The M&A landscape moved from being mostly volume-driven to one that was more strategic in nature, with deals becoming smaller and more selective, with a greater focus on operations.
As the industry moves into 2026, what can we expect? Based on the signs, there are plenty of reasons to believe the new year will be one defined by pent-up deal pressure, portfolio rationalization, and new efficiencies driven by technology.
Our M&A outlook for 2026 examines these and other global M&A trends.
M&A Market Trends
The coming year is a blank slate, and it’s difficult to know precisely what to expect. However, taking a close look at what’s happened in the recent past can provide some insight into what is likely to be the shape of the M&A market in 2026. Some of the most important trends to impact M&A deals over the next 12 months include:
1. M&A Deal Volume
Experts have identified three current M&A trends they believe will exert a positive influence on volumes:
Partners seek acquisitions to support the business core: Rather than acquire targets tangential to core business purpose, companies will seek M&A partners that closely align with their core. One example to note is the trend of pharmaceutical companies pairing up with biotech firms.
Private equity investors are increasing investment activity and shifting focus: In the past, private equity investors were in no rush to move into new market sectors. Often, they preferred to time the market. These days, private equity places a greater emphasis on action rather than waiting for the perfect time to invest. As a result, private equity firms are increasingly investing throughout the business cycle. Their increasing activity can buffer M&A volumes in down cycles. They continue to actively deploy capital, while favoring add-ons and platform extensions that offer more-natural fits. Take-privates, in which a public company is bought by private equity firms and delisted from the market, continue to remain attractive thanks to undervaluation on the public market and the operational flexibility they provide. The newly private company can transform away from the spotlight. If all goes well, it can deliver a lucrative return on investment for the private equity funders.
International deals increase to gain a competitive advantage: Twin forces of the pandemic and geopolitical instability led to a decline in cross-border deals. The reluctance to international M&A activity seems to be decreasing. Experts are forecasting a spike in international M&A volumes as players seek a competitive advantage within the supply chain by partnering with international firms.
2. Portfolio Restructuring and Divestitures Accelerate
Recent market conditions are driving many companies to reassess where they stand and look to trim the fat wherever they can. This means an increasing number of organizations are reassessing their non-core assets and underperforming divisions. By divesting themselves of these underwhelming components, they can free up capital and improve their valuation narratives in anticipation of deals. This benefits private equity and strategic buyers because it means cleaner carve-outs and the chance for more-focused growth plays.
3. Cash-Rich Buyers Maintain Strategic Advantage
Cash is king, the saying goes. In the current environment, that may well be true. Companies that have access to capital without needing to finance are well-positioned to take advantage of the current market. For them, strategic acquisitions are actually a part of the business strategy. They can buy up partners when competition is low and gain a strategic advantage within their sector. Not only can they move faster and absorb uncertainty, but they also reduce their reliance on leverage. This lowers their risk and improves board confidence.
4. Regulatory Scrutiny and Compliance Shape Deal Execution
Compliance is always a major consideration behind any M&A deal, and that focus is only going to become stronger in 2026. With increased oversight on financial services, cross-border deals, and technology, buyers are going to demand better reporting hygiene and audit-ready financials much earlier in the deal than before. Among the many factors that will call for greater diligence this year are data privacy, ESG disclosures, and antitrust risk.
5. Small to Midsize Deals Stabilize and Strengthen
The decrease in M&A volumes appears to be one of size. Overall, deals worth more than $1 billion dropped more than twice the rate of deals worth less than $1 billion. There are a few reasons smaller deals are less affected and expected to recover sooner. One is volatility. Large deals are more likely to be affected by global market forces. Small deals are not as impacted by volatility and are less likely to go off-track because of external forces.
Small deals are also less expensive. Companies may be able to finance the purchase with existing financial reserves or by selling off assets, rather than seeking financing. Thus, the high interest rates are not as much of a turnoff as they are for companies that need to finance their M&A activity.
The regulatory environment also plays a role. Big deals are subject to stricter regulations than small ones. Regulatory and compliance issues can deter a large company from the M&A process. For smaller deals, the obstacle just isn't there. There are sectors of the market where M&A activity remains strong. For these reasons, some analysts forecast a steady rise in M&A activity in the coming year.
