Digital Health‘s Path Forward: IPOs,M&A,and the Blueprint for Success
The digital health landscape is shifting.After a period of relative IPO dormancy, 2024 saw a resurgence wiht companies like waystar, Hinge Health, and Omada Health successfully entering the public markets. But going public isn’t the only path to growth and sustainability. Increasingly, mergers and acquisitions (M&A) are gaining traction, reshaping the industry. This article explores the current state of play, offering insights for companies navigating these critical decisions.
The IPO Window Reopens – But It’s Selective
For years, the IPO market was largely closed to digital health companies. Now, the door is cautiously opening. Megan Scheffel, head of credit solutions for life science and healthcare at Silicon Valley Bank, notes a growing number of companies are preparing for a public debut in 2026 and 2027.
though, simply wanting to go public isn’t enough. The market is demanding proof of concept. Companies need to demonstrate they have the financial profile to succeed in the scrutiny of public ownership.
The Omada & Hinge Model: A New Standard
Omada Health and Hinge Health have become benchmarks for future IPO hopefuls. They’ve effectively “redefined the blueprint” for what it takes to become a publicly traded company, according to Sasha kelemen, a director in Baird’s global healthcare investment banking group.
Here’s what set them apart:
* Strong Top-Line Growth: Both companies showed consistent revenue increases.
* Healthy Margins: They demonstrated efficient operations and profitability.
* Path to Profitability (or Actual Profitability): Investors wont to see a clear route to sustainable financial performance.
* Proactive Preparation: Leaders at both firms actively prepared for public scrutiny while still private.
Daniel Perez,CEO and co-founder of Hinge Health,revealed they ran their business as if it were public for two years prior to their IPO. This included mock earnings calls and a commitment to consistently exceeding expectations for four consecutive quarters. Sean Duffy, co-founder and CEO of Omada, emphasized the importance of seeking specific investor feedback during the pre-IPO phase, rather than solely focusing on timing.
M&A Momentum: A Rising tide
While an IPO represents a meaningful achievement, it’s not the right move for every company. the costs, restrictions, and shareholder scrutiny are significant. Consequently, many firms are finding attractive exits through mergers and acquisitions.
Data from Rock Health indicates a significant increase in M&A activity. Deal volume rose 37% year-over-year, with 166 acquisitions recorded through the third quarter of 2025, compared to 121 in 2024.
This trend is manifesting in two primary ways:
- Consolidation: Similar companies are merging to achieve efficiencies and scale.
- Capability Expansion: Companies are acquiring businesses in adjacent areas to broaden their service offerings.For example, a behavioral health provider might merge with a physical therapy company.
The Challenges of Integration
M&A offers a viable exit strategy, but it’s not without its hurdles. Integrating two companies, particularly for startups lacking M&A experience, can be complex and challenging.
Kelemen notes a “come to Jesus moment” across the digital health sector. Many companies are realizing that merging with others may be necessary for survival or to preserve their legacy. However, she cautions that the integration process itself can be “painful.”
What Does This Mean for Your Company?
The digital health landscape is dynamic. Whether you’re considering an IPO, exploring M&A opportunities, or simply navigating the evolving market, here’s what you need to focus on:
* Financial Discipline: Prioritize revenue growth, profitability, and strong margins.
* Operational Maturity: Run your business with the rigor and transparency of a public company,even if you’re still private.
* Strategic Alignment: Carefully evaluate your long-term goals and determine which path – IPO or M&A – best aligns with your vision.
* Due Diligence: Thoroughly assess potential acquisition targets or be prepared for intense scrutiny during an IPO process.
* **Integration Planning
Keep reading