shareholder returns.

Divestitures enable companies to significantly reduce operational complexity by outsourcing non-core activities, allowing them to concentrate resources on areas where they possess the most expertise and market share. This focused approach invariably leads to greater efficiency and enhanced performance across the remaining core business. A primary advantage of these transactions is the liberation of financial resources that can be strategically redeployed into other high-priority initiatives, such as funding research and development for innovative technologies or pursuing acquisitions that strengthen core competencies. Moreover, positioning a carve-out unit as an independent entity can unlock its inherent value. This independence grants the new entity greater flexibility and agility to pursue its own distinct market strategies, including forging new partnerships and alliances that might have been constrained or unfeasible under the parent company's larger, often more rigid, structure.7

The pervasive emphasis on "strategic carve-outs" , "portfolio optimisation" , and "reducing complexity" signals a fundamental shift in corporate strategy. This contrasts sharply with distressed M&A, which, while still present, is often a distinct trend driven by different pressures. The language employed in market analyses, such as the aim to "position the firm for growth, financial flexibility, and sustained competitive advantage", clearly indicates a proactive, forward-looking intent behind these divestment decisions. This evolution signifies that divestitures are becoming a core competency for large corporations, rather than a last resort in times of distress. For prospective buyers, this strategic pivot suggests a higher caliber of divested assets entering the market, as sellers are actively curating their portfolios for strategic advantage rather than simply offloading underperformers. This also implies a more competitive landscape for these high-quality assets.

2. Overall M&A and Divestiture Landscape in Europe (2025 Trends)

The broader M&A environment in 2025 provides essential context for understanding the specific dynamics of divestiture activity within European HealthTech. A complex interplay of macroeconomic shifts, evolving deal volumes and values, and the significant influence of private equity characterizes this landscape.

Macroeconomic Tailwinds and Cautious Optimism

The M&A market in 2025 is marked by a notable surge in optimism, reaching levels not observed since before the global pandemic. This positive sentiment is largely propelled by improving macroeconomic conditions and a reasonable prognosis for sustained economic tailwinds throughout the year. A key factor contributing to this renewed confidence is the easing of financial conditions, particularly the gradual reduction in interest rates. This development is actively revitalising financing markets, thereby facilitating larger deal activity and encouraging increased private equity investment. The Deloitte M&A Index further supports this positive outlook, forecasting a continued increase in European deals for the upcoming quarter, with an optimistic scenario potentially seeing up to 4,000 transactions. This projection is attributed to the stabilisation of inflation observed in the previous year and the renewed growth momentum within European economies.

The consistent mention of "easing financial conditions", "economic tailwinds" and "stabilisation of inflation" as catalysts for increased M&A activity points to a direct causal link: improved economic stability reduces overall uncertainty and lowers borrowing costs, which in turn emboldens dealmakers. The prevailing "cautious optimism" suggests that while conditions are improving, market participants remain mindful of past volatility. This leads to a more strategic and quality-focused approach to transactions. This environment fosters a "flight to quality", where high-quality companies attract competitive auctions and command higher valuations. For divestitures, this implies that well-positioned HealthTech assets, particularly those demonstrating strong alignment with prevailing growth themes, are likely to fetch robust prices, thereby encouraging more corporations to consider divestment as a viable strategy for unlocking value.

Global and European M&A Volume and Value Trends (H1 2025 Data)

In the first half of 2025, the global M&A landscape presented a seemingly paradoxical trend: a 9% decline in deal volumes compared to the first half of 2024, yet an overall 15% increase in deal values. This divergence is primarily explained by a "flight to quality," where high-quality companies continue to attract intense interest, leading to more competitive auctions, higher prices, and even preemptive bids. This market bifurcation is further underscored by the fact that large-scale transactions, those exceeding $1 billion, experienced a 17% increase in volume in 2024, effectively setting the tone for the broader market. Conversely, mid-sized and smaller deals saw an 18% decline, reflecting a more selective and risk-conscious approach among investors.

Focusing specifically on Europe, deal volumes in the EMEA region (Europe, the Middle East, and Africa) were down 6% in the first half of 2025.17 However, within the European healthcare sector, a notable trend emerged: an 87% spike in total capital deployed (deal value), reaching EUR 31.8 billion year-to-date (YTD) in 2025. This substantial increase in value occurred despite an 8% decline in the actual number of deals (deal count), totaling 418 transactions compared to the same period in 2024.18 This contrasting trend strongly indicates a strategic pivot towards larger, potentially more transformative transactions, often characterized as "mega-mergers," rather than a simple proliferation of smaller deals.18 The European market, in terms of transaction numbers, is demonstrating faster growth than both the US and the global market, recording a 9.1% increase in 2024.14 Despite this, Europe is still in the process of catching up with global activity levels when compared to 2021.

