Series A fundraising process is increasingly becoming an M&A exit route for HealthTech companies in 2025
- Lloyd Price
- Jun 23
- 4 min read
Nelson Advisors are seeing a growing consensus in 2025 that for many HealthTech companies, particularly those at the Series A stage, an M&A exit is becoming a more prevalent and often necessary outcome, rather than a traditional Series B, C, or IPO path.
Here's a breakdown of why this is increasingly the case in 2025:
1. Tight Venture Capital Environment
Post-pandemic correction: The boom in digital health funding seen during 2020-2022 has corrected, with higher interest rates and market caution leading to a significant slowdown in venture capital. Digital health funding in Europe, including the UK, saw a substantial drop in 2023, making it harder for Series A companies to secure follow-on funding.
Investor risk aversion: VCs are becoming more risk-averse. They are prioritizing more mature platforms with proven clinical impact, scalability, and monetisation potential. This means that early-stage companies with high cash burn rates and unproven revenue models face a tougher time meeting investor expectations for growth or profitability.
Dominance of "Mega Deals": While overall funding might show modest increases, a significant portion of capital is being directed towards "mega deals" (over $100 million) for more established companies. This leaves less capital available for smaller, earlier-stage rounds, pushing some Series A companies towards alternative exit strategies.
2. Dormant IPO Market
The public market volatility has stalled the IPO window, leaving a backlog of maturing unicorns and later-stage companies unable to go public. This bottleneck impacts the entire funding ecosystem, as VCs need successful exits to return capital to their limited partners and re-invest in new ventures. With IPOs less viable, M&A becomes the primary exit route.
3. Strategic Buyer Appetite for Innovation
Consolidation: Larger healthcare organisations, including big pharma, global tech firms, and even European health systems, are actively seeking to acquire Series A HealthTech companies. They view these smaller, innovative firms as a way to enhance their digital capabilities, enter high-growth areas (like AI, telehealth, and digital diagnostics), or acquire specific niche solutions that align with their strategic priorities.
Lower Valuations: Series A firms typically have lower valuations than later-stage startups, making them cost-effective targets for strategic buyers, especially in a market where funding constraints have depressed valuations.This is an attractive proposition for larger players looking to acquire innovation without overpaying.
Focus on AI-Native Solutions: Companies with embedded proprietary AI into core workflows are seeing outsized interest. Acquirers are prioritising AI-native capabilities over retrofitted solutions, making AI-driven Series A HealthTech companies particularly attractive.
Addressing NHS Challenges: In the UK, strategic buyers, including NHS Trusts, are looking for solutions that address the health system's challenges, such as improving interoperability, driving efficiencies, supporting preventative care, and enhancing patient outcomes. Series A companies that can demonstrate this alignment are highly attractive.
4. Distressed M&A Opportunities
Unfortunately, some Series A HealthTech companies in the UK and Europe are facing distress due to unsustainable business models, staffing challenges, or high operational costs. This creates opportunities for larger companies to acquire their assets or technologies at discounted valuations through distressed M&A.
5. Regional Market Complexities and Strategic Alignment
Many Series A HealthTech companies focus on niche solutions that align with regional priorities, such as NHS interoperability in the UK or GDPR-compliant digital health platforms in Europe. This strategic alignment makes them attractive to buyers looking to enhance their offerings in specific markets.
In essence, the current economic climate has created a perfect storm: a tighter VC funding landscape and a challenging IPO market are compelling early-stage HealthTech companies to consider M&A as a viable, and often preferable, exit. Meanwhile, strategic buyers are eager to acquire innovative technologies at more favorable valuations to fuel their own digital transformation and address evolving healthcare demands. This trend is expected to continue dominating the exit landscape for Series A HealthTechs throughout 2025.
Nelson Advisors > Healthcare Technology M&A
Nelson Advisors specialise in mergers, acquisitions & 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
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