Where are the opportunities in 2026 for Private Equity in the European Healthcare IT and AI markets?

Nelson Advisors
8 minutes ago
14 min read

Executive Summary: The 2026 European HealthTech Investment Thesis

The European HealthTech market, encompassing Healthcare IT and Artificial Intelligence (AI), presents a robust and timely opportunity for specialised Private Equity (PE) deployment in 2026. Following a period defined by market correction and post-COVID-19 volatility, the sector is experiencing a strategic rebound driven by demographic pressures, mandatory regulatory shifts and the transition from fragmented point solutions to scalable, proven business models.

PE confidence in the overall health and resilience of the European market is high, with senior decision makers anticipating an increase in transactions over the next 12 months, supported by strong fundamentals and a generally positive outlook.

The strategic deployment mandate for PE firms in 2026 hinges on leveraging significant operational expertise and technological integration capabilities to consolidate fragmented mid-tier assets.

Top 3 High Conviction Theses for 2026

Regulatory Arbitrage Platforms: Strategic investment in solutions that ensure compliance and enhance interoperability, particularly those enabling the mandates of the European Health Data Space (EHDS) and managing the risk requirements of the EU AI Act. These regulatory frameworks, while introducing complexity, effectively create a competitive barrier to entry for smaller, non-compliant entities, transforming compliance into a defensible competitive moat.
Operational IT Consolidation (Buy and Build): Executing rigorous buy-and-build strategies in highly fragmented, non-clinical IT segments such as Revenue Cycle Management (RCM), finance, billing, and inventory management. This approach targets immediate and verifiable EBITDA uplift by imposing operational standardization and transitioning traditional service models into recurring, Software-as-a-Service (SaaS) revenue streams.
Clinically Validated AI Enablers: Focusing capital on AI and Digital Health applications that demonstrate clear clinical validation, established real-world evidence signals, and secured reimbursement pathways. The most prominent example is leveraging the German Digital Health Application (DiGA) framework to de-risk monetisation and create a scalable validation blueprint for pan-European expansion.

Macro Context and Financial Landscape in 2026

Structural Drivers of Digital Adoption

The impetus for digital transformation in European healthcare is not cyclical but structural, driven by inescapable macro trends. Population growth, aging demographics, and a rising burden of chronic co-morbidities place increasing, unsustainable pressure on existing healthcare infrastructures. In response, technological innovation is shifting from a desirable enhancement to a necessary foundation for system survival.

Specifically, AI applications are viewed as critical levers to tackle long-standing challenges, such as rising costs and fundamental inefficiencies, by optimising resource allocation and streamlining administrative workloads. For instance, predictive modelling capabilities within AI can accurately forecast patient admissions, thus optimising the utilisation of hospital beds, staff and essential equipment.

Market Growth and Investment Environment

The European Health IT market demonstrates sustained resilience. It is projected to grow at a Compound Annual Growth Rate (CAGR) of 5.6% from 2022 to 2030, eventually reaching a projected revenue of US$2,896.8 Million by 2030. While the overall growth is stable, the market shows geographic variation, with the United Kingdom (UK) expected to register the highest CAGR during this forecast period.

Crucially for PE deployment, the European market is experiencing heightened investor interest. Amidst global geopolitical turbulence and regulatory complexity in other jurisdictions, Europe’s comparative political and regulatory stability is increasing its appeal as a target investment destination. This stability, combined with attractive valuations relative to the US, is motivating US investors to diversify capital deployment into Europe. This large volume of unallocated capital, or "dry powder" globally reported at nearly $2.5 Trillion for PE funds, including US investors sitting on an estimated $1.1 Trillion ready for investment, is expected to accelerate deal activity in the second half of 2025 and intensify throughout 2026.

The Importance of Valuation Discipline and Exit Strategy

PE investment mandates remain centered on acquiring stable, cash-flowing assets that offer clear pathways to value creation. In the first half of 2025, PE transactions in European Healthcare averaged an 11.2x median EV/EBITDA multiple, reflecting the premium paid for predictability and maturity.