The consistent observation of declining deal volumes but increasing values, attributed to a "flight to quality", is a powerful signal. Specifically, the 87% spike in deal value alongside an 8% decline in deal count within European HealthTech strongly indicates that fewer deals are occurring, but those that do are significantly larger and more impactful. This suggests that buyers are highly selective, focusing on "high-quality assets" and those demonstrating "proven value". This market dynamic implies that for companies considering divestitures, non-core assets that are perceived as "lower-quality" or lack a clear growth trajectory will likely struggle to attract interest, potentially leading to extended or even terminated sale processes. Conversely, "cream of the crop" HealthTech assets, particularly those with strong fundamentals, proven clinical impact, and clear scalability, are highly sought after and can command premium valuations. This market behaviour incentivises corporations to rigorously optimise their portfolios and divest assets that do not meet this elevated standard of quality, rather than retaining them.

The Role of Private Equity (PE) and Dry Powder

A substantial amount of unallocated private equity capital, totaling USD 2.5 trillion, continues to act as a significant catalyst for M&A markets globally. This robust PE activity, coupled with lower interest rates and strengthening credit markets, is positioning European healthcare and life sciences M&A for a substantial rebound in 2025. Private equity interest in MedTech and digital health companies is notably on the rise. PE firms are increasingly active, possessing considerable capital to deploy, as exemplified by transactions such as Carlyle Group's $3.8 billion acquisition of Baxter International's renal care unit. A critical development in this landscape is the direct competition emerging between PE players and strategic buyers for HealthTech targets, particularly for capital-light and scalable assets like AI-driven diagnostics, digital therapeutics, and care coordination businesses.

The sheer volume of "dry powder" held by private equity firms, combined with their increasing interest in HealthTech and their willingness to deploy significant capital in "platform acquisitions", indicates that PE is not merely a participant but a major driving force in the market. Their focus on "proven value" and a "clear pathway to profit" validates specific segments of HealthTech as attractive for investment and, by extension, for corporate divestment. This dynamic creates robust buyer-side demand for particular types of HealthTech assets, especially those that can be scaled or optimised. Corporations can strategically leverage this strong PE appetite to divest non-core units that might be undervalued within their larger organisational structure but hold significant potential for a PE firm, either as a standalone entity or as part of a broader roll-up strategy. This market condition also suggests that valuations for HealthTech assets with strong growth potential and clear profitability pathways will remain robust, making divestment an increasingly attractive option for corporations seeking to unlock inherent value.

3. Key Drivers of Divestitures in European Healthcare Technology

Corporate divestitures in European healthcare technology are propelled by a confluence of strategic, technological, economic, regulatory, and geopolitical factors. These drivers compel organisations to continuously reassess and optimise their portfolios to maintain competitiveness and foster growth.

Strategic Realignment and Portfolio Optimisation

Fundamental factors such as existing portfolio gaps, uncertainties within supply chains, and shifts in policy direction are expected to be significant drivers of M&A activity within the broader health industries in 2025. Large pharmaceutical conglomerates are continuously reviewing their extensive portfolios to identify non-core assets and low-growth areas as prime candidates for divestiture.

These divestitures serve multiple critical strategic purposes. They generate cash that can be immediately reinvested into new, higher-growth initiatives, thereby optimising existing portfolios and enabling companies to more closely align with their core competencies. Furthermore, shedding these assets can provide substantial balance-sheet relief by offloading research and development (R&D) expenses and reducing operational complexity across the entire supply chain, from manufacturing through distribution. Illustrative examples of this divestiture strategy include Viatris's sale of its over-the-counter (OTC) business to Cooper Consumer Health, its active pharmaceutical ingredients (API) division to Matrix Pharma Private, and its women's health business to Insud Pharma. Similarly, Sanofi strategically opted to transfer a controlling stake in its consumer health business, Opella, to CD&R, rather than pursuing a spin-off IPO. This approach allowed Sanofi to remain a significant shareholder while partnering with a private equity firm specialised in the consumer space to support Opella's future growth strategy. GSK also divested its consumer business to sharpen its focus on core areas such as oncology and immunology.

The consistent pattern of divesting "non-core assets" and "low-growth areas" with the explicit aim to "align with core competencies" clearly indicates a strategic pivot away from diversified conglomerate models. This shift is further reinforced by examples like GSK's divestiture of its consumer business to concentrate on oncology and immunology. The stated benefits of divestment—such as freeing up capital, reducing R&D expenditure, and simplifying supply chains—directly support this drive towards specialisation. This trend suggests that HealthTech companies are increasingly recognising that attempting to be "all things to all people" is inefficient in a rapidly evolving, highly specialised market. Divestitures enable them to concentrate resources on areas where they can achieve market leadership and higher growth rates, which, in turn, fuels innovation within those core areas. This also implies that the remaining core businesses become more attractive to investors due to a clearer strategic focus and potentially higher growth trajectories.

