Blog | 11/25/2025
What a Difference a Year Makes: Diagnostics Deal-Making Roars Back
By Donna Hochberg, Chris Karras, Gary Gustavsen, Arushi Agarwal, Martha O’Neill, and Rebecca Podolsky
After two years of stagnation, 2025 has shattered records in diagnostics deal-making. Last week’s acquisition of Exact Sciences by Abbott for a total value of $23B marks the largest transaction in in vitro diagnostics history. Add to that the BD/Waters merger and TPG/Blackstone’s take-private of Hologic, and this year’s mega-deals (almost) surpass the combined total of the past decade. What changed? And what does this mean for the future of diagnostics and precision medicine?
How Did We Get Here?
The story begins with the pandemic hangover. In 2023 and 2024, the diagnostics (Dx) industry faced a drought in big deals. Valuations fell sharply as the market normalized post-COVID, and investors grew cautious, closing the IPO window and slowing smaller transactions. Large deals, defined as those over $1 billion, were nonexistent.
Meanwhile, both strategic players and private equity firms were sitting on significant dry powder. COVID testing had generated billions in cash for major diagnostics companies, but much of that capital either remained idle, was used to repurchase shares, or was diverted to non-Dx investments. Private equity firms also had money to deploy but avoided diagnostics in 2023 and 2024.
Another factor was the complexity of conglomerate portfolios. Many large companies housed diagnostics and tools assets alongside medtech businesses with very different growth profiles. This created pressure to consider strategic divestitures. Becton Dickinson’s decision to separate its diagnostics and tools assets was a turning point. Its sale to Waters not only ranked among the largest Dx deals in history, but signaled that big Dx assets could move successfully. The process attracted private equity interest in diagnostics for the first time in years, as firms saw undervalued assets with strong fundamentals.
The result? In 2025, three mega-deals—each among the top five Dx transactions ever—were announced. Combined, they exceeded the total value of all mega-deals in the past decade.
Where Are We Going? Predictions for 2026–2027
The momentum is unlikely to stop here. Conglomerate divestitures and stressed Dx businesses will continue to create opportunities for spins, take-privates, and large acquisitions. Private equity firms, having re-engaged with the sector, are expected to play a bigger role in the coming years, alongside big moves from strategics.
Precision medicine (PM) labs such as Exact, Natera, and Guardant are steadily progressing toward profitability after years of losses, while maintaining high double-digit revenue growth. These companies are increasingly positioned to become aggregators themselves. Given the economics of the lab business, achieving scale is a logical strategy to improve margins and strengthen competitive positioning.
Finally, the IPO window may also be reopening. Strong fundamentals, two successful IPOs (Caris and Billion to One) in 2025, and renewed investor confidence could revive public offerings for Dx and PM companies, adding another layer of dynamism to the market.
Why Abbott + Exact Matters
Abbott’s acquisition of Exact Sciences adds a fascinating dimension to the story. Abbott is a product company that sells tests broadly to multiple end users who run them in their own labs or at the point of care. Exact Sciences, by contrast, operates as a single-site specialty lab performing proprietary tests exclusively in its own facility.
This raises the age-old question: should product companies own labs? Historically, the barriers have been significant—earnings-per-share dilution, operational complexity, and the challenge of integrating two very different business models. Abbott’s move suggests these hurdles can be overcome, at least when the lab in question is mature, generating significant revenue, and profitable. For Abbott, the drivers were clear: access to innovation (and data), early go-to-market opportunities via LDTs, a very successful lab from a revenue standpoint, access to the fast-growing oncology & predictive medicine/screening markets, and the potential to globalize Exact’s tests.
Will Dx and PM Merge Further?
The question of whether diagnostics and precision medicine will merge further has long been debated. Previous examples have had a mixed history.
Our team has advised clients on this topic for years, and the drivers of interest remain compelling: access to innovation, early commercialization through LDTs, and opportunities to globalize tests.
However, barriers persist. Historically, these deals have been dilutive to EPS, and the operational models of product companies and labs differ significantly. Strategic fit is another challenge—labs must complement the acquirer’s portfolio and expertise.
Abbott’s acquisition of Exact may inspire others to follow suit, but it required a willingness to accept EPS impact for two years and make a bold strategic bet. Will others take similar steps? Which labs will emerge as prime targets?
Our take: yes, we will see a few additional examples of this type of merger. The ingredients are right: improving performance of labs, product company cash and need to drive innovation, and reasons to believe that some synergies can be achieved.
Conclusion: A Market Reshaped
After years of stagnation, diagnostics deal-making is back and bigger than ever. Structural shifts are underway; the next two years will continue to restructure the industry. How the market will look in 2027 is hard to predict, but one thing is clear: after the pandemic hangover, renewed interest and investment in Dx and PM can only accelerate innovation and bring critical technologies to patients faster.