M&A trends in diagnostics and life sciences tools
The diagnostics and life sciences tools sector is attracting continued investor interest across both private equity and large corporates, although the nature of that opportunity is evolving. There has been a clear expansion beyond oncology-centric diagnostics towards a broader spectrum of diagnostic technologies, such as specialty and advanced proteomics, immune monitoring, and increasingly consumer facing testing.
Value is being seen in platforms that generate deeper biological insight and scale across multiple use cases. Examples include Abbot/Exact and Tempus, which integrate molecular data with real-world clinical outcomes to enable precision medicine applications, and SomaLogic, whose proteomics platform captures functional biology closer to phenotype than genomics alone and recent acquisition by Illumina illustrates a broader push toward more multi-omic approaches, supporting use cases from biomarker discovery through to diagnostics and pharmaceutical development.
Biological context is increasingly recognised as incredibly nuanced and important in improving diagnostic yield, leading technology advances in sequencing (e.g., modifications, structural variants), multi-omics, spatial / single-cell context, and the resulting, increasingly complex data analytics requirements that are starting to embed AI. In parallel, investment opportunities are expanding across the full workflow, including reagents, technology platforms, diagnostic tests, data, and services.
There is a pent-up wave of PE-backed exits in the life sciences tools and diagnostics sector due to come to market, which will be looking for either strategic exits or another turn of PE. As many of those PE-backed portfolio companies approach typical holding periods, emphasis will be on strategic focus, shoring up portfolios and operational capabilities to demonstrate future growth potential.
Strategic drivers in M&A
We see five key strategic drivers underpinning M&A activity across the space, spanning both corporate acquirers and financial sponsors.
Technology and innovation remain a primary driver of acquisitions, with buyers seeking access to differentiated or next-gen technologies, platforms, or intellectual property. These transactions are relevant across large corporates, PE-backed portfolio companies, and standalone private equity investors (who are considering a future strategic exit), particularly where technology can strengthen competitive positioning or address strategic capability gaps.
Scale is another important driver, with transactions focused on increasing size, geographic reach, operational capacity, or customer footprint. These deals are often aimed at driving efficiencies, strengthening market position, and enhancing leadership within specific segments. These scale-driven acquisitions are particularly relevant for large corporates, as well as standalone PE firms looking to establish a platform they can continue to build on.
Offering expansion also continues to drive activity, as companies look to source growth by broadening their product or service offering into adjacent segments or customer groups while leveraging existing commercial channels and customer relationships. This is relevant to large corporates and PE-backed portfolio companies.
Content expansion is another area becoming increasingly important as businesses look to add data, software, or analytics capabilities to enhance the value of existing tools, platforms, and workflows. These transactions are particularly relevant for large corporates and PE-backed portfolio companies seeking to deepen workflow integration and strengthen customer value propositions.
Finally, portfolio streamlining remains a key theme across the sector, with corporates and financial sponsors pursuing divestments or carve-outs of non-core assets to sharpen strategic focus, simplify operations, and reallocate capital toward priority growth areas. These carve-outs are of significant interest to PE firms who may want to use them as a platform for further bolt-ons, which also expands the pool of potential corporate acquirers who may be an attractive exit for smaller or PE-backed companies.
When is the right time to invest?
Investors consider a number of factors when evaluating acquisitions in the diagnostics and LS tools space, including the right time to buy, the key gaps being addressed, and the pathway to exit. These dynamics can influence the level of corporate versus financial investor interest, as well as the ease and success of a transaction process.
A key consideration is the trade-off between securing differentiated technology early and waiting for clearer commercial validation. Corporate acquirers will sometimes move early where a platform is viewed as strategically critical or fills an important capability gap, particularly in emerging modalities or next-generation workflows. However, these transactions remain relatively selective and often carry significant technical, clinical evidence, and commercial risk.
In practice, many diagnostics and life sciences tools businesses require a longer scale-building phase before becoming attractive strategic acquisition targets. Private equity can play an important role in this process, helping businesses build commercial traction, operational scale, and clearer strategic positioning through platform development and bolt-on acquisitions. By the time many corporates engage, they are often looking not only for differentiated technology, but also for evidence of customer adoption, recurring revenues, workflow integration, and sustainable growth pathway.
As a result, investors are becoming increasingly selective about which early-stage technology bets offer genuine value and are worth the punt versus those that remain more optional in nature where they continue to ‘watch and wait’. For smaller LS tools / diagnostics businesses, it is still important to engage with the large strategics early, both to be on their radar and also to learn what they would want to see as you continue product development and early market traction, however, expectations around successfully landing an exit or transaction should be realistic.
Companies looking to be acquired need to ensure a clear strategic plan to prepare and develop a clear path to exit, demonstrating their ‘hook’ for a strategic buyer or for a further turn of PE.
In terms of strategy, acquirers look for a clear and coherent strategic narrative, rather than fragmented initiatives. The most attractive businesses are those that have used targeted bolt-ons or R&D to build a focused platform with a clear ‘hook’ for strategic buyers. Critical to this is focus and depth in clearly defined areas where the technology adds measurable value. For financial sponsors, the key is having a growth story that can carry the business through multiple investment cycles, not just near-term upside.
For products, the strongest acquisition targets offer a clearly defined value proposition grounded in clinical, data, or workflow impact, not just the underlying technology. This distinction is fundamental. Buyers want evidence of real-world adoption beyond pilots, with proven commercial traction and use cases. It is critical to establish that the technology platform addresses tangible customer unmet needs and wins the right to have a place in the customer’s workflow, versus being a technically superior solution that only delivers limited value to the customer for their particular needs. A technically superior tool that doesn't solve a tangible business or clinical problem for the customer has limited appeal, regardless of its sophistication. Regulatory approval, clinical validation, and reimbursement pathways (or credible routes to them) are significant in de-risking the asset.
What makes a business attractive at exit?
Exit attractiveness is another central consideration, particularly for private equity investors where this will be a key question up front as they consider entry, not only toward the end of the investment cycle. Exit planning often shapes investment decisions from the outset, with companies needing to demonstrate a credible path to scale, clear differentiation, and a compelling strategic rationale for future corporate buyers. Businesses that lack a clear strategic exit narrative may struggle to generate investor interest, and can face longer hold periods and increased valuation pressure over time.
Operational readiness is essential for scale over an investment cycle. This includes the ability to manufacture, deliver, and support products at scale, as well as a clear plan for supply chain and service model expansion. Buyers also look for a credible path to profitability or EBITDA expansion, strong leadership, and governance, particularly the maturation from founder-led technical specialists to commercially oriented growth-phase leaders.
The diagnostics and life sciences tools sector offers exciting M&A opportunities for businesses prepared to seize them. To do this successfully as a seller, you need more than technology, as buyers seek commercial viability, operational scale, and mature leadership. Companies that combine focused strategy, proven customer adoption, and organisational readiness will be best positioned to exit on their terms, and to unlock the elusive strategic sale that rewards years of patient building.
About the author
Tom Bell is a partner in L.E.K. Consulting’s London office. A member of the life sciences practice, Bell focuses on biotech and biopharma corporate strategy, portfolio strategy, M&A, and value creation. He also has a focus on contract services for biopharma, including CROs and contract commercialisation organisations. He has led numerous projects within the life sciences industry for biotech, large and midsize pharma, and contract services providers, and for investors in both public and private companies. Bell has conducted various market and commercial opportunity assessments in oncology, immunology, respiratory, rare disease, and other areas, including for advanced modalities such as cell and gene therapy.