Technological Advancements and Digital Transformation

The rapid evolution of cutting-edge technologies, including robotics, artificial intelligence (AI), miniaturisation, and enhanced connectivity, stands as a major catalyst for M&A activity across the HealthTech sector. Companies are actively acquiring firms that possess innovative technologies to bolster their product portfolios and maintain a competitive edge in the market. The integration of AI and digital health solutions is particularly fuelling M&A, especially in critical areas such as diagnostics, remote monitoring, and personalised treatment. Acquirers are actively seeking AI-driven platforms to streamline healthcare delivery and significantly improve clinical outcomes.

AI technologies in healthcare demonstrate immense potential to benefit both patients and practitioners. They can boost clinician productivity by up to 40%, synthesise vast amounts of data, support accurate diagnoses, and streamline administrative tasks, with the potential to save hundreds of thousands of lives annually and generate substantial cost savings. AI also plays a crucial role in accelerating medicine authorisation and pharmacovigilance by enabling digital submissions and facilitating the early detection of safety signals. Consequently, telehealth, healthtech, and health analytics companies that demonstrate the ability to deliver greater efficiencies in patient care are highly attractive assets for investment and acquisition.

AI's explicit mention as a "deal driver" and a "hot spot for M&A activity" highlights its transformative impact. However, the concurrent mention of "divestiture of business models vulnerable to AI disruption" reveals a powerful dual dynamic. Organisations are actively acquiring AI capabilities to gain efficiencies and enhance their product offerings, but simultaneously considering divesting parts of their business that AI might render obsolete or less competitive. This creates a comprehensive portfolio re-evaluation. Assets that effectively leverage AI or provide AI capabilities are highly valued, while those that are inefficient or susceptible to AI-driven disruption become prime candidates for divestiture. This phenomenon accelerates the pace of portfolio transformation within HealthTech, leading to a more specialized and technologically advanced market.

Economic and Financial Factors

The easing of financial conditions, characterised by a gradual reduction in interest rates, is actively reviving financing conditions, which in turn facilitates larger deal activity and encourages private equity investment. Despite a global decline in M&A volumes, deal values have risen, primarily driven by sustained interest in high-quality companies that command higher prices. In response to a prolonged period of higher interest rates, many buyers have found traditional bank loans and bond markets less accessible for financing acquisitions. This has led to a growing enthusiasm for the private credit market to fund deals, with 52% of private equity executives reporting or planning to tap non-bank lenders in 2025.

From the perspective of healthcare providers, financial pressures are mounting significantly. They face projected increases in total expenses (around 11%) that outpace anticipated increases in reimbursements (around 3.6%), leading to a substantial squeeze on margins. This financial strain is compelling providers to prioritise investments in IT tools and the maintenance or replacement of equipment that directly sustain operations or drive efficiency.

While easing financial conditions generally support M&A activity, the persistence of "higher interest rates" has shifted dealmakers towards private credit. This indicates that traditional financing avenues might still present challenges for some transactions, making alternative structures or private equity involvement more critical. Simultaneously, healthcare providers' "squeezed margins" are creating a strong market demand for "digital efficiencies" and cost-saving HealthTech solutions. This dynamic implies that HealthTech companies offering solutions that directly address cost reduction and efficiency for providers—such as administrative automation or clinical decision support—will be particularly attractive acquisition targets, even in a tighter financing environment. Divestitures of such "efficiency-enabling" assets could therefore be highly successful, as they directly meet a pressing need in the market. Conversely, divestitures of assets that do not offer clear cost savings might face greater challenges.

Evolving Regulatory Landscape

The publication of the European Health Data Space (EHDS) Regulation in March 2025 marks a pivotal moment for digital health in Europe. The EHDS is designed to transform healthcare by improving access to and utilisation of electronic health data, fostering innovation, and enhancing Europe's competitiveness in the health sector. Its harmonised implementation across EU Member States is deemed crucial for maximising its potential impact, as a fragmented approach could significantly limit its benefits.

Concurrently, the European Artificial Intelligence Act (AI Act), which entered into force on August 1, 2024, aims to foster responsible AI development and deployment across the EU. Notably, high-risk AI systems, such as AI-based software intended for medical purposes, are subject to stringent requirements, including robust risk-mitigation systems, high-quality data sets, clear user information, and human oversight.

Furthermore, directors' duties in insolvency are under heightened scrutiny, particularly as the EU progresses with its harmonisation directive on insolvency law, introducing new considerations for corporate restructuring. Navigating the restructuring of regulated entities requires a delicate balancing act and necessitates early and sustained engagement with regulators. Moreover, uncertainties surrounding national legislative changes, such as the Hospital Care Improvement Act in Germany, had a negative impact on the German healthcare M&A market in Q1 2025, highlighting the sensitivity of deal activity to regulatory shifts. Companies must remain diligently informed about current and emerging regulations, particularly concerning AI applications, to ensure their use of AI does not inadvertently lead to violations.

