Halfway through 2026, Nelson Advisors predictions on what’s to come in European HealthTech and MedTech
- Nelson Advisors
- Jul 1
- 12 min read
Executive Summary
The first half of 2026 confirmed the thesis we set out last December: European HealthTech and MedTech are transitioning from a volume-driven market into a value-driven one. Fewer companies are being funded, but the survivors are being funded harder; fewer deals are being signed, but the ones that close are larger, more strategic and increasingly organised around a single question, who owns defensible, clinically validated artificial intelligence.
We enter the second half of the year with a market that is quieter on the surface and structurally more active underneath.
Our headline call for H2 2026 is that the “bigger cheques, fewer bets” dynamic accelerates. We expect European digital health venture funding to remain well below its 2021–2022 peak in deal count, while average round sizes continue to climb and late-stage capital concentrates in a narrow band of category leaders.
On the M&A side, we anticipate a busier second half than first, driven by strategic carve-outs, private-equity buy-and-build platforms, and incumbents using their balance sheets and compliance infrastructure to acquire innovation they can no longer afford to build slowly. The regulatory picture, meanwhile, has shifted in a way that materially changes deal timing, and we think most market participants have not yet fully priced it in.
This report sets out ten predictions across capital markets, M&A, artificial intelligence, regulation, sub-sectors, private equity and geography, followed by the principal risks to our view and the strategic actions we believe founders, acquirers and sponsors should take before year-end.
The H1 2026 Backdrop
Any credible forecast has to start from where the market actually is, and the numbers from the first quarter frame the picture cleanly. European digital health venture funding reached roughly $1.2 Billion across 67 deals in Q1 2026, a decline of around 44% in capital deployed and 46% in deal count against the same period in 2025. On its own that reads as a market in retreat. But the average deal size rose to approximately $21 million, up 8% year-on-year and three mega-rounds of $100 Million or more closed in the quarter, led by Oviva’s $235 Million Series D, Alan’s $116 Million Series G and DentalMonitoring’s $100 Million Series D.
This is not a market that has run out of capital; it is a market that has become far more selective about where capital goes.
The exit environment tells a complementary story. Thirteen European exit transactions in Q1 2026 carried roughly $552 million in disclosed value, led by Kaia Health at $285 Million and Gleamer at $267 Million. Patient Solutions captured the largest share of new capital at around $298 Million, with Medical Diagnostics close behind and cardiovascular, diabetes and nutrition-focused ventures attracting the deepest therapeutic funding.
The signal is consistent: money is flowing to categories with clear reimbursement pathways, demonstrable clinical outcomes and a credible route to either scaled commercialisation or strategic exit.
The broader market context remains genuinely large. Europe’s digital health market generated an estimated $130 Billion in revenue in 2025 and is projected to compound at roughly 10% annually toward $314 Billion by 2034, while the European HealthTech market specifically is forecast to grow at an 18% CAGR from around $97 Billion in 2025 toward $222 Billion by 2030. Underneath a soft funding headline sits a structurally expanding end-market. That gap between subdued private financing and robust underlying demand is precisely the condition under which strategic and sponsor acquirers move and it is the foundation for most of what follows.
Prediction 1 — M&A gets busier in the second half and the deals get bigger
We expect European HealthTech and MedTech M&A activity to be materially higher in H2 2026 than in H1, continuing the shift from cautious, volume-driven dealmaking to high-value, transformative transactions. European healthcare M&A already demonstrated its resilience through 2025, with deal value spiking roughly 87% to €31.8 Billion in the first half of that year even as deal count fell around 8%. That “fewer, larger” pattern is now the base case rather than an anomaly.
The catalysts are aligned for a strong close to the year. Large listed healthcare businesses are under pressure to prune their portfolios, and we expect a wave of carve-out and divestiture activity as incumbents shed non-core assets to fund AI and high-growth therapeutic bets. Roughly half of European dealmakers surveyed expect activity to rise over the coming twelve months despite persistent volatility and the macro backdrop, with global M&A projected by some houses to approach record territory in 2026, supports risk appetite at the top of the market.
We anticipate a rising number of mega-deals at the $5 Billion-plus level, concentrated in advanced diagnostics, neurovascular & neuromodulation and AI data platforms, alongside a deeper stream of bolt-on transactions in the €25–250 Million range where most of our clients operate.
