Key Highlights
- U.S. deal value is expected to top $2 trillion in 2025, a 9% increase from last year, and grow again in 2026.
- Strategic buyers have taken the lead over PE firms, leveraging operational advantages to pay premiums and expand their market reach.
- Deal structures are becoming more creative and using contingencies like earnouts and partial ownership arrangements to manage risk amid market uncertainties.
After several years of deal advisors predicting/wishing/hoping for a real rebound in mergers and acquisitions, the last year and change looks to have delivered. Researchers at EY Parthenon said recently that U.S. deal value is on track to top $2 trillion in 2025, an increase of 9% from last year. And they see another 3% increase coming in 2026, albeit with questions about inflation, geopolitics and labor supply tilting risks to the downside.
Still, some market players think there’s more good news to come because buyers, including private-equity firms, are hungry. In a recent update to clients, the investment bankers at Harbor View Advisors said there aren’t enough sellers in the market.
“As a result, competition is heating up,” the Harbor View team wrote. “Whereas earlier in the year, premiums were being paid at the triple-A asset level, deals are now heating up for the next tier of companies. PE firms are telling us that they were working hard to get deals over the finish line and are now having to work even harder to stay in the hunt to win at competitive processes.”
If you’re looking to get in the hunt in 2026, here are a few factors and trends to keep in mind:
New Stories Are Being Written
Across the economy, companies large and small are reinventing at least parts of their lineup. Several steel manufacturers, for instance, have been buying businesses that make garage doors or utility pylons. A hatful of corporations with decades of history making air conditioners or other electrical equipment are taking that know-how to the booming data center sector. And many a conglomerate — including big names such as Honeywell, DuPont and 3M — is on a journey toward more focus and higher margins, generating headlines of spinouts and divestitures.
Management teams are writing new stories and looking beyond their traditional markets. What that means is the number of potential buyers for those looking to sell — and of possible sellers for those looking to acquire — is likely larger than it would’ve been a few years ago, when corporate trends leaned more toward aggregation.
That shift is why strategic buyers took the lead this year over PE firms, which have broadly pulled back versus 2021 and 2022, as they look to overhaul their growth and margin profiles. A recent case in point: Looking to focus more narrowly on electric conduit and fittings and cable and cable management systems, the leaders of Atkore Inc. are selling their Tectron steel tube group to Indiana-based Lock Joint Tube.
These are businesses with recurring revenue models or things that are tied to serving aging infrastructure and energy grids and things like that. That’s where we’re seeing buyers be increasingly what the Street will refer to as ‘risk-on.’
- Ryan Budlong of M&A advisory firm Harris Williams
“They have operational advantages, right?” Patrick McAuley, a partner in Grant Thornton Advisors LLC’s transaction advisory services group, said about strategic buyers on an S&P Global webinar earlier this fall. “Cost savings, expanded market reach, products. And they have the ability, particularly at the functional org chart level. to absorb a lot of employee redundancy, a lot of duplicative costs. So they can be more competitive in any market process and even be able to pay a premium.”
‘Boring is Beautiful’ is Back
A related idea to the above is that many of the structural economic changes around data centers and artificial intelligence demand a lot from old-school businesses. And that’s spurring a bit of a bidding frenzy for known quantities — contributing to the idea that aren’t enough sellers.
“It’s been-there-done-that businesses where boring is beautiful in a certain way,” Ryan Budlong, a managing director of M&A advisory firm Harris Williams, said on the S&P Global webcast. “These are businesses with recurring revenue models or things that are tied to serving aging infrastructure and energy grids and things like that. That’s where we’re seeing buyers be increasingly what the Street will refer to as ‘risk-on.’”
Budlong said he’s been advising clients to make more add-on acquisitions rather than bigger, high-leverage deals as the overall M&A market has adjusted to — despite recent Federal Reserve cuts — the sharply higher interest rates of recent years versus the more financing-friendly environment of the preceding decade-plus. Also playing into that advice is that advice is the higher level of uncertainty around markets and policy these days.
Slightly lower rates (as well as a few more quarters of digesting past deals) should tilt the field more toward private-equity firms next year. The EY Parthenon team is forecasting that PE deal volume will grow 5% while corporate M&A deals will grow 3%.
Wanted: More Flexibility
Uncertainty means more delicate negotiations. In its report, the EY Parthenon team said buyers are “largely looking through looming growth headwinds” and willing to commit to deals but they are using more risk-management tools to keep deals flowing. That means more contingencies such as earnout structures to keep sellers engaged for a while or clauses to give them an out should new tariff shocks emerge.
Sellers looking to strike a deal should be prepared for more “creative” deal structures than during a more traditional, less volatile period. Experts said that includes being open to keeping a non-controlling interest as Middleby Corp. executives are doing with the residential kitchen group that houses notable brands such as Viking and Rangemaster. On Dec. 24, teams from Middleby and notable sports investor Josh Harris’ 26North Partners LP platform said 26North will pay $885 million for 51% of Middleby’s division.
Notable: In the deal’s announcement, the 26North team highlighted its “flexible, solutions-oriented approach to corporate partnerships and carveouts” in the first paragraph.
Be a Better Target
If you’re looking to jump to the front of the pack for potential buyers, having a well-run business and a willingness to discuss alternative structures may not be enough. Brian Gerritsen, an assistant vice president at Travelers and leader of the insurer’s middle-market manufacturing segment, said leadership teams preparing for a sale have several ways to improve their risk management profile.
Navigating the Journey
Travelers earlier this year surveyed more than 800 risk and insurance professionals about the top risks businesses face from M&A activity, including with PE firms. The resulting report, “Navigating M&A Challenges: Essential Insights for Risk Management,” covers respondents’ deal motivations as well as their successes and struggles and outlines a range of steps leadership teams should consider to improve their organizations’ risk profiles. You can check it out right here.
Most notably, Gerritsen said, companies should give their supply chains a thorough resiliency check — something that has taken on even more significance in recent years. It’s a good idea to again vet suppliers, even long-running ones, on matters of quality, consistency and price. Doing so before a sale, Gerritsen added, can tee up productive post-deal conversations about renegotiating while adding volume.
Such supplier vetting should also assess a partner’s potential exposure to a disruptive severe-weather event and their ability to pivot as needed. In addition, management teams can set themselves up better for deal talks by:
- Ensuring their employee safety and training programs are where they need to be
- Showing that they’ve addressed potential issues around excessively relying on certain key leaders and other personnel
- Reducing their reliance on contract labor, an issue that has emerged as the Trump administration has pushed harder on its immigration agenda
As always, the M&A market contains many moving pieces for both buyers and sellers and is influenced by factors that can each quickly change. But opportunities abound, particularly if more interest-rate cuts are coming. Perhaps analysts at Wall Street Horizon put it best just before Thanksgiving: “Is uncertainty high? Yes. Is the macroeconomic foundation shaky? Yes. Are companies seeking creative solutions? It appears so.”
About the Author
Geert De Lombaerde
Contributor
A native of Belgium, Geert De Lombaerde joined EndeavorB2B in September 2021 to cover public companies, markets, and economic trends primarily for IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World, and Healthcare Innovation. His work focuses on strategy, leadership, capital spending, and mergers and acquisitions, and he also works with Endeavor Business Intelligence on surveys and data projects.
Geert has been in business journalism since the mid-1990s. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati, initially covering retail and the courts before shifting to banking, insurance, and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in 2008. He led a team that helped grow the Post's online traffic by an average of more than 15% annually before joining Endeavor.
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