However, technology innovators in high-growth areas, such as AI diagnostics, telemedicine, and digital surgery, often achieve significantly higher revenue multiples, ranging between 6x and 8x due to premium demand from both strategic buyers and PE firms.

The structure of the valuation landscape directly dictates the primary exit strategy. The broader Initial Public Offering (IPO) market is projected to remain subdued throughout 2025, presenting a continued challenge for larger PE-backed companies seeking public listings. Therefore, Mergers & Acquisitions (M&A) activity, specifically strategic consolidation and eventual acquisition by corporate buyers, remains the predominant exit pathway by volume.

A core strategic mechanism for generating superior returns in the European market is to capitalise on a fundamental valuation gap. European companies historically trade at lower valuations compared to their US counterparts, often due to market fragmentation.

PE funds execute a strategic arbitrage: acquire European assets at lower entry multiples, rigorously standardise operations for cost efficiency, integrate modern technology like AI to enhance margins, and subsequently achieve an exit to a global strategic buyer (frequently US-based) at a higher comparative multiple. This requires demonstrating measurable operational improvements, such as the 10-20% EBITDA uplift achievable through standardisation and successfully transitioning the portfolio company towards a high-multiple recurring revenue model.

Private Equity Playbook: Value Creation through Consolidation and SaaSification

The Imperative of Buy-and-Build Strategies

The most critical strategy for PE funds deploying capital into European HealthTech in 2026 is the Buy and Build (B&B) model. The entrenched structural fragmentation within the HealthTech and MedTech landscape makes it an ideal environment for B&B, which allows PE to create scale and add value where high asset prices may constrain standalone deals.

Studies indicate that B&B deals significantly outperform standalone PE deals, reinforcing this approach as the primary value driver. This strategy is particularly successful in service-based sectors such as dentistry, physiotherapy and specialty laboratories, where technology integration is key to centralising operations.

Execution of the Roll-up Playbook

Successful execution of the roll-up strategy requires a disciplined, phased approach that prioritises deep operational and technological integration over simple financial consolidation.

The initial stage involves the Platform Acquisition, identifying a mature, market-leading company in a specialised niche such as niche Medical Device Original Equipment Manufacturers (OEMs) or specialised testing laboratories that can serve as the core technology and operational backbone.

The subsequent Rapid Integration phase focuses on immediate efficiency gains. This includes centralising back-office functions (finance, procurement) and standardising processes across acquired entities.

Operational consulting support, focusing on M&A strategy and integration, has historically delivered significant results, with demonstrable improvements in earnings before interest, taxes, depreciation and amortisation (EBITDA) of up to 20% for medical device services providers. For example, PE activity in the DACH region has successfully consolidated service providers like dental practices into large networks (e.g., Nordic Capital's European Dental Group) to streamline operations and centralise administrative functions.

Similarly, Cera Health in the UK acquires existing home healthcare companies and immediately rolls out proprietary patient management software to standardise service delivery and centralise billing. The viability of this consolidation model critically depends on the successful integration of technology systems across disparate acquired entities. Failing to standardise information technology systems, or acquiring businesses burdened by legacy IT that requires significant, unanticipated capital expenditure, can derail expected cost synergies.

Therefore, rigorous due diligence must assess the technical compatibility and readiness for integration of target companies. As the European Health Data Space (EHDS) mandates data harmonisation, investments must prioritise IT systems that are designed for interoperability and data modernisation, mitigating the substantial risk associated with technology debt in non-compliant legacy systems.