Prediction 2 — Funding stays concentrated, and the mega-round returns selectively
On the venture side, we do not expect a broad-based recovery in deal count during H2 2026. Instead, we expect the concentration to intensify: a widening gap between a small cohort of category leaders raising large late-stage rounds and a long tail of early-stage companies facing a genuinely difficult financing environment. Average round sizes should continue to rise even if aggregate capital deployed stays soft, because investors are consolidating conviction into fewer names.
The clearest opportunity and risk sits at Series B and the growth stage. Companies with proven unit economics, real reimbursement traction and defensible technology will find capital available on reasonable terms; those still searching for product-market fit or dependent on pilot revenue will face down rounds, bridge financings and in many cases, acqui-hire outcomes. We expect the mega-round (≥ $100 Million) to remain a feature rather than the norm, clustered in obesity and metabolic care, AI-enabled diagnostics and infrastructure and insurance or payer-adjacent platforms. For founders, the practical implication is that raising in H2 2026 will reward demonstrable outcomes data over narrative more than at any point in the last five years.
Prediction 3 — AI moves decisively from investment thesis to competitive filter
The single most important structural force in both sectors remains the race to acquire defensible artificial intelligence. AI already captured the majority of Europe’s digital health funding through 2024 and that dominance has, if anything, deepened. What changes in H2 2026 is the nature of the advantage: AI stops being a differentiator that attracts a premium and starts being a threshold requirement without which assets struggle to attract capital or acquirers at all.
We expect the valuation spread to persist and widen. Companies with proprietary, clinically-validated algorithms and deep integration into clinical workflows should continue to command premium multiples in the region of 6x to 8x revenue, against a broader HealthTech range closer to 4x to 6x. The most sought-after targets remain ambient clinical intelligence and AI scribes, AI-powered diagnostics and medical imaging and revenue-cycle and operational automation platforms.
A second-order effect is what we would call the AI deflationary wave: as generative tools compress the cost of building certain software categories, differentiation migrates decisively toward proprietary data assets, regulatory clearances and distribution, the things that cannot be replicated by a model. We expect acquirers to pay up for those moats and to discount undifferentiated software aggressively.
Prediction 4 — The regulatory clock resets, changing deal timing more than deal logic
The regulatory story is where we think the consensus view is most out of date. The market spent two years pricing in August 2026 as the hard deadline for full high-risk obligations under the EU AI Act, the point at which AI-enabled medical devices would need to complete conformity assessment against a demanding set of data-governance, human-oversight and transparency requirements. That deadline is now moving. Under the European Commission’s proposed “Digital Omnibus” package, with support signalled from both Council and Parliament, the enforcement dates for high-risk systems are expected to shift to December 2027 for standalone systems and August 2028 for AI embedded in regulated products, including medical devices.
We read this as a reprieve, not a reversal. The direction of travel, toward stringent oversight of clinical AI, with the parallel application of the AI Act and MDR/IVDR adding an estimated 18 to 24 months to certification timelines for higher-risk software, is unchanged. What changes is timing and breathing room. In the near term this relieves some pressure on notified-body bottlenecks and gives under-resourced companies more runway to achieve compliance.
Over the medium term, however, the fundamental competitive dynamic holds: high fixed compliance costs continue to strain under-capitalised SMEs and continue to advantage large incumbents such as Medtronic and Philips that can absorb them. Layered on top sits the European Health Data Space, now in force and rolling out through the decade, which we expect to become a genuine M&A catalyst by creating value around consent-management infrastructure, health-data access intermediaries and AI platforms trained on structured, cross-border data. Our net conclusion is that regulation remains the market’s most powerful consolidation engine and the Omnibus delay simply changes when, not whether, that consolidation plays out.
Prediction 5 — Sub Sector calls: where we expect capital and deals to cluster
Obesity and metabolic care remain, in our view, the defining investment theme of the year. GLP-1 therapies have reshaped the entire adjacent ecosystem and companies building monitoring, adherence, titration and outcomes platforms around them are becoming strategically valuable to both pharmaceutical manufacturers and payers. Obesity-focused ventures attracted around $300 Million and diabetes a similar figure in Q1 2026 alone and we expect pharmacotherapy plus-digital hybrid models to attract continued capital and acquisition interest through H2 as the market shifts from consolidation toward scaled delivery.
Mental health is the second theme we would overweight. Demand continues to outstrip capacity across Spain, the UK and Germany, with waiting times measured in months and the category attracted more capital than any other therapeutic area in the US at the start of 2026.
