Nelson Advisors: Creating Liquidity From Struggling European HealthTech, MedTech, Health AI Portfolio Companies
The stranded middle of the portfolio
Every European health fund raised between 2019 and 2022 now holds companies that are alive, off plan and unlikely to raise another priced round. They are not the winners that will return the fund, and they are not the write-offs that have already been taken. They sit in the middle: a CE-marked device with slow hospital uptake, a digital therapeutic with a reimbursement code in one country and nothing elsewhere, a health AI company whose models are good but whose NHS or German sick-fund sales cycle has eaten three years of runway.
These companies absorb a disproportionate share of partner time, reserve capital and LP patience. Left alone, most of them drift towards a down round nobody wants to lead or a quiet insolvency that returns nothing. Yet many of them hold real, monetisable assets: regulatory clearances, clinical evidence, structured health data, signed hospital contracts, specialist teams and, occasionally, a profitable core business hidden inside a growth story that no longer works.
This article is about the gap between those two outcomes. It sets out the practical routes a general partner can take to turn a struggling European healthtech, medtech or health AI company into cash, carried value or at least a clean exit, and how to decide which route fits which company. None of these routes produces a fund-returning multiple. All of them beat the default, which is to hope and wait.
Why European health companies get stranded
The capital is still there, but it has moved to the top of the market. Tech.eu's H1 2026 report puts European healthtech at €4.3 billion raised in the first half of the year, the third-largest vertical, while total European deal count fell to just over 1,740 as investors wrote bigger cheques to fewer companies.
Monthly healthtech data from the same source shows the squeeze underneath: August 2026 saw only 20 rounds, down more than half on the prior year by value. The money is going to category leaders with reimbursement traction and proven unit economics. Everyone else is being asked to prove something they cannot yet prove.
Health companies get stuck for reasons that are specific to the sector, and a GP needs to name which one applies before choosing a route out.
Sales cycles that outlast the runway. Selling into the NHS, German statutory insurers, French hospital groups or Nordic regions takes 18 to 36 months per account. Procurement frameworks, information governance reviews and clinical safety sign-offs do not compress because the company is burning cash. A Series A sized for a 12-month enterprise sales cycle runs out before the second contract lands.
Reimbursement that is national, not European. A DiGA listing in Germany, a NICE recommendation in England or a remboursement decision in France each take years and transfer nowhere. Companies that budgeted for "Europe" discover they funded one country and a pipeline of pilots.
Regulatory cost that arrived late. MDR and IVDR recertification, and from 2026 the EU AI Act's high-risk obligations for clinical AI, have pushed a meaningful chunk of each round into compliance rather than growth. Devices that were CE-marked under the old directives have faced expensive, slow transitions with notified bodies.
Pilot revenue mistaken for product-market fit. Hospitals will trial almost anything that is free or grant-funded. Paid pilots rarely convert at the rates modelled in the deck, and a company with 15 pilots and two paying customers looks, on a spreadsheet, like it has no business.
Health AI valuations set in a different market. Companies that raised in 2021 and 2022 on AI narratives now face buyers who price on ARR, not on model performance. Many have good technology and no path to the revenue multiple their last round implied.
None of these are signs of a bad company. They are signs of a company whose financing plan did not match the market it sells into. That distinction matters, because it means the underlying assets are often more valuable than the equity story suggests.
Triage first: three questions before any process
The worst outcome is running the wrong process for a year and ending up with a cheaper version of the same problem. Before anything else, the GP and the board should answer three questions honestly, ideally with an outside operator or a specialist adviser who has no stake in the original thesis.
1. Is there a cash-flow business inside the company? Strip out the growth hires, the second geography, the next product and the pilots that will never convert. What is left: a handful of paying hospital or payer contracts with high renewal rates, a reimbursed product in one country, a services arm that funds itself. If the stripped-back company can reach breakeven inside 9 to 12 months on cash it already has, the restructuring route is open and usually preserves the most value.
2. What would a buyer actually pay for, and who is that buyer? A struggling company rarely sells as a whole for a growth multiple. It sells for one or two things: a regulatory clearance that would take the acquirer three years to replicate, a dataset with consent in place, a team that knows a clinical workflow, a contract with a hard-to-reach health system, or an installed base of devices. Listing these assets and the five to ten organisations that need each of them turns a vague "explore strategic options" mandate into a targeted outreach.