The Strategic Roll-up Playbook: Value Creation Phases (2026 Focus)

PE Phase	Target Timeframe	Primary Focus (Value Creation Lever)	Metric/Goal
Focus	Timeline	Function	Process
Platform Acquisition	30–60 Days	Strategic/Financial Alignment, Proprietary Technology Fit	Establish Core Management & Governance
Rapid Integration	3–4 Months	Cost Reduction, Back-Office Standardization, Regulatory Integration	Achieve 10-20% EBITDA Uplift Potential
Acceleration & Optimization	6–12+ Months	Growth, Cross-Selling, AI & Interoperability Tech Integration	Drive Multiple Expansion (SaaS Model)

Technological Value Creation: The SaaS Transition

In the final phase of acceleration and optimisation, PE deployment must focus on maximising the multiple by transitioning portfolio company revenue models. A crucial trend in MedTech and HealthTech is the shift from traditional one-off product sales to repeatable, service-based models.

PE investment must prioritise targets capable of transitioning their business model to offer recurring revenue services, such as software maintenance contracts, remote monitoring subscriptions, or outsourced testing agreements. This transition to a Software-as-a-Service (SaaS) model, enabled by platform scale, facilitates the negotiation of long-term service contracts and generates the predictable cash flow that commands superior revenue multiples during exit.

High Conviction Investment Opportunities by Sub-Sector (IT and AI)

Investment opportunities are converging on three key areas in 2026: efficiency-focused IT, clinically validated AI, and decentralized care enablement.

Operational Efficiency IT (RCM and Core Infrastructure)

The largest and most stable targets for PE deployment reside in efficiency focused IT systems that streamline clinical and administrative workflows. Finance and billing represented the largest revenue-generating function in the European Health IT market in 2021, reflecting the sheer scale of the administrative burden. Moreover, inventory and material management is projected to be the most lucrative function segment, registering the fastest growth during the forecast period.

The market for Revenue Cycle Management (RCM) solutions, which handles critical financial processes like billing, coding, and claims processing, is highly attractive. The RCM market is fragmented, generates predictable, recurring revenue streams and aligns perfectly with PE’s preference for stable cash flow. AI solutions that automate and optimise these administrative tasks, such as patient scheduling and billing, are essential for freeing healthcare professionals to focus on patient care and reducing system costs.

While high-profile AI diagnostics often attract premium valuations, the majority of deployable PE capital in 2026 will be anchored by consolidating back-office IT and RCM solutions, as these assets provide the strong cash flow and immediate, verifiable cost savings required to solidify a platform acquisition and justify subsequent technology integration.

AI in Clinical and Research Solutions

AI-driven solutions are unequivocally the primary magnet for strategic investment and M&A interest, commanding higher valuations in the European market.

Within clinical practice, AI significantly enhances accuracy and enables earlier detection. Examples include AI systems used in mammography screening, which can identify early signs of breast cancer, and systems deployed in intensive care units that can predict the onset of life-threatening sepsis hours before clinical symptoms appear. This earlier detection often leads to less invasive and more cost-effective treatment options.

In the pharmaceutical sector, AI is transforming the entire lifecycle of medicines. It accelerates medicinal product discovery by identifying targets and optimising design, enhances formulations during development, and facilitates personalised medicine by optimising processes and minimising clinical trial failures, thereby significantly reducing time and costs.

The European Union recognises this necessity and is heavily investing across the entire AI value chain, from infrastructure (EuroHPC Joint Undertaking launching 13 AI Factories, 10 focusing on healthcare) to the development of robust and trustworthy models. The underlying factor for successful AI investment remains data. Investors demand clinically validated datasets, clear reimbursement pathways, and robust, defensible AI pipelines, distinguishing high-potential companies from early-stage experimentation.

Technologies Enabling Decentralised Care

The demographic and systemic pressures necessitate a shift in care delivery away from expensive hospital settings. A major investment trend moving into 2026 is the strategic shift towards outpatient care, driven by market tailwinds, policy support and technological innovation. In France, for instance, outpatient surgical procedures have dramatically grown from 47% of all surgeries in 2013 to 64% in 2024, illustrating the velocity of this shift.

