M&A Outlook 2026: What Drove 2025 and What Will Define 2026

What You Need to Know:

• M&A rebounded in 2025, led by improving market conditions, easing financing constraints and renewed confidence among large, well-capitalized buyers.
• Mega-deals drove most of the value growth in 2025, while smaller and mid-sized transactions remained more selective, resulting in a top-heavy recovery.
• Artificial intelligence (AI) emerged as a central driver, with companies using M&A to acquire critical technology, data and infrastructure capabilities rather than build them internally.
• Stronger equity markets and improving credit conditions expanded financing options, enabling more complex and strategically ambitious transactions.
• Regulatory scrutiny and trade dynamics continued to shape deal execution, particularly for larger and cross-border transactions.
• Looking ahead to 2026, M&A activity is expected to broaden, with small- and mid-cap companies becoming more aggressive participants as confidence, liquidity and strategic clarity improve.

Key Drivers That Shaped Deal Making

M&A experienced a resurgence in 2025, powered by stronger markets, improved financing conditions and a shifting strategic landscape being driven by expectations for AI. Buyers, especially large-caps, returned with renewed confidence across sectors buoyed by rate-cuts, and backed by low-cost capital plus a focus on high‑conviction opportunities. Despite lingering macro pressures, dealmaking remained resilient through the H1 and accelerated in H2 – creating a dynamic foundation for broader deal participation in 2026.

Quarterly M&A Activity

Artificial Intelligence and Technology Demand

AI emerged as a major catalyst for dealmaking, driving companies to acquire proven platforms rather than build new capabilities from scratch. Limited data center capacity, rising infrastructure demands and the growing need for compute power reinforced the urgency to secure AI ready assets. Across industries, organizations sought technology that could streamline operations, reduce labor reliance and support localized production, contributing to increased consolidation in AI driven sectors.

Equity Market Rally Enabled More Stock‑Funded Deals

Stronger equity markets boosted buyer confidence and made stock a more attractive form of deal currency. As the year progressed and market volatility eased, companies became more willing to use shares to bridge valuation gaps and pursue strategic combinations. Stabilizing conditions later in the year further reopened stock based dealmaking, helping buyers and sellers align more easily on terms.

Improved Financing Conditions

Financing conditions evolved steadily throughout the year, creating a more supportive backdrop for M&A. Early on, uncertainty in traditional lending markets led many buyers to rely on private credit for its speed and certainty. As credit markets stabilized, lenders became more flexible and capital became easier to access, enabling companies to pursue larger and more complex transactions. By year end, improving liquidity helped revive deal pipelines and increase buyer activity.

Private Equity Dynamics

Private equity firms navigated a year of both constraint and opportunity. Early challenges – such as extended hold periods and valuation mismatches – slowed deployment, while private credit played an essential role in moving deals forward. As market conditions improved later in the year, sponsors re engaged more actively, supported by better liquidity and narrowing pricing gaps. Firms prioritized high conviction investments and sectors with strong long term fundamentals.

Regulatory and Trade Environment Slowed Cross-Border Deals

Regulatory scrutiny and shifting trade dynamics had a noticeable impact on dealmaking. Companies faced longer diligence timelines and more complex approval processes, particularly for larger strategic transactions. At the same time, trade tensions, supply chain reassessments, and reshoring efforts made cross border deals more challenging. These factors encouraged buyers to be more selective and strategic when pursuing international opportunities.

Mega-Deals

Mega-deals re-emerged as a defining feature of the 2025 M&A landscape, driving a sharp rebound in aggregate deal value despite only modest growth in overall volumes. Well-capitalized corporates and sponsors returned to the market with renewed confidence, pursuing large, strategic transactions to scale operations, secure critical AI- and technology-enabled capabilities and reshape portfolios. While these large transactions moved the market forward, smaller and mid-sized deals remained more cautious, reflecting a K-shaped recovery led by the largest buyers rather than broad-based market participation.

What’s Driving M&A Growth in 2026

The M&A landscape is poised for another active year, with broader participation expected across sectors and company sizes. Building on the renewed momentum of 2025, companies and investors are entering 2026 with confidence – ready to pursue strategic growth, sharpen portfolios and capitalize on a supportive financing environment. With dealmaking becoming more focused, more agile and more widely distributed, the year ahead is set to bring a deeper and more dynamic mix of opportunities across the market.

Continued Deal Activity

We expect M&A activity to remain strong in 2026 as economic and market conditions continue to support corporate and investor confidence. Private equity firms are likely to contribute meaningfully as they look to monetize past investments and redeploy capital, while smaller and mid‑sized companies are anticipated to become more active participants in the deal landscape. After a more cautious approach in 2025, small and mid-cap buyers are positioned to pursue M&A more aggressively in 2026. Improving financing conditions and clearer strategic priorities could help sustain deal momentum across both strategic and financial buyers.

Risk-On Environment

Companies are expected to lean into strategic M&A that strengthens core capabilities, advances technology adoption and supports long term growth goals. Private equity sponsors are preparing to deploy capital more actively, using tools such as continuation vehicles and structured exits to manage liquidity. Deal structures may increasingly incorporate creative mechanisms like earn outs or stock based consideration to bridge valuation gaps and balance risk between buyers and sellers.

Portfolio Reshaping

More companies are expected to streamline their operations through carve outs, spin offs and separations as they focus on simplifying their businesses and unlocking hidden value. This trend will likely drive transactions designed to enhance operational clarity and improve strategic focus. Integration planning is expected to become more disciplined, with an emphasis on managing complexity and protecting synergies.

Regulatory Overhang

Regulatory scrutiny will continue to shape deal processes in 2026, adding steps and considerations for both buyers and sellers. Heightened disclosure requirements and evolving oversight standards may introduce additional planning needs, making it important for companies to incorporate regulatory buffers into their processes. Deal teams will increasingly build contingency pathways to navigate potential regulatory hurdles with greater certainty.

Competitive Financing Environment

The financing backdrop is expected to remain favorable, with clearer interest rate trends and improved visibility supporting borrower confidence. A healthy supply of credit from both private lenders and traditional syndicated markets will contribute to a competitive environment for deal financing. This dynamic should provide buyers with greater flexibility in structuring transactions and support continued momentum across a wide range of deal types.