Regulatory changes are explicitly cited as both challenges, such as "regulatory complexity" and "regulatory constraints" and as drivers of innovation, exemplified by the EHDS fostering innovation.

The AI Act's classification of medical AI as "high-risk" implies significant compliance burdens. However, successful navigation of these stringent regulations can also become a competitive advantage. For instance, companies that have already achieved compliance with EHDS for data handling or the AI Act for AI systems will possess a "regulatory premium," making them more attractive acquisition targets or carve-out units. This dynamic suggests that divestitures in European HealthTech are not solely about financial or strategic fit, but also about regulatory readiness. Acquiring a divested unit that is already compliant with complex EU regulations significantly de-risks the investment for the buyer. This could lead to a preference for divested assets that have demonstrated robust regulatory compliance, potentially increasing their valuation. Conversely, it also encourages companies to divest non-compliant or high-risk assets that would require substantial future investment to meet new standards.

Geopolitical and Supply Chain Shifts

Dealmakers are adopting a more nuanced perspective on geography, meticulously assessing each link in their supply chains to identify dependencies and mitigate risks. This approach aims to enhance resilience and resistance to tariffs and the increasingly volatile geopolitical backdrop. Nearshoring strategies and the rise of protectionist policies are actively reshaping the dynamics of cross-border M&A. There is a growing possibility that lawmakers may pursue policies aimed at repatriating drug manufacturing onshore or nearshore. This trend is contributing to higher scrutiny of cross-border M&A, prompting companies to reassess their supply chains, pricing corridors, and overall geopolitical exposure.

The strong emphasis on a "nuanced view of geography", "nearshoring" and "reassessing supply chains" 9points to a clear strategic response to global instability. This indicates that companies are actively restructuring their operations and portfolios to reduce external dependencies and enhance resilience. This trend suggests that divestitures might occur to shed geographically dispersed or high-risk supply chain components, while acquisitions might focus on consolidating regional capabilities or bringing critical functions closer to home. For European HealthTech, this could translate into an increase in intra-European deals or divestitures of non-European operations to streamline regional supply chains and reduce exposure to trade wars or broader geopolitical tensions.

4. Common Assets and Business Units Involved in European HealthTech Divestitures

The European HealthTech divestiture landscape in 2025 reveals distinct patterns in the types of assets and business units frequently involved. These patterns reflect underlying strategic shifts and market demands.

Digital Health Platforms and Solutions

Interest in digital health companies is notably rising within the private equity community. Acquisitions of health tech and health-adjacent technology platforms, particularly those focused on AI-driven diagnostics, digital therapeutics, and care coordination businesses, remain a significant M&A hotspot. These assets are highly attractive to private equity firms due to their capital-light nature and inherent scalability. Examples of significant PE deals include Bain's acquisition of HealthEdge, a next-generation SaaS platform connecting health plans, providers, and patients, and New Mountain Capital's plan to combine three health tech companies to create an AI-driven revenue cycle management platform aimed at automating hospital administrative workflows. In the first half of 2025, the top-funded digital health categories included Oncology, Mental Health, Cardiovascular Diseases, Women's Health, and Neurology, indicating strong investor interest in these therapeutic areas. Notable European digital health companies highlighted for their innovation and potential include Philips Health Technology, Onera Health (a wearable medical-grade diagnostic patch for sleep medicine), Oura (a smart ring for health tracking), Kry/Livi (a leading telehealth provider), Neko Health (a preventive full-body scanning system), and Liva Healthcare (a digital platform for chronic disease management).

The market signals a strong investor preference for AI ventures that demonstrate "robust clinical validation and a clear pathway to profit (P2P)" and emphasize a "productivity premium" that shortens care pathways or reduces operational costs. This preference is further supported by the focus on "digital efficiencies" to bridge staffing and cost gaps for healthcare providers.8 This indicates that not all digital health assets are equally attractive for divestiture or acquisition. Those that can clearly demonstrate tangible return on investment (ROI) through efficiency gains, cost reduction, or improved clinical outcomes will command higher valuations and be more readily divested or acquired. This market behavior incentivises companies to develop or acquire digital health solutions with clear value propositions for providers and payers, moving beyond mere "AI-for-AI" narratives.