Opportunities are abundant in technologies that enable this decentralization. Key target areas include Remote Patient Monitoring (RPM), which enables chronic disease management outside traditional settings, and AI-driven tools for bed optimisation and operational scheduling. These technologies facilitate the cost-effective transfer of procedures and monitoring out of hospitals, opening fresh investment opportunities in alternative care spaces.

The Regulatory Environment as a Value Lever and Risk

European regulations are not merely compliance hurdles; they are foundational market forces that define the competitive landscape and establish high-value barriers to entry for PE-backed platforms in 2026.

5.1 European Health Data Space (EHDS) Interoperability Mandate

The EHDS, established under Regulation (EU) 2025/327, introduces a harmonised technical, legal, and governance architecture for electronic health data across the EU.

Regarding the Primary Use of data, the EHDS requires Member States to align national electronic health record (EHR) systems to EU-level exchange formats. This mandate ensures that patient summaries, ePrescriptions and diagnostic reports are interoperable across borders, allowing health professionals to access necessary medical records even in different Member States.

For Secondary Use, the EHDS creates a consistent, trustworthy and efficient legal framework for reusing health data (e.g., from EHRs, clinical trials, and wellness applications) for research, innovation (such as personalised medicines), and policy-making. This framework unlocks significant monetisation potential for platforms that aggregate and utilise patient data ethically.

PE opportunity exists in investing in platforms that solve the fundamental data plumbing challenge. Firms capable of ensuring interoperability and secure data integration with EHRs and compliance with the EHDS mandate command higher revenue multiples, typically ranging from 5.5x to 7x.

These opportunities include infrastructure build-out, data normalisation services, and secure re-use platforms. The EHDS necessitates a focus on managing security risks, as liberalised data access requires more entities to manage credentials and authentication, creating a larger technical security surface.

AI Act Compliance and RegTech Investment

The EU AI Act introduces a risk-based regulatory framework, significantly impacting the healthcare sector. A large segment of AI utilised in healthcare, particularly in diagnostics and treatment planning, will be classified as 'high-risk' under the Act and thus subject to multiple requirements.

MedTech organisations must navigate complex compliance overlap, integrating AI Act obligations into existing frameworks like the Medical Device Regulation (MDR), the In Vitro Diagnostic Medical Devices Regulation (IVDR), and the General Data Protection Regulation (GDPR). This complexity necessitates enhanced due diligence during PE transactions to ensure that target companies have clear inventories of their AI models and adequate governance structures in place.

The inherent complexity and compliance costs create a clear opportunity for investment in specialised Regulatory Technology (RegTech) solutions. These solutions automate compliance checks, manage the complex alignment of AI Act requirements with MDR/IVDR timelines (2025-2027) and streamline regulatory submission processes.

PE-backed platforms that can centralise and standardise compliance functions effectively transform these regulatory costs into a competitive advantage over smaller, localised competitors. By systematically managing and de-risking compliance across a portfolio, the PE platform becomes far more attractive to strategic acquirers, thereby driving a higher exit multiple.

Regulatory Sandboxes (August 2026)

A key enabler for innovation under the AI Act is the mandated establishment of AI regulatory sandboxes. Each Member State must establish at least one such sandbox by 2nd August 2026. These frameworks are designed to foster innovation by facilitating the development, training, testing and validation of high-risk AI systems in controlled environments before they enter the market. This initiative aims to lower compliance costs and ease entry barriers, especially for Small and Medium-sized Enterprises (SMEs) and startups.

PE funds can strategically identify and fund startups utilising these sandboxes, effectively de-risking the regulatory path and obtaining early access to vetted, compliant technology platforms prior to full-scale acquisition.

Geographical Opportunity Mapping: Fragmentation and Focused Strategies

The fragmentation of the European market is a double-edged sword: it necessitates the buy and build strategy but also mandates a geographically nuanced approach, given the uneven deployment and uptake of digital solutions across the region.