3. What is the real cash runway, including the cost of stopping? Boards routinely underestimate wind-down costs. Redundancy obligations in France, Germany and the Netherlands, notified body contracts, post-market surveillance obligations for a device still on the market, data-retention duties under GDPR and clinical trial close-out all cost money. If the company cannot afford to close cleanly, that is the most urgent problem, because every month of delay moves the company closer to an insolvency process where the fund loses control of the outcome.
The answers sort the company into one of four groups: restructure and hold, sell whole, sell in parts, or close in an orderly way. The routes below map to those groups. A GP who tries to keep all four open at once usually ends up with none of them.
Route 1: Strategic M&A and acqui-hires
Strategic buyers are the most reliable source of liquidity for a sub-scale health company, and 2026 has been a stronger year for them than for venture. Tech.eu's Q1 healthtech tracker lists Kaia Health's €239 million acquisition and Gleamer's €230 million sale as the two largest healthtech transactions of the quarter, both above any funding round in the period. Those are outcomes for companies that worked. The same buyer logic applies lower down the scale, at prices that will not make headlines but will return capital.
The buyers fall into recognisable groups:
Medtech and diagnostics incumbents (Siemens Healthineers, Philips, GE HealthCare, Roche, Medtronic's European units, and mid-caps like Elekta, Getinge or Sectra) buy software and AI capabilities to attach to installed hardware. They value regulatory clearances, clinical validation and integrations into their own platforms. They rarely value the standalone revenue.
Electronic health record and hospital IT vendors (Dedalus, CompuGroup, Nexus, System C, Cambio, Chipsoft) buy point solutions they can cross-sell to an existing hospital base. A company with 12 NHS trusts or 20 German hospitals live on its software is attractive because the buyer can lift the attach rate across hundreds of accounts.
Pharma and contract research organisations buy patient-engagement, remote-monitoring and real-world-data tools, especially those with consented, longitudinal datasets in a therapeutic area they care about.
Private-equity-backed healthcare services platforms (dental, diagnostics, care homes, outpatient chains) buy software that improves their own margins and will pay for it if the business case is clear.
Larger venture-backed peers that have raised a late-stage round and want to add a product, a geography or a reimbursement code. These buyers usually pay in shares, which converts one illiquid position into another but may upgrade the quality of the paper considerably.
An acqui-hire sits at the bottom of this range. A health AI team of 15 engineers and clinicians might be worth €5 to €15 million to a buyer that needs to build a regulated product quickly, even if the product itself is retired. These deals are usually structured as a modest payment to shareholders plus retention packages for the team, and they return a fraction of invested capital. They are still better than zero, and they settle the position within three to four months.
The practical rules for this route: run the process from the fund, not the founder. Founders of struggling companies are exhausted and conflicted, and most have never sold a company. A GP-led process with a specialist boutique adviser, a short list of 15 to 25 named buyers, a crisp data room and a six-week timetable produces better outcomes than a founder sending cold emails. Price the company at what it is, not what the last round said. Buyers know the funding environment. A GP who anchors on the Series B valuation loses the buyer and the time.
Route 2: Selling the parts, not the whole
When no buyer wants the company, several buyers may still want pieces of it. Health companies accumulate assets that are expensive to create and have clear value to a specific owner, even when the business around them has failed. A GP should inventory these and sell them separately when the sum is higher than any whole-company offer.
Regulatory assets. A CE mark under MDR for a Class IIa or IIb device, an IVDR certificate, a UKCA mark, an FDA 510(k) or De Novo clearance, a DiGA listing in Germany or a positive NICE evaluation each represents one to three years of work and several million euros of cost. Clearances transfer with the technical file and the quality management system, and companies with a product that fits an acquirer's pipeline will pay for the shortcut. The technical documentation and the ISO 13485 QMS should be kept current throughout any process, because a lapsed certificate is worth nothing.
Clinical evidence. Completed trials, published validation studies, health-economic models and real-world outcome data are reusable by any buyer who takes over the product. They should be catalogued with their IP status and consent basis clearly set out.
Data. Structured, consented, longitudinal health datasets are the most frequently overvalued and most frequently undervalued asset in a health portfolio. The value depends entirely on whether the consent and data-processing basis permits transfer and secondary use. Where it does, pharma, diagnostics companies and AI developers in the same therapeutic area are buyers, and a dataset built over four years in a rare disease or a specific imaging modality can be the single most valuable item on the list. Where the consent basis does not allow transfer, the data has no sale value, and a GP should find that out early rather than after an offer.
