Going into 2026, it felt like the Health IT market was finally positioned for a sustained recovery. Inflation had moderated, interest rates were moving in the right direction, and transaction activity was beginning to build momentum. Then came the SaaSpocalypse, raising legitimate questions about how AI could transform software markets, followed by the conflict with Iran. Together, they introduced uncertainty, shifted interest rate expectations, tightened credit markets, and once again slowed what appeared to be a strengthening M&A environment.
This was only the latest in a longer series of disruptions that has repeatedly interrupted market momentum since COVID. After several years of inflation, rising rates, government spending volatility, tariffs, geopolitical conflict, and now AI-driven uncertainty, investors have become conditioned to expect that another challenge may be around the corner.
Yet beneath that caution, the market remains constructive. Capital is available, buyers are active, and high-quality businesses continue to command strong valuations. At the same time, the market is more disciplined, in a way that is generally healthy. There is still enough tightness that certain middle-tier assets are struggling to achieve clearing valuations, reflecting a combination of more selective underwriting and, in some cases, buyers waiting for greater visibility into how AI may reshape software markets. Overall, the market continues to function well, transactions are getting done, and sellers are increasingly adjusting to today’s environment.
The market may finally be recognizing that the environment it has been waiting for is already here. While not every asset profile is participating equally, buyers are engaged and capital is available. This is not an exuberant market, but it is a rational one, and a healthy foundation on which to build a sustainable and vibrant M&A market. We believe that is a more encouraging place to be than many market participants appreciate today, and that foundation is already taking shape as we enter the second half of 2026.
See below for a few specific, additional observations relating the today’s Health IT Market:
Buyout vintages have experienced a slowdown in exit pace. This slowdown is more pronounced for the COVID vintage, likely a result of elevated valuations during the period. While it remains too early to draw definitive conclusions on more recent vintages, the data suggests that realization timelines have shifted structurally higher. Elevated entry multiples have likely contributed to this trend by raising return thresholds and requiring a combination of earnings growth and improved financing conditions before sponsors can achieve attractive exits.
Health IT’s AI advantages have narrowed the valuation gap with Enterprise SaaS. Health IT has historically traded at a discount to Enterprise SaaS, but that relationship inverted during 2025 and 2026 as Enterprise SaaS was more acutely impacted by the SaaSpocalypse. Health IT has proven more resilient, supported by the competitive moats created by HIPAA protected data, complex clinical workflows, regulatory requirements, high switching costs, and mission critical applications. At the same time, healthcare may represent one of AI’s greatest opportunities given its vast stores of unstructured data. As Enterprise SaaS revenue multiples fell, Health IT valuations remained closer to their long-term averages. Enterprise SaaS multiples rebounded from a low of 3.1x revenue in April to finish the quarter near 4.0x.
Overall, Health IT investment activity continues to gain traction in the market, but is underpinned by a more nuanced shift towards fewer, larger deals. Capital deployment in 1H 2026 was concentrated among a relatively low number of institutional investments – 174, compared to 233 in 1H 2025. Of the 233 investments ultimately recorded for 1H 2025, 199 had been announced as of the publication of HGP’s July 2025 report. Further, the 20 largest deals captured ~56% of total 1H 2026 capital invested in U.S. Health IT. This shift represents a meaningful departure from historical trends, with the top 20 deals comprising an average of ~33% of total U.S. Health IT investment annually from 2021 to 2025.