Germany: The De-Risked Digital Health Ecosystem (DiGA)

Germany offers the most mature, government-backed pathway for digital health monetisation in Europe. The Digital Health Applications (DiGA) framework provides access to prescription and reimbursement for digital applications for 73 Million insured Germans, provided the applications meet standards for safety, quality, functionality, data security and positive care effects.

PE opportunities in Germany center on acquiring DiGA-listed companies. The “fast-track” approval process allows developers to obtain Preliminary Admission into the DiGA Directory for 12 months, during which time the application is reimbursable and available for prescription. This interim status creates a clear, de-risked path for monetisation.

PE investment should target companies that are well-positioned to complete the required large-scale clinical study within the 12 month period to achieve Permanent Admission and secure subsequent price negotiations with the National Association of Statutory Health Insurance Funds. DiGA status provides a highly standardised, guaranteed revenue stream that fundamentally de-risks the commercial potential of digital therapeutics, attracting substantial capital and positioning Germany as a high-conviction environment for digital health investment.

The UK and Northern Europe

The UK market is strategically important, forecasted to register the highest CAGR in European Health IT.Investment should focus on solutions that align with the strategic priorities of the National Health Service (NHS) and its Integrated Care Systems (ICSs). High-demand areas include Remote Patient Monitoring (RPM) for chronic disease management and AI-driven mental health solutions.

The operational consolidation playbook is particularly visible here; for instance, UK-based Cera Health has successfully used acquisitions of smaller home healthcare providers as platforms to rapidly deploy proprietary patient management software, standardising delivery and optimising efficiency.

Consolidation in Outpatient Services and Specialties

Across Europe, the trend of shifting care towards outpatient settings creates a need for specialised IT services. This transition is evident in markets like France, where outpatient surgery rates reached 64% in 2024. This macroeconomic trend favours PE consolidation plays in fragmented service sectors such as dental, ophthalmology and specialty medical practices. PE firms actively merge these service providers into larger networks, leveraging centralised IT and administrative platforms to streamline operations and create operational and financial efficiencies.

Conclusion and Strategic Recommendations

The Private Equity opportunity in European Healthcare IT and AI in 2026 is strategic, defined by the need for operational discipline and regulatory sophistication. The market is transitioning from an early-stage experimentation phase to one focused on "selective scale," where investors prioritise assets with measurable clinical and financial outcomes.

Priority Deployment Recommendations:

Platform Anchor: Anchor platform acquisitions with mature, mid-market companies specialising in high-growth, high-recurring-revenue operational IT, specifically RCM, finance, billing and inventory management solutions. These segments offer the fastest route to verified EBITDA uplift necessary to support aggressive roll-up strategies.
Regulatory Integration: Every acquisition must be assessed through the lens of EHDS and AI Act compliance. Prioritise targets that provide interoperability solutions to solve the data plumbing challenge for the entire platform portfolio, securing the ability to monetise secondary health data use and driving higher revenue multiples.
Geographic De-Risking: Use markets with standardised reimbursement pathways, such as Germany’s DiGA framework, as high-conviction deployment targets. The guaranteed revenue stream provided by successful DiGA status fundamentally de-risks capital deployment into digital therapeutics, creating a validation signal for future expansion.

Risk Mitigation:

Technology Debt and Integration: Rigorous due diligence is required to prevent the acquisition of assets burdened by legacy IT systems that cannot achieve the mandated EHDS interoperability requirements or integrate efficiently into a centralised platform.
Regulatory Overhang: Mitigate the substantial risks and compliance costs associated with the EU AI Act and MDR/IVDR by integrating specialized RegTech solutions across the portfolio and strategically supporting innovative startups utilizing the new regulatory sandboxes established by August 2026.

By executing a strategy that combines European regulatory stability, meticulous operational standardisation and the integration of advanced, clinically-validated AI tools, PE platforms will successfully transition European assets into high-multiple, institutional-grade entities, primed for acquisition by strategic global buyers.

Nelson Advisors > MedTech and HealthTech M&A

Nelson Advisors specialise in mergers, acquisitions and 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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