Contracts and installed base. A framework agreement with an NHS procurement body, a contract with a German sick fund or a multi-year deal with a hospital group is transferable by novation if the counterparty agrees, and acquirers who have struggled to get through the same procurement process will pay for the shortcut. Installed devices and the associated service contracts are a sellable annuity.
IP and software. Patents, trademarks and code have modest standalone value unless they block a competitor or save a buyer a year of engineering. They should be sold, but a GP should not expect them to carry the process.
Asset sales require a solvent company and a clean cap table. Buyers of regulatory or data assets need warranties, and a company on the edge of insolvency cannot give them. This is why the triage question about the cost of stopping comes first: the asset-sale route only works while the company has enough cash to stay out of a formal process for the four to six months a staged sale takes. Done well, an asset sale can return 0.3 to 0.8 times the capital invested in the last round, which is far more than the liquidator will achieve selling the same assets without warranties and under time pressure.
Route 3: Secondaries, continuation vehicles and structured liquidity
The secondaries market has never been larger, and most of it is not available to a struggling health company. Global secondary volume set another record in 2025, with GP-led deals accounting for roughly half of it, and dedicated venture secondaries funds continue to raise: TrueBridge closed a $508 million venture secondaries fund in September 2026 and StepStone is raising its seventh.
In Europe, HV Capital's 2022 continuation fund and Acurio's €115 million European VC secondaries vehicle show the infrastructure exists. Figures circulating in the industry put venture at only around $5 billion of the record first-half 2026 volume, clearing near 78 percent of NAV against the low 90s for buyout; treat those as approximate, but the direction is not in doubt. Buyers are plentiful for quality assets and scarce for everything else.
For the struggling middle of a health portfolio, four structures are realistic:
Multi-asset continuation vehicle with a mixed basket. Secondary buyers will not fund a vehicle of only stranded companies. They will fund one that holds two or three of the fund's strongest positions alongside several weaker ones, priced as a package. The GP gets liquidity for LPs who want out, retains upside in the winners, and buys time for the weaker companies to execute one of the other routes in this post. The discount to NAV is the price of that time. LPs and their advisers will push back on any attempt to use the strong assets to disguise the weak, so the valuation work must be transparent and the weaker assets marked realistically before the process starts.
Direct secondary sale of the position. A fund can sell its stake in a single company to a specialist buyer, another investor on the cap table, or a strategic that wants a foothold before a full acquisition. For a struggling company the price will be a steep discount, often 20 to 40 percent of the last-round price or lower, but the transaction is fast, requires no company process and removes the position from the fund's books. It makes sense when the fund is near the end of its life and the alternative is holding through a wind-down.
Structured preferred or NAV-based financing. Preferred equity at the fund level, secured against the whole portfolio, lets a GP return capital to LPs now without selling anything. For the stranded companies this does nothing directly, but it relieves the pressure that often forces a bad sale. It also costs 12 to 16 percent a year in most current terms and layers leverage on top of illiquid assets, so it is a bridge to a known exit plan, not a substitute for one.
Tender offers alongside a strategic round. Where a company can raise a small round from a strategic investor, the fund can negotiate a partial sale of its own position into that round. The strategic gets a larger stake at a price it has set, the fund gets some cash, and the company gets runway. This is the most common form of partial liquidity in European healthtech today, and it works best when the GP initiates it rather than waiting for the strategic to propose it.
The rule across all four: secondaries price what the company is now. A GP who has not marked the position down will find the bid insulting and walk away. A GP who has done the marking will find the bid roughly where expected and can decide on the merits.
Route 4: Restructure to a cash flow business
The most undervalued route in European healthtech is to stop pretending the company is a venture asset and run it as a small profitable business. Many digital health and medtech companies with €2 to €6 million of revenue and 60 to 80 percent gross margins can reach breakeven at half their current headcount, because the cost base was built for a growth plan that no longer exists. A company that does this becomes something a different set of buyers will pay for: lower-mid-market private equity, healthcare services groups and search funds all buy profitable, boring health software at 2 to 4 times revenue or 8 to 12 times EBITDA.
The restructuring usually looks the same across companies. Headcount comes down to the people who ship the product, keep the regulatory file current and serve existing customers. The second geography closes. Pilots that have not converted in 12 months are ended. Pricing moves from per-patient or usage-based models that hospitals find hard to budget for towards annual licences that match how health systems actually buy. Services revenue (implementation, training, data work) is accepted rather than treated as a dilution of the software story. In Germany, France and the Netherlands the GP should budget for 3 to 6 months of redundancy cost and works-council consultation; in the UK it is faster and cheaper.