We expect European mental-health platforms with clinical validation and payer contracts to be prime bolt-on targets. In diagnostics and imaging, AI-powered tools remain the most mature emerging technology, with adoption on a steep trajectory; we expect this to be among the most active M&A subsectors of the second half. Ambient clinical intelligence, AI scribes and voice technologies embedded in the clinical encounter, should see accelerating European adoption despite and partly because of, the tighter regulatory frame.
Beyond these, we continue to like femtech, preventive and behaviour change care, and the earlier stage but strategically important frontiers of bioelectronic and neuromodulation medicine, sleep technology and defence adjacent MedTech and supply chain resilience, each of which we expect to feature in selective dealmaking.
Prediction 6 — Private equity becomes the dominant architect of consolidation
If strategics set the tone at the top of the market, we expect private equity to do the heavy lifting across the middle. Sponsor buyout activity in European healthcare rose sharply through 2025, up roughly 276% to €29.6 Billion year-to-date against 2024 and PE deal volume reached a record, surpassing the previous 2021 peak. We expect that momentum to carry through H2 2026, with three strategies dominating.
The first and most important is buy and build. The structural fragmentation of European HealthTech and MedTech makes it close to an ideal environment for platform consolidation and we expect sponsors to assemble scale through a lead platform acquisition followed by a programmatic series of bolt-ons and technology integration.
The second is the AI-native merger, in which PE firms bolt AI-native capabilities onto legacy healthcare businesses to create modern, data-driven platforms, a pattern already visible in revenue-cycle management and one we expect to spread into diagnostics, clinical documentation and care operations.
The third is the club deal, where sponsors partner with corporate buyers to concentrate on a specific therapeutic area, sharing risk and combining sector expertise. With substantial dry powder still committed to the sector, including large dedicated early-stage funds, we expect PE to be the most consistent source of liquidity for founders through year end, particularly for Series B and later companies with proven unit economics positioned for an M&A-centric exit.
Prediction 7 — Geography: the UK leads, DACH and the Nordics anchor, France stays selective
We expect the United Kingdom to retain its position as Europe’s most active single digital health market and to register the strongest structural growth in Health IT. The NHS 10 Year Health Plan’s move toward standardised, value-based procurement, shifting roughly £10 Billion of annual MedTech spend from cost-driven to outcome-driven purchasing, is, in our view, one of the most consequential demand side developments in Europe and it should reward companies that can evidence outcomes rather than merely price. We expect this to draw both domestic and international acquirer interest in UK assets through H2.
The Nordics should continue to punch above their weight in AI-driven oncology, preventive health and clinical grade diagnostics, supported by strong data infrastructure and a receptive clinical culture. Germany remains the largest and most consistent Continental market despite some softness in deal value and we expect DACH to be a focal point for both carve-outs and buy-and-build platforms. France and the Netherlands remain steady, selective performers. Across all of these, we expect Europe to keep absorbing relative share from a US market that has seen its own dislocations, though we would caution that US mega-round dynamics continue to set the global valuation benchmark against which European assets are measured.
Prediction 8 — Valuation discipline holds, with a widening quality premium
We do not expect a broad re-rating of the sector in H2 2026. Instead, we expect the bifurcation in valuation to sharpen. Assets with clinical validation, regulatory clearances, real reimbursement and defensible data or AI will continue to clear at premium multiples and in competitive processes, above ask. Undifferentiated software, pilot-stage revenue and “AI-enabled” positioning without proprietary substance will continue to face compression, longer processes and structured outcomes. For sellers, the gap between a well-prepared, evidence backed process and an opportunistic one has rarely been wider and that gap is, in practice, worth multiple turns of revenue.
Prediction 9 — Cross-border and pharma-adjacent capital deepens
The pharmaceutical patent cliff, with a very large tranche of branded sales exposed to loss of exclusivity between 2026 and 2030, continues to push Pharma toward innovation-led M&A and toward digital and data assets that extend the value of their franchises. We expect this to manifest in HealthTech through deeper partnerships and acquisitions around companion digital tools, real-world-evidence platforms and adherence infrastructure, particularly in metabolic, oncology and cardiovascular care. Pharma-adjacent capital, in our view, becomes one of the more reliable sources of both partnership revenue and eventual exit for European digital health companies operating close to the therapeutic frontier.
