Digital health's 'come to Jesus moment': Merge or die
Original story by: Business Insider
Last updated: Oct 23, 2025
Ad
- Context: Healthcare startups are facing increased pressure to consider mergers or accept lower valuations in acquisitions. This trend is driven by a shift in investor and buyer focus towards Artificial Intelligence (AI), leaving many non-AI focused companies struggling to secure funding. Mergers are becoming a critical survival strategy for these businesses.
Ad
Ad
- Detailed Summary:
- Several experts, including representatives from General Atlantic, Baird, and JPMorgan, observe a rise in healthcare startup mergers and acquisitions (M&A).
- Many digital health startups, previously hesitant to merge, are now recalibrating expectations and considering consolidation as a path to survival.
- The booming interest in AI has diverted attention and capital away from other healthcare sectors, forcing non-AI startups, particularly those that raised significant capital in 2021, to explore M&A as a last resort.
- The article highlights specific examples of acquisitions with valuation markdowns, such as RemedyMeds acquiring Thirty Madison for $500 million (down from its $1 billion valuation in 2021) and DocGo's potential acquisition of SteadyMD.
- Healthcare M&A deal value increased significantly in the first half of 2025, even with a slight dip in deal volume, largely due to higher-priced AI deals.
- Struggling companies fall into two categories: late-stage companies that raised heavily in 2021 and are finding it difficult to meet high IPO standards, and earlier-stage companies caught in a "doom loop" of drying funding and declining valuations.
- Mergers of "equals" are challenging due to potential disagreements on valuation and leadership.
- Conversely, the healthcare AI sector is experiencing a surge in investor and buyer demand, with a particular focus on companies involved in hospital revenue management.
- Companies like Abridge are also reserving capital to pursue acquisitions within the AI space.
- Valuation corrections are seen as potentially healthy for the industry, despite the challenges they present to individual companies.
Ad
Ad