The cap table usually needs to be cleaned up at the same time. Stacked liquidation preferences from three rounds leave founders and remaining staff with no economic reason to stay through a two-year path to a modest sale. A recapitalisation that collapses preferences, resets the option pool and gives the operating team 15 to 25 percent of the equity is standard. Investors who refuse it typically end up with a preference on nothing.
This route takes patience. A fund in year eight of a ten-year life may not have it. But for a fund with time, a restructured company that generates €1 million of EBITDA and sells three years later for €10 million returns more capital than almost any other option for a company in this position, and it does so without the fund writing another cheque. The GP's job is to find the operator who will run it, which is almost never the founding CEO.
Route 5: Mergers between portfolio companies and small roll-ups
Two sub-scale companies that each burn €300,000 a month can sometimes become one company that burns €150,000 and has twice the revenue. Combining two or three companies from the same fund, or from co-investors' portfolios, into a single entity removes duplicated finance, regulatory, sales and engineering overhead and produces a company that is large enough to interest a buyer or a growth investor.
This works when the companies are adjacent rather than identical: a remote-monitoring platform plus a device company whose data it already ingests; two digital therapeutics in related indications that sell to the same payers; a radiology AI company plus a workflow tool used in the same departments. It works less well when two direct competitors merge, because customers see no new value and the combined sales team spends a year fighting over accounts.
The mechanics are harder than they look. Relative valuation between two struggling companies is an argument neither management team wants to have, and the fund has to act as the honest broker, often by setting the ratio itself and asking the boards to accept or walk. Cap tables with different preference stacks need to be collapsed into one simple structure. One CEO leaves. A small amount of new money, €1 to €3 million, is usually needed to fund the integration and give the merged company 18 months of runway, and the fund should expect to provide most of it.
A more ambitious version is a private-equity-style roll-up, where the fund works with a buy-and-build sponsor to combine four to six companies in a vertical such as dental software, care-home technology or diagnostics AI into a platform. The sponsor brings the operating model and most of the capital, the fund contributes its companies at an agreed value in exchange for a minority stake in the platform, and the exit comes three to five years later when the platform is sold to a larger PE house or a strategic. This converts several small illiquid positions into one larger, better-managed, still illiquid position. That is an improvement, not a solution, and it suits funds with time rather than funds that need distributions this year.
Route 6: Non-dilutive and alternative capital to bridge to an exit
Most of the routes above take six to eighteen months, and the company needs to stay alive while they run. Europe's health sector has more non-dilutive capital available than almost any other, and a GP should treat it as part of the exit plan rather than as a founder's side project.
European and national grants. EIC Accelerator, Horizon Europe, EIT Health, Innovate UK, Bpifrance, HTGF and the German federal programmes continue to fund clinical validation, AI development and market access. Tech.eu's data shows the EIB as the most active healthtech investor in August 2026, a sign of how much of the sector's capital is now public. Grants take six to twelve months to land and cannot fund general operations, but a €1 to €2.5 million EIC grant that pays for the trial a buyer wants to see is worth pursuing even for a company that will be sold.
Venture debt and revenue-based financing. Lenders will not finance a company with no path to repayment, but a company that has restructured to breakeven and has recurring hospital contracts can borrow against them. The debt should be sized to the exit timetable, not the growth plan, and the covenants read carefully: a default that hands the lender control removes the GP's options.
Strategic and corporate venture capital. Pharma, medtech and insurer corporate VCs will invest in small rounds in companies they may later acquire. Taking their money narrows the eventual buyer list and sets the price, but it also funds the company through to a sale. A GP should negotiate the right of first refusal carefully so that it does not become a right to buy cheaply later.
Licensing and partnership revenue. Licensing the technology to a larger company in one geography or indication, in exchange for an upfront payment and milestones, can fund the rest of the business while a sale is prepared. For AI companies, licensing a model to an incumbent's platform is frequently the first step towards being acquired by it.
The point of this capital is to buy time for a process, not to extend the life of a company with no process. If none of the other routes is being run, non-dilutive money only defers the decision.
Route 7: Orderly wind-downs that still return capital
Some companies should close. The mistake is closing them badly. An insolvency administrator in Germany, a liquidator in the UK or a mandataire in France will sell the same assets described above, but without warranties, under statutory time pressure, and after paying their own fees and preferential creditors. The fund typically receives nothing.