MedTech Product Lines

The private equity sector saw a record high volume of European healthcare deals in 2024, driven by a higher number of smaller transactions, particularly within the biopharma and MedTech sectors. Divestitures are strategically employed to streamline portfolios and enable increased investment in core business areas. For instance, Highridge Medical divested its bone healing division to sharpen its focus and boost investment in its spine and orthopedic surgery business. Acquisitions in MedTech are actively bolstering capabilities in interventional systems, digital testing, manufacturing, and specialised equipment. Examples include Medtronic's acquisition of Nanovis' nano-surface implant technology, Boston Scientific's purchase of SoniVie Ltd, and SyntheticMR's acquisition of Combinostics Oy for its AI-driven diagnostic tools. The MedTech sector is characterized by a notable absence of mid-sized companies, creating unique opportunities for large corporates and private equity firms to engage in carve-outs. Underperforming units within larger MedTech portfolios, such as Danaher's dental platform, Bayer's MEDRAD radiology business, and Medtronic's diabetes unit, are frequently cited as potential candidates for divestiture.

The examples of MedTech divestitures reveal a clear pattern: companies are shedding specific product lines or underperforming units to "streamline portfolio" and "increase investment" in other, often more specialized or higher-growth, areas. This is not solely about cost-cutting but about strategically reallocating capital to areas of pronounced strategic focus, such as spine and orthopedic surgery for Highridge Medical. This trend signifies a move towards more agile and focused MedTech companies. Divestitures enable them to shed legacy products or non-core technologies, freeing up R&D and marketing resources to double down on cutting-edge innovations, such as AI integration or advanced interventional devices. This strategic reorientation is expected to lead to a more competitive and innovative European MedTech landscape, where companies are highly specialized within their chosen niches.

Non-Core Pharmaceutical Assets and Consumer Health Businesses

Large pharmaceutical conglomerates are expected to continue their strategy of monitoring and divesting non-core assets and low-growth areas from their extensive portfolios. Specific examples of this trend include Viatris's sale of its over-the-counter (OTC) business, its active pharmaceutical ingredients (API) division, and its women's health business.8 Similarly, Sanofi's decision to transfer a controlling stake in its consumer health business, Opella, to CD&R, rather than pursuing a spin-off IPO, highlights a strategic approach to shedding non-core assets while retaining some exposure. GSK also divested its consumer business to allow for a more concentrated focus on its core areas of oncology and immunology.

The repeated instances of large pharmaceutical companies divesting consumer health, OTC, or specific API divisions indicate a broader trend of large conglomerates disaggregating their diverse "health industries" portfolios. This phenomenon is driven by a desire to focus on higher-growth, higher-margin areas, such as biotech, oncology, and immunology, and to unlock value from businesses that might be undervalued when embedded within a larger, diversified structure. This implies that the traditional "Health Industries" sector is becoming increasingly segmented. Divested consumer health or API businesses, for example, can thrive under new ownership, such as private equity firms, that can provide dedicated focus and investment. This creates new opportunities for specialised buyers and fosters a more focused competitive landscape within each distinct segment.

Healthcare IT Solutions for Efficiency and Cost Reduction

Within the healthcare service sector, there is a heightened and urgent focus on enhancing the efficiency and quality of care delivery. This is primarily being achieved through the adoption of innovative healthcare IT solutions and the exploration of how generative AI can be effectively utilised in these settings. Healthcare providers are operating under immense pressure to improve efficiency and achieve more with fewer resources, facing tight budgets and ongoing staffing challenges. Consequently, capital investments are highly targeted, primarily directed towards IT tools and the maintenance or replacement of equipment that directly sustain operations or drive efficiency. Examples of recent acquisitions in this space include Cantata Health Solutions' acquisition of Geisler IT Services and Cardinal Health's acquisition of Specialty Networks and its PPS Analytics platform, both aimed at enhancing operational capabilities.

The snippets clearly articulate the financial pressures on healthcare providers and their pressing need for "digital efficiencies" and "innovative healthcare IT solutions".This indicates that Health IT assets are being divested or acquired not merely for their technological innovation, but specifically for their proven ability to reduce costs, streamline administrative tasks, and improve operational workflows. This trend signifies that Health IT companies focusing on a "productivity premium" and demonstrating a clear return on investment for providers will be highly sought after. Divestitures in this space will likely involve mature, proven solutions that can immediately address operational pain points, rather than speculative or early-stage technologies. This also highlights the criticality of robust post-sale support and seamless integration for these solutions to ensure their full value is realised.

5. Impact of Divestitures on Innovation and Market Structure

Corporate divestitures in European HealthTech are not isolated transactions; they exert profound effects on the sector's innovation trajectory and overall market structure, fostering both specialisation and consolidation.

Specialisation and Reinvestment in High-Growth Areas

Divestitures serve as a strategic mechanism for companies to reinvest capital into mission-critical technologies, such as advanced AI systems, drone technologies, and cybersecurity solutions. By strategically shedding lower-growth or non-core businesses, companies can effectively boost their overall growth rates and liberate capital that can then be channeled into higher-growth opportunities. Leading companies proactively manage their portfolios, a practice that prevents the value erosion often observed when non-core assets are starved of necessary resources and attention.6 Once divested, independent units gain increased flexibility and agility, enabling them to pursue their own distinct market strategies and forge new partnerships that might have been constrained under the previous parent company structure.