Factors Shaping the 2026 M&A Environment
As is the case every year, the only thing predictable about the M&A landscape in 2026 has been unpredictability. However, there are several key factors that are sure to have a serious effect on M&A activity as the 2026 marches onward, and it would behoove anyone with any interest to be aware of them and what they could mean:
Interest Rates and Monetary Policies: All eyes remain on the Federal Reserve for signs of interest rate fluctuations. In early 2025, the Fed announced it would be holding interest rates steady, which ordinarily would mean stability in terms of debt financing and deal structures for the immediate future. However, at the same time the Fed warned of a weakening economy and higher inflation by the end of the year. This may likely dampen the enthusiasm for deal-making in the coming months.
Market Valuation: Many of the most closely watched models indicated in 2025 that the market overall is overvalued, meaning there’s a possibility of a correction coming in the near future. However, certain sectors demonstrated better performance, such as the utilities and financials markets. These sectors may be more likely to experience a relatively surge in M&A deals compared to others.
Regulatory Landscape: Certain sectors have experienced increased scrutiny in recent years, especially the technology and finance industries. As the fallout from these regulatory changes continue to reverberate throughout the M&A landscape, businesses also feel the pressure of regulatory compliance as they prepare to make deals.
M&A Trends by Sector
Looking ahead into the next 12 months, it’s expected that there will be differing levels of M&A activity by industry. Some of the sectors anticipated to undergo the most change include:
Technology — Digital transformation and continued investment in AI are sure to continue tech’s dominance over the M&A market in 2026. Expect some significant deals focused on AI, cloud computing and cybersecurity as the year continues.
Healthcare — With costs continuing to rise and biotech innovations on the march, acquisitions in the healthcare sector are expected to be healthy, with a particular emphasis on telemedicine and pharmaceuticals.
Energy — As other industries intensify their efforts in ESG, clean energy and sustainability-focused deals are expected to increase, especially with regard to renewable energy and carbon capture technology.
Automotive — With sustainable transportation gaining momentum all the time, increased investments in electric vehicle infrastructure, battery technology and autonomous vehicle development should drive more deals.
Financial Services — More consolidation within banking and fintech is expected as firms seek scale and efficiency through mergers.
M&A Market Update for 2026
Taken together, analysts generally agree that M&A activity will rise, despite economic uncertainty. Moderate growth is expected as interest rates stabilize and global economies continue to heal from disruptions inflicted by the pandemic. Ongoing integration of AI, machine learning and cloud-based computing are expected to fuel deals in tech, healthcare and the financial services sectors as businesses continue to drive digital transformation efforts.
Analysts widely believe that challenging market conditions will themselves lead to opportunities for increased M&A activity. Consider the rise in corporate restructuring seen in many sectors. The root issue is low valuations, in which the company (or sections of the company) are seen as having less value. Companies may find themselves with subsidiaries or assets that feel mispriced relative to valuations. Disposing of the mispriced asset can free the company of unwanted weight; a cash-rich or private equity buyer may feel as if it’s a bargain.
Private equity firms tend to hold onto investments for an average of three to five years. Considering the uptick in private equity investments in 2020 and 2021, that three-to-five-year time frame is here. If these companies stick to the usual playbook, they'll soon be looking to cash out. This in turn can bring new life into a market that feels lackluster at present. Analysts are confident about M&A volumes moving into 2026. PE firms should maintain a strong presence, particularly through strategic acquisitions in growth industries including renewable energy, biotech and fintech.
Geopolitics will continue to exert an influence on the M&A outlook landscape. Investors are still cautious and attuned to threats on a global stage. However, cross-border M&As are expected to rise, particularly between U.S., Europe and parts of Asia. Industries such as energy, infrastructure and tech will be looking for synergies in new markets.
Key Takeaways
Looking ahead, many of the factors that suppressed M&A activity are still in play. There are also opportunities coming to fruition, but discipline will be the watchword. Analysts making their M&A forecasts believe activity will begin to rise, driven by several interrelated factors. The organizations that are better prepared will be in the best position to take advantage and close more deals.
More than ever, companies that find themselves engaging in M&A activity need tools, workflow and file management capabilities that leverage advanced features including artificial intelligence. See why companies choose DFIN for their M&A software solutions to reduce their risk and enable greater speed.