A solvent, GP-managed wind-down produces a different result. The sequence is: decide early, while there is at least six months of cash; stop all discretionary spend and non-core hiring immediately; sell or license the assets over a three-to-four-month window while the company can still give warranties; novate customer contracts to a buyer or a competitor who will take over support, which protects the company's directors from claims about patient safety and keeps clinical users whole; settle employee obligations properly, which in most European jurisdictions is a legal requirement rather than a courtesy; close the regulatory file correctly, including post-market surveillance handover and notified body notification; and distribute what is left under the preference waterfall.
Health companies carry obligations that other startups do not. A device still implanted or in use must have a legal manufacturer responsible for it. Patient data must be retained, transferred or destroyed according to GDPR and national health-data rules. A clinical trial in progress must be closed out or transferred to a sponsor who will finish it. These are not reasons to avoid a wind-down; they are reasons to run it from the fund with proper advice rather than leaving a departing founder to work it out.
A well-run solvent wind-down of a health company with real assets returns 10 to 30 percent of the last round's capital in most cases, and sometimes considerably more where a regulatory clearance or dataset finds the right buyer. It also protects the fund's reputation with the founders, employees and hospital customers who will be on the other side of the table in the next fund. A GP who closes companies well is a GP that the best founders are willing to take money from again.
The playbook for GPs
The routes above are not alternatives to pick from a menu. The sequence is what matters, and most funds get it wrong by starting with the process they find easiest (a quiet word with a banker) rather than the one that preserves the most options (triage and a cash plan). A workable order for a GP facing several stranded health companies at once:
Mark the positions honestly, now. Write the companies down to what a buyer would pay today. Every route below gets easier once the GP has stopped defending a valuation that no longer exists, and LPs would rather see a realistic mark than a surprise.
Run triage on each company within 30 days. Use the three questions above. Bring in an operator or adviser with no attachment to the original thesis. Produce a one-page verdict per company: restructure, sell whole, sell parts, or close.
Fix the cash runway before anything else. Cut the cost base to buy at least nine months. Apply for the grants that are actually available. Do not fund a bridge from the reserve unless it is attached to a named process with a timetable.
Take control of the process. The fund, not the founder, appoints the adviser, sets the buyer list and runs the timetable. Founders are consulted and paid for staying through completion. They are not left to sell the company alone.
Clean the cap table. Collapse preferences, reset the option pool and align the people who will run the next 18 months. Co-investors who will not engage should be given a chance to sell their position cheaply to the fund or to a secondary buyer.
Run parallel tracks, but not forever. A whole-company sale process and an asset-sale fallback can run side by side for eight weeks. After that, pick one. A process that drifts beyond six months is a process that has failed.
Use the fund's own tools. A multi-asset continuation vehicle, a NAV facility or a direct secondary of one position can unlock the time and cash to execute the company-level routes. Treat fund-level liquidity and company-level liquidity as one plan.
Close what should close, properly. Decide early, fund the wind-down, protect patients and staff, and distribute the proceeds. Then move on.
The funds that do this well tend to have one partner, or one operating partner, whose entire remit is the stranded middle of the portfolio. Spreading the work across deal partners who would rather be finding new investments is how companies drift for two years and then fail.
Conclusion
European healthtech, medtech and health AI will keep producing stranded companies for as long as the sector's sales cycles, reimbursement systems and regulatory costs outlast the runways its investors fund. The capital is concentrating in a handful of winners, and the companies in between are being left to sort themselves out. That is the environment, and no fund can change it.
What a fund can change is whether those companies return capital or vanish.
The assets inside them are real: regulatory clearances, clinical evidence, consented data, hospital contracts, teams that understand clinical workflows and, in many cases, a small profitable business that was buried under a growth plan. Each has a buyer, a structure or an operating model that can convert it into cash, carried value or a cleaner exit. The difference between a fund that returns 0.3 times on its stranded companies and one that returns nothing is rarely the quality of the companies. It is whether the GP decided, early and honestly, to run a process at all.
The figures in this post on funding and secondaries volumes are drawn from the linked sources; valuation ranges and return estimates are the author's working assumptions and will vary by company, jurisdiction and buyer.
Nelson Advisors > European Healthcare Technology Investment Banking
Nelson Advisors specialise in Mergers and Acquisitions for European HealthTech, MedTech, Digital Health, Healthcare IT, Healthcare AI companies in the Lower to Mid Market ranging from $25M to $250M EV. www.nelsonadvisors.co.uk
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