The core argument for divestitures often centers on "portfolio optimisation" and "focusing on core competencies". The evidence explicitly states that this process frees up capital for "new investments" in "mission-critical technologies such as AI, drones and cybersecurity". This establishes a direct causal link: by divesting, companies are not merely shrinking; they are strategically re-investing in areas with higher growth potential and innovative capacity. This implies that divestitures actively contribute to a more dynamic and innovative HealthTech ecosystem in Europe. Capital and talent are reallocated from mature or non-core areas to emerging, high-impact technologies. This shift is expected to lead to faster development cycles and more breakthrough solutions in areas like AI-driven diagnostics or personalised medicine, as specialised entities can operate with greater agility and dedicated resources.

Consolidation and the Emergence of "National Champions"

The European healthcare sector's M&A landscape in 2025 is characterised by a significant 87% spike in deal value, despite an 8% decline in deal count. This strongly indicates a strategic pivot towards larger, more transformative transactions and "mega-mergers".18 This trend suggests that the market is increasingly prioritizing scale and established entities, potentially making it more challenging for smaller, early-stage companies to secure exits unless they offer highly differentiated value or a clear strategic fit within a larger consolidation play.18 Drawing parallels from other sectors, such as the banking industry, where M&A is actively creating "national champions" through consolidation and digital disruption, a similar trajectory could be anticipated for the European HealthTech market.

While companies are internally specialising through divestitures, the overall market trend points towards larger deals and "mega-mergers". This might appear contradictory, but it reflects a nuanced market evolution. The HealthTech market remains "highly fragmented". Companies are specialising

internally by shedding non-core assets, but externally, they are consolidating to achieve greater scale, streamline operations, and broaden product portfolios within their chosen specialised areas. The observed emergence of "national champions" in other sectors suggests a similar trajectory for HealthTech, where consolidation within specialised niches leads to the formation of larger, dominant players. This implies a maturing market where smaller, undifferentiated players may struggle. Divestitures from larger corporations might provide opportunities for these smaller players to be acquired and integrated into larger, more specialized platforms, or conversely, for them to be marginalised if they cannot demonstrate "differentiated value". This dynamic will likely lead to a more concentrated market structure in key HealthTech sub-segments.

The Role of Alternative Deal Structures (Joint Ventures, Partnerships)

There is a growing preference for alternative deal structures, including earn-outs, royalties, licensing agreements, and joint ventures, particularly for financing innovation and platform builds in biotech and diagnostics. In the digital health sector specifically, co-development partnerships are proving instrumental in mitigating regulatory and reimbursement risks, offering crucial flexibility for both buyers navigating policy shifts and sellers awaiting a recovery in IPO markets.9 In Germany, 2024 notably saw an increase in co-operations and joint ventures within the inpatient sector, reflecting a broader trend towards collaborative arrangements in response to prevailing market conditions.

The shift towards "alternative deal structures" like joint ventures and partnerships, specifically to "mitigate regulatory and reimbursement risk", represents a critical adaptation by market participants. This suggests that the inherent complexities and uncertainties in European HealthTech, such as varying national regulations and reimbursement challenges, are making outright acquisitions riskier. Companies are increasingly opting for shared-risk models to access innovation or divest non-core assets without fully committing to a traditional M&A transaction. This implies that "divestiture" might not always entail a full sale. It could involve shedding operational control or financial exposure through a joint venture, allowing the divested unit to operate more independently while still benefiting from the parent company's expertise or market access. This flexibility can unlock value from assets that might be too risky for a traditional outright sale, fostering a more collaborative and adaptive market environment.

6. Challenges and Opportunities for Dealmakers in 2025

Navigating the European HealthTech divestiture landscape in 2025 presents a dual reality of significant challenges intertwined with compelling opportunities for strategic growth and value creation.

Navigating Economic Uncertainty and Valuation Gaps

The market continues to grapple with persistent challenges, including geopolitical shocks, ongoing inflation, and sector-specific turbulence. Economic uncertainty is fostering unease among companies, leading to cautious decision-making; for instance, 46% of large companies reported halting new hiring, and there are observable delays in new product development and technology investments. A significant hurdle that persists is the continuing valuation gap between the expectations of sellers and the offers from buyers for certain assets.

While there is "survey optimism running high" and "easing financial conditions", the continued presence of "economic uncertainty" or "geopolitical tensions" and a "continuing valuation gap" indicates that despite positive macroeconomic signals, dealmakers remain cautious. This caution leads to a highly selective market. This implies that successful divestitures will necessitate realistic valuations and a clear articulation of the value proposition, especially for assets that are not considered "cream of the crop." Sellers must be prepared to bridge valuation gaps, potentially through earn-outs or other alternative structures , while buyers will continue to prioritise the "flight to quality".

