The rehabilitation M&A market is showing signs of renewed vigor in 2025 after a period of moderation. With easing interest rates and persistent sector fragmentation, deal activity is picking up as private equity and strategic buyers position for consolidation. To unpack these trends, the LevinPro HC team interviewed Paul Martin, President of Florida-based Martin Healthcare Advisors. Martin’s insights highlight the market’s current dynamics, buyer priorities and staffing challenges that could shape deals in the year ahead.
Martin Healthcare Advisors is a national leader in middle market healthcare mergers and acquisitions, valuations, profit building consulting and buyer-seller advisory services specializing in Outpatient Rehabilitation, and Applied Behavior Analysis. The firm has done more than 150 deals representing more than 400 clinics and a total payout to owners of more than $500 million.
“The rehab market is active but evolving. We’re not at the record pace of 2021–22 when COVID and close-to-free debt drove a surge in deals,” Martin noted.
According to LevinPro HC data, 34 rehab deals have been announced year to date as of September 29, 2025. This compares to 28 rehab deals during the same 2024 period, 38 during the same 2023 period, 66 during the same 2022 period and 65 during the same 2021 period. Full year totals show 46 rehab deals announced in fiscal 2024, 51 in fiscal 2023, 82 in fiscal 2022 and 96 in fiscal 2021. Among strategic acquirers, Ivy Rehab and its pediatric arm Ivy Rehab for Kids stand out as the most active so far in 2025, with four and three deals respectively.
While the uptick from 2024 is welcome, the market is still adjusting to higher borrowing costs that tempered activity through much of the year. The Federal Reserve’s September 17 rate cut, lowering the federal funds rate to a target range of 4.00% to 4.25%, could accelerate momentum further.
“We’ve had a rate cut recently. Lower borrowing costs tend to boost confidence across the industry,” said Martin.
This easing aligns with broader healthcare M&A recovery, where outpatient rehab’s fragmentation continues to attract buyers. The sector’s structure, with thousands of independent clinics nationwide, creates ample room for platforms to scale through add-ons and tuck-ins. According to Martin, larger deals, those targeting companies with $50 million or more in EBITDA, have been scarce but activity may thaw as capital flows improve.
At the heart of this activity are buyers seeking targets with solid fundamentals. In rehab, operational efficiency and cash generation separate the attractive from the overlooked.
“Buyers are drawn to well-run practices: owners who understand their business, operate efficiently, and generate strong cash flow,” Martin explained. “Another motivation is competition. Companies will step up when they know they are in a competitive process; everyone wants the winning assets.”
Martin emphasized that the competitive environment not only influences pricing but also accelerates the pace of deals. When multiple buyers are chasing the same target, diligence and negotiations often move faster, resulting in higher valuations for well-positioned sellers.
“When an acquirer knows peers are competing on the same timeline, they move faster, streamline diligence and push valuations higher,” said Martin.
Fragmentation remains a defining feature of the outpatient rehab market. According to Martin, the top three companies in the United States represent just 8-10% of the overall clinics, leaving significant opportunity for consolidation. Investors and operators with the resources to scale can leverage this fragmentation to capture market share or create efficiencies that smaller, independent clinics cannot.
“Outpatient physical therapy remains highly fragmented. By clinic count, the three largest operators together control roughly 8% of U.S. clinics; even the top five to six combined are only ~10–11%, depending on the denominator you use,” Martin added.
Private equity firms specializing in healthcare services lead the charge, building platforms like Confluent Health and Upstream Rehabilitation through strategic add-ons. Of the 34 deals announced so far this year, 20 have involved private equity acquirers and/or their portfolio companies, encompassing nearly 59%. This compares to just nine private equity deals announced during 2024, encompassing 32%. Waud Capital Partners was the most active private equity backer, with involvement in seven Rehabilitation deals so far in 2025. Public players such as U.S. Physical Therapy add measured volume but face tighter oversight.
Looking ahead, Martin is optimistic about the market’s trajectory, though he warns that staffing constraints could influence future growth.
“I’m very optimistic about rehab into late 2025 and beyond, though staffing is the biggest wildcard. New PT graduates carry heavy debt loads, and current salary levels haven’t yet kept pace,” said Martin.
The staffing squeeze, driven by tuition costs often exceeding $100,000 for Doctor of Physical Therapy programs and entry-level pay averaging $101,000 annually, threatens clinic throughput and deal appeal. New grads enter the field saddled with massive debt, making it harder for clinics to attract and retain talent without competitive wages. Without adjustments like higher starting salaries or efforts to lower program tuition (such as scholarships or cost reforms at schools), understaffing could erode cash flows and stall growth.
Operators pushing for better reimbursements and retention strategies like flexible scheduling and professional development programs will fare best. For instance, U.S. Physical Therapy, Inc. has rolled out clinician mentorship initiatives and work-life balance perks to combat turnover amid shortages.
Strategic Advice for Rehab M&A Dealmakers:
For operators and investors navigating the rehab M&A landscape, Martin emphasizes the importance of taking proactive steps to stay resilient and capitalize on opportunities. Privately held companies, in particular, should step back periodically to gain perspective on shifting dynamics.
“For private firms: take a moment to lift your head, observe what’s happening in the market, who’s being acquired, how peers are repositioning. And ensure you’re constantly adding value to your business,” Martin advised.
In practice this means regularly evaluating the company’s worth, monitoring comparable transactions and implementing enhancements such as expanding payer mixes or strengthening referral networks. These actions help businesses remain competitive, anticipate market shifts and prepare for smoother exits whether through a sale or strategic partnership. For owners considering a transition, understanding the current value of their enterprise can guide targeted growth initiatives and turn potential weaknesses into strategic advantages.
Larger platforms and investors meanwhile often underestimate the value of front-line expertise in rehab operations.
“For larger companies and investors: come in with the humility that many clinician operators know how to run clinics, and those operators may be ideal partners for the future,” said Martin.
Successful integrations often rely less on outside consultants or corporate managers and more on elevating experienced physical therapists who understand local operations. This approach preserves community relationships, drives clinician engagement and accelerates post-deal performance. In a sector where patient connections and referral networks are critical, blending scale with operator-led management can unlock long-term value, particularly as private equity players like Waud Capital expand their platforms.
