Life Sciences M&A Is No Longer Just About Science:

Investment in healthcare by private equity reached $115 billion in 2024—the second-highest annual total on record¹. Meanwhile, funding into generative AI more than doubled to $56 billion, defying broader slowdowns in the market². Those two data points aren’t atoms, they’re synapses—they’re at the frontlines of a change in how life sciences M&A is now informed by tech.

From AI-based diagnostics to cloud-native clinical systems, the nature of value creation in healthcare transactions is shifting swiftly. That is why private equity firms are re-calibrating their strategies, not just to put capital to work efficiently, but also to understand, and scale, technology-driven health assets.

Here are five key dynamics informing private equity’s growing role in life sciences M&A:

1. Artificial Intelligence Is Shaping Where—and How—Capital Flows

AI in life sciences has moved past just experimental phases. Its deployment, in drug development, in diagnostic imaging and in clinical trial optimization, is now being widely instantiated and investors are responding in kind. The AI in healthcare market, which was worth $19.27 billion in 2023, is estimated to record CAGR 38.5% from 2024 to 2030 signalling its growing strategic importance³.
Transactions like the acquisition of Abiomed by Johnson & Johnson or InstaDeep by BioNTech showcase a preference for targets that not only have scalable AI capability, but proprietary datasets as well.

Implication: Treat AI capabilities as a fundamental asset class. Due diligence should center around machine learning pipelines, labeled datasets, and clinical validations pathways—not be relegated to side notes.

2. Technology Due Diligence Has Become Non-Negotiable

Expanding digital health infrastructure brings added complexity — and risk. PE firms need to examine a target’s digital undercurrents as closely as its financials now.
Between 2023 and 2028, the healthcare cloud computing market is expected to build up by 98.6 billion U.S. dollars, at a compound annual growth rate (CAGR) of 31.52 percent⁴. The increase demonstrates a greater reliance on digital across clinical and operational workflows.
Consequently, any security, interoperability or compliance gaps in cloud and data systems can silently eat away at post-deal value.

Implication: Expand the formal “risk” scope of pre-close reviews to include technology risk. This entails reviewing API maturity, security protocols, audit trails for AI models, and regulatory documentation for software-as-a-medical-device (SaMD) classes.

3. Integration Is No Longer Just Operational—It’s Technical

Today, effective integration is less about rationalizing staff or locations—and more about aligning cloud platforms, digital systems and data architectures.
The need to modernize is on the minds of a growing number of healthcare organizations: Up to 70% of life sciences organizations are transitioning to cloud-native solutions in their pursuit for better data access, compliance, and collaboration⁵. However, legacy infrastructure continues to hold back post-acquisition transformations. Many targets need significant modernization just to reach baseline interoperability standards.

Implication: Focus on interoperability and cyber security in the post-merger integration (PMI) plan. Involve CTOs and CIOs early. Resolve systems conflicts and legacy risks before cost synergies are measured.

4. Private Equity Is Becoming a Strategic Operator in Biotech and Healthtech

With IPO markets uncertain and R&D pipelines growing ever complex, biotech and digital health companies are turning to PE firms that can provide patient capital and strategic guidance.
In 2024, global PE investment in life sciences totaled $115 billion, an amount that underlines the increasing confidence being placed in private capital to promote innovation in the industry⁶.
This is now frequently accomplished with milestone-based earnouts, where the value realization is directly tied to regulatory approvals or clinical progress. Firms need to provide more than just capital; they need to enable long-horizon product planning, data monetization, and digital integration.

Implication: PE firms will have to develop value-creation playbooks with multiple levers, not only balance sheet optimization. Finally, expertise in data commercialization, digital product strategy, and real-world evidence generation is becoming increasingly relevant.

5. Flexible Deal Structures Are Becoming a Competitive Advantage

Emerging modalities of transaction design are being defined by market dynamics and founder preferences. Structured partnerships are preferred by MBS founders about 60% of the time, according to McKinsey, reflecting their desire for funding with autonomy rather than outright M&A exit⁷. 

• • This has translated into increased utilization of minority stakes, joint ventures and ecosystem investments that aggregate related capabilities in a single platform. 
  • These structures allow for incremental commitment of capital at the same time that they mitigate the investment overhang in science-based, high-risk enterprises.

Implication: Build internal accounting frameworks for hybrid deals. Legal, risk, and operating teams need to be able to assess and execute on co-ownership, shared IP, and staged capital deployment.

Conclusion:

To compete effectively in the current M&A environment, private equity shops should:

• • Establish consistent standards for technology due diligence in all healthcare deals
  • Embed tech integration teams pre and post deal to minimize execution risk
  • Become part of the ecosystem by investing in data-driven AI companies
  • Enact organized arrangements that match incentives with long-term outcomes
  • Assemble cross-disciplinary teams with cloud, cybersecurity and regulatory technology expertise

Technology now sits at the center of life sciences M&A, not just on the periphery. Private equity firms are more aware of this. Success in this sector includes a better understanding of not only scientific capabilities but digital as well. Those that achieve that understanding early will define the next chapter of healthcare investment.

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