Regulatory Complexity and Compliance

Understanding and complying with the intricate landscape of medical device regulations, such as the EU Medical Device Regulation (MDR) and ISO 13485, continues to be a significant challenge for companies operating in Europe. The EU is actively advancing its harmonisation directive on insolvency law, which will introduce new considerations for corporate restructuring. Furthermore, the European Health Data Space (EHDS) requires harmonised implementation across all member states to fully realise its potential benefits; a fragmented approach could significantly limit its impact. Companies must remain diligently informed about current and emerging regulations, particularly concerning AI applications, to ensure their use of AI does not inadvertently lead to violations.

Regulatory complexity is undeniably a "significant challenge". However, frameworks like the EHDS and the AI Act are also designed for "fostering innovation".This implies that companies with robust compliance capabilities or those whose products inherently align with new regulations, such as secure data handling under EHDS, gain a substantial competitive advantage. Conversely, non-compliance or the high cost of achieving it could render an asset a prime divestiture candidate. This dynamic indicates that regulatory due diligence is paramount in HealthTech divestitures. Buyers will assess not just the financial performance but also the regulatory burden and compliance maturity of the divested unit. Sellers who have proactively invested in compliance will find their assets more attractive, while those struggling might find divestiture a strategic means to offload a significant future cost or risk.

Staffing Challenges and the Need for Digital Efficiencies

Healthcare providers across Europe are facing major concerns related to persistent workforce shortages and escalating labor costs. In response to these pressures, many providers are planning to increase headcount for critical clinical roles, such as nurses, lab technicians, and specialised physicians, to meet patient demand. Simultaneously, they are planning to decrease administrative and back-office staff, with the explicit expectation that technology will fill this operational gap. The confluence of staffing challenges, inflationary cost bases, and stagnant government funding is exerting significant pressure on healthcare providers to identify and implement digital efficiencies wherever possible.

The explicit mention of "staffing challenges" and the expectation that "technology is expected to fill the gap" 24creates a clear and urgent demand signal for HealthTech solutions focused on efficiency and automation. This is a direct cause-and-effect relationship: labor shortages directly necessitate technology that reduces reliance on human capital or significantly boosts its productivity. This implies that HealthTech assets offering demonstrable improvements in administrative or clinical efficiency, such as AI copilots assisting clinicians or automated patient scheduling systems, will be highly attractive for acquisition. Divestitures of such solutions could be driven by larger companies seeking to monetize valuable, efficiency-focused intellectual property or business units that can scale independently to address this pervasive industry challenge.

Opportunities for Strategic Growth and Value Creation

Despite the prevailing challenges, M&A remains a critical lever for achieving strategic growth within the HealthTech sector The market is strategically positioned to capitalise on favourable conditions as new opportunities continue to emerge across Europe.

Key areas for strategic growth include AI-driven diagnostics, digital therapeutics, and care coordination businesses, which are attracting significant investment and M&A interest.

The combination of "renewed momentum", "favourable conditions" , and the overarching "strategic imperative for digital transformation" suggests a prime window of opportunity for companies. Those that act decisively now, leveraging divestitures to sharpen their strategic focus and acquiring key technologies, stand to gain a significant competitive advantage. This implies a "use it or lose it" scenario for some corporations. Those that delay portfolio optimization through divestitures might find themselves outmaneuvered by more agile competitors who are actively reshaping their businesses to capitalize on HealthTech's core growth drivers.

7. Outlook and Recommendations for European HealthTech Divestitures

The European HealthTech divestiture landscape in 2025 is dynamic, shaped by a blend of economic recovery, technological advancement, and evolving regulatory frameworks. The trends observed point towards a more discerning and strategically driven market.

Anticipated Trends for the Remainder of 2025 and Beyond

The market is expected to continue its focus on a "flight to quality," favouring larger, more transformative deals that deliver significant strategic value rather than a high volume of smaller transactions. Domestic and cross-border M&A activity is anticipated to accelerate as markets mature, regulatory frameworks stabilize, and investor confidence strengthens across Europe. Increased competition is foreseen from impact, infrastructure, and tech-focused investors, particularly in the rapidly evolving areas of healthcare IT and generative AI solutions. The "selective scale" phase in digital health funding will persist, with capital preferentially flowing to AI ventures that demonstrate robust clinical validation and a clear pathway to profitability.

