In a Changing M&A Market, Know the Trends and Remember Realism
Key Highlights
- Major sectors like AI, energy, infrastructure and defense are fueling sustained M&A activity, driven by long-term strategic investments.
- Private equity faces a 'purgatory' period with extended holding times and reduced deal volume that could push owners to lower asking prices and seek liquidity.
- Business brokers say the market for smaller companies is balanced and buyers and sellers are adjusting expectations in the face of economic headwinds.
Crawl into a shell when things get tricky and unpredictable? That’s yesterday’s mergers-and-acquisitions market.
In a recent survey, 65% of U.S. large-company CEOs told EY-Parthenon they plan to hunt for deals that will bring them technology, talent or new operations. Similarly, nearly half said they plan to divest parts of their businesses to better focus or bring in capital. A big factor driving those plans, which EY-Parthenon expects will produce 11% more corporate M&A this year than in 2025, is the rising level of geopolitical and economic uncertainty.
“Disruption is not a reason to pause,” Mitch Berlin, the EY Americas vice chair at EY-Parthenon, said. “It is a catalyst to act, as leading executives use deals to build technology advantage, protect margins and secure critical capabilities.”
With their bias toward action over pause, many executives also are making bigger bets and focusing on creating strategic value over the long term, with a few key trends driving a lot of activity. Todd Dubner, the deal advisory and strategy leader in KMPG US’ industrial manufacturing group, said the past 12 months’ number of deals worth $500 million or more was at its highest level in at least eight years.
But that doesn’t mean smaller companies are being shut out of the market. Here are three key themes to take with you on your journey into the M&A arena during the rest of 2026 and into next year.
The Stock Market’s Big Trends Are Enduring
For years now, equity investors have been supporting the aggressive expansion plans of executive teams in several key sectors of the economy. Most prominent among them is the head-spinning boom in all things artificial intelligence and data centers, which is pulling along with it elements of the communications, energy and manufacturing sectors and has spurred dozens of notable mergers and acquisitions.
But investment in the energy sector more broadly has been growing strongly since before the launch of ChatGPT in late 2022 as part of the long-term electrification of the economy. The same goes for infrastructure investment, which is gathering steam and pumping billions into roads, bridges, water systems and much more.
A more recent addition to the spending boom — and one likely to be a longer-term contributor — that is helping drive M&A activity is the defense sector. Fed by learnings from Ukraine’s defense against Russia since 2022 and this year’s Iran war, established and start-up companies are piling billions into building capacity, either organically or via acquisitions. Dubner said the bulk of that investment won’t be in growing the military’s ranks but will go toward hardware such as drones, missiles, ships and other gear that’s proving indispensable in 21st-century warfare.
Dubner said the combination of these trends is a long-term story that will be worth multiples of what the United States spent to build today’s highway system. And because speed is important and firms will be looking to both integrate vertically and expand into adjacent market segments, M&A will play a key role throughout the investment wave.
Much of PE is in Purgatory
Large parts of the private-equity sector are going through it these days. Many investors struck high-valuation deals during the low-interest-rate era of early this decade, but the embedded growth expectations haven’t always panned out, with swaths of the software sector standing out as the biggest pain point.
PE firms typically like to hold their investments for about five years, but McKinsey & Co. said early this year that that figure now stands at more than six-and-a-half years. That’s being reflected in the number of transactions involving PE firms: The experts at EY-Parthenon say PE deal volume fell 11% in the first quarter versus early 2025 and are forecasting that PE deal volume will be flat this year.
It’s going to be a long and sticky battle getting them to pull through the system.
- Marc Cooper of investment bank Solomon Partners on investments PE firms want to sell
On top of that, fundraising activity is well below its normal levels, which means many owners are under additional pressure to sell so they can free up capital to acquire other businesses. It’s a core tenet of the PE model.
“The logjam has to be fixed in the next few years for PE to remain a viable asset class,” KPMG’s Dubner said. “The cost of debt and cost of equity starts accumulating.”
That means this class of owners will be forced to take down their asking prices much more than they’re used to doing. There are and will be deals to be had.
“It’s going to be a long and sticky battle getting them to pull through the system,” Marc Cooper, chairman and CEO of investment bank Solomon Partners, said at the recent 2026 M&A Summit hosted by The Conference Board in New York City.
The Market for Small Deals is Heating Up
While big-dollar Wall Street deals dominate headline statistics and can skew the perception of the total M&A market, here’s an encouraging stat from Main Street: This spring, nearly two-thirds of business brokers surveyed by for-sale marketplace BizBuySell said they expect deal volume involving small companies to increase through the fall. They expressed that sentiment after a first quarter in which BizBuySell, which draws its data from more than 70 large U.S. markets and 65 industries, registered 2,345 sales, right in line with the average since the start of 2024.
“For prepared sellers and capable buyers who can align pricing, structure, and expectations, the outlook for the remainder of 2026 remains constructive,” BizBuySell analysts wrote. “Broker sentiment reflects a balanced market, with 34% saying conditions favor buyers, 32% favor sellers, and 27% calling it even.”
That balanced market also showed itself in how some brokers told BizBuySell that many sellers and buyers are moving forward after a year of high uncertainty. Things feel a bit more stable now, and both sides of potential transactions are aware of the economic headwinds, whether from tariffs or the Iran war, that are out there. That is leading to more productive conversations more quickly.
“Buyers are disciplined, and sellers who are properly advised and positioned are still achieving strong outcomes,” said Carson Bomar, a business broker with Exit Game Plan in Tampa. “The key is aligning expectations with market realities early in the process.”
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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