Prediction 10 — Preparation, not timing, determines outcomes
Our final prediction is less about the market and more about how participants should meet it. In a value-driven, selectivity-first environment, outcomes are determined well before a process begins. The companies that will command premium valuations and attract competitive processes in H2 2026 are those that have already invested in clinical validation, regulatory readiness under MDR/IVDR and the AI Act, interoperability with EHR systems and EHDS standards such as FHIR and OMOP and clean, defensible data assets. We expect the reward for that preparation to be unusually large this year, and the penalty for its absence to be unusually severe.
Risks to Our View
Several factors could move the market against this base case. A sharper-than-expected macroeconomic deterioration, a spike in rates or a broad risk-off episode would compress both financing and M&A appetite quickly, given how sentiment-driven the top of the market has become.
A reversal or further delay in the Digital Omnibus package could reintroduce the compliance-cliff pressure we now expect to ease, changing deal timing. US mega round dynamics could pull capital and talent back across the Atlantic and widen the valuation gap against European assets. And a high-profile failure of a clinical AI product, whether a safety event or a reimbursement withdrawal, could chill enthusiasm for the AI-anchored theses that underpin much of our outlook.
We regard each of these as plausible rather than probable, but they define the distribution around our central case.
Strategic Implications
For founders and sellers, the message is to prioritise evidence over narrative: invest in clinical validation and regulatory readiness now, build interoperability into the product, and prepare processes that put outcomes data at the centre. Category leaders should consider whether H2 2026 is the moment to raise a decisive late-stage round or to run a sale process into strong strategic and sponsor demand.
For strategic acquirers, we would focus the second half on regulatory-infrastructure and data plays ahead of EHDS milestones, on AI-native platforms that can be integrated across an existing portfolio, and on disciplined bolt-ons in mental health, femtech, metabolic care and preventive health. For private equity, the environment favours buy and build platforms in fragmented verticals, AI-native mergers that modernise legacy assets, and club deals that concentrate expertise and share risk in attractive therapeutic areas.
The through-line across all three audiences is the same one we opened with: capital and conviction are concentrating, AI has become the organising principle of value and regulation is quietly rewiring who can compete. The second half of 2026 will reward those who are prepared, evidenced and clear-eyed about where durable advantage actually sits.
Nelson Advisors > European MedTech and HealthTech Investment Banking
Nelson Advisors specialise in Mergers and Acquisitions, Partnerships and Investments for Digital Health, HealthTech, Health IT, Consumer HealthTech, Healthcare Cybersecurity, Healthcare AI companies. www.nelsonadvisors.co.uk
Nelson Advisors regularly publish Thought Leadership articles covering market insights, trends, analysis & predictions @ https://www.healthcare.digital
Nelson Advisors publish Europe’s leading HealthTech and MedTech M&A Newsletter every week, subscribe today! https://lnkd.in/e5hTp_xb
Nelson Advisors pride ourselves on our DNA as ‘Founders advising Founders.’ We partner with entrepreneurs, boards and investors to maximise shareholder value and investment returns. www.nelsonadvisors.co.uk
#NelsonAdvisors #HealthTech #DigitalHealth #HealthIT #Cybersecurity #HealthcareAI #ConsumerHealthTech #Mergers #Acquisitions #Partnerships #Growth #Strategy #NHS #UK #Europe #USA #VentureCapital #PrivateEquity #Founders #SeriesA #SeriesB #Founders #SellSide #TechAssets #Fundraising #BuildBuyPartner #GoToMarket #PharmaTech #BioTech #Genomics #MedTech
Nelson Advisors LLP
Hale House, 76-78 Portland Place, Marylebone, London, W1B 1NT
Meet Nelson Advisors @ 2026 Events
Digital Health Rewired > March 2026 > Birmingham, UK
NHS ConfedExpo > June 2026 > Manchester, UK
HLTH Europe > June 2026, Amsterdam, Netherlands
HIMSS AI in Healthcare > July 2026, New York, USA
Bits & Pretzels > September 2026, Munich, Germany
World Health Summit 2026 > October 2026, Berlin, Germany
HealthInvestor Healthcare Summit > October 2026, London, UK
HLTH USA 2026 > October 2026, USA
Barclays Health Elevate > October 2026, London, UK
Web Summit 2026 > November 2026, Lisbon, Portugal
MEDICA 2026 > November 2026, Düsseldorf, Germany
Venture Capital World Summit > December 2026 Toronto, Canada
Comments