The consistent messaging about a "flight to quality", "selective scale", and the focus on "larger, more transformative transactions" suggests that these are not temporary phases but enduring trends. AI's pervasive impact across diagnostics, operations, and research and development indicates its fundamental and deepening role in shaping the future of HealthTech. This implies that the European HealthTech market will continue to reward highly specialised, technologically advanced (especially AI-driven), and operationally efficient assets. Companies contemplating divestitures must ensure their non-core assets are either high-quality enough to attract premium buyers or are strategically positioned for a carve-out that unlocks their inherent value.

Strategic Considerations for Companies Contemplating Divestitures or Acquisitions

For companies navigating the European HealthTech market in 2025, strategic foresight and agile execution are paramount.

For Sellers:

Conduct rigorous portfolio reviews: Continuously assess your existing portfolio to identify non-core, lower-growth assets that could be divested to unlock value and free up capital for reinvestment. This involves a critical evaluation of how each business unit aligns with core competencies and long-term strategic objectives.

Demonstrate clear value proposition: For any asset considered for divestiture, articulate a compelling and measurable value proposition, particularly around efficiency gains, cost reduction, or improved clinical outcomes, especially for digital health and Health IT solutions. Buyers are seeking proven value and a clear pathway to profitability.

Proactively address regulatory compliance: Ensure that divested units are fully compliant with current and emerging EU regulations, such as the EHDS and AI Act. Robust compliance can significantly de-risk the asset for potential buyers and may command a premium valuation.

Consider alternative deal structures: Be open to earn-outs, royalties, licensing agreements, or joint ventures, especially to bridge valuation gaps, mitigate regulatory and reimbursement risks, or attract buyers in a selective market.

Prepare for standalone operations: If a carve-out is planned, ensure the divested unit can operate independently with minimal stranded costs. This includes defining clear intellectual property rights, R&D resources, employee transfers, and data protection protocols.

For Buyers:

Prioritise high-quality, strategic assets: Focus on acquiring assets with proven value, scalability, and strong alignment with strategic growth areas, particularly those leveraging AI, digital health, and solutions that enhance operational efficiency.

Conduct thorough regulatory and data due diligence: Meticulously assess the target's compliance with complex EU regulations, its data governance frameworks, and its ability to integrate seamlessly with existing systems to avoid future compliance burdens or interoperability challenges.

Leverage private equity partnerships: Explore collaborations with private equity firms for larger, transformative deals, especially for platform acquisitions or "mega-mergers" that require substantial capital deployment.

Seek consolidation opportunities: Identify fragmented sub-sectors within European HealthTech where strategic acquisitions can lead to market consolidation, economies of scale, and the potential to create specialised "national champions".

Focus on solutions addressing human capital challenges: Prioritise HealthTech solutions that demonstrably improve administrative or clinical efficiency, reduce reliance on scarce labor, or enhance staff productivity, as these address a critical and pervasive need for healthcare providers.

Conclusion

Corporate divestitures in European healthcare technology in 2025 are fundamentally driven by a strategic imperative to optimize portfolios, accelerate digital transformation, and navigate a complex regulatory and geopolitical landscape. The market is characterized by a "quality over quantity" approach, where larger, more impactful deals dominate, reflecting a selective and risk-conscious investment environment. Artificial intelligence emerges as a dual catalyst, driving both the acquisition of innovative capabilities and the divestiture of business models vulnerable to disruption. Economic factors, including easing financial conditions and the rise of private credit, provide a supportive backdrop, while stringent EU regulations, such as the EHDS and AI Act, simultaneously pose challenges and create opportunities for differentiation. Geopolitical shifts are compelling companies to reassess supply chains, favoring more localized or resilient operational models.

The common assets involved in divestitures—digital health platforms, MedTech product lines, non-core pharmaceutical assets, and healthcare IT solutions—all reflect a broader industry move towards specialization and efficiency. These divestitures are not merely financial transactions; they are strategic maneuvers that enable reinvestment in high-growth areas, foster innovation through focused efforts, and contribute to the consolidation of a fragmented market. While challenges like economic uncertainty and regulatory complexity persist, the opportunities for strategic growth and value creation through proactive portfolio transformation are significant. Companies that embrace agility, prioritize compliance, and invest in solutions addressing critical industry needs, such as staffing shortages and efficiency demands, will be best positioned to thrive in Europe's evolving HealthTech landscape.

Nelson Advisors > Healthcare Technology M&A

Nelson Advisors specialise in mergers, acquisitions and partnerships for Digital Health, HealthTech, Health IT, Consumer HealthTech, Healthcare Cybersecurity, Healthcare AI companies based in the UK, Europe and North America. www.nelsonadvisors.co.uk

Nelson Advisors regularly publish Healthcare Technology thought leadership articles covering market insights, trends, analysis & predictions @ https://www.healthcare.digital

We share our views on the latest Healthcare Technology mergers, acquisitions and partnerships with insights, analysis and predictions in our LinkedIn Newsletter every week, subscribe today! https://lnkd.in/e5hTp_xb

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