2026 M&A Market Update: More Deals, More Scrutiny, and a Growing Divide

At our recent Corporate Development event, 2026 M&A Market Update, panelists discussed the forces shaping deal activity midway through the year and what business owners, investors, and corporate development teams should be watching as 2026 continues to unfold.

The conversation made one thing clear: the M&A market is active, but the headline numbers don’t tell the whole story. On one side, deal volume is up, capital is available, and there are reasons for optimism heading into the second half of 2026. At the same time, buyers are becoming more selective, diligence is getting deeper, and the gap between top-tier businesses and everyone else continues to widen.

For business owners, buyers, sellers, and corporate development teams, understanding those dynamics matters. Here are several takeaways from our panel’s conversation and what they could mean for M&A activity in the months ahead.

A Complicated, Bifurcated Market

Today’s economic signals are sending mixed messages. Consumer spending continues to grow despite consumer sentiment sitting near historic lows. Public equities remain near record highs amid significant geopolitical uncertainty. Even the direction of interest rates has become less certain. The takeaway for dealmakers is to be careful about relying too heavily on any single economic indicator. Conditions can look very different depending on the sector, size of the transaction, and type of business involved.

M&A Volume Is Up With Mega Deals Doing the Heavy Lifting

The first half of 2026 was the strongest for M&A since 2021, with total dollar volume rising sharply compared with last year. That said, large transactions are responsible for roughly 80% of that growth, while overall deal count has not increased at the same pace. To be noted: a strong headline M&A market does not necessarily mean every segment of the market is experiencing the same momentum.

Private Equity’s Aging Backlog Is Building Pressure

PE firms continue to hold a growing number of portfolio companies longer than originally anticipated, creating mounting pressure to generate exits and return capital to investors. Wide gaps between what sellers expect and what buyers are willing to pay have kept many businesses from coming to market. Our panelists expect valuations to gradually move closer together over the next 24 months, potentially creating a larger pipeline of opportunities as sponsors become increasingly motivated to transact.

Take-Privates and Carve-Outs Are Picking Up

Take-private transactions are becoming more attractive as buyers identify public companies whose valuations may not fully reflect their long-term potential. Carve-outs are another area to watch as companies reassess their portfolios, divest non-core operations, and redirect capital toward higher-growth opportunities. For strategic and financial buyers, both trends could create new sources of deal flow beyond the traditional sale process.

Winners Are Winning Big

Capital is available, but buyers are concentrating it around a relatively narrow group of high-quality assets. Category leaders are commanding significantly stronger multiples than comparable businesses, while failed auction rates are reportedly increasing for companies that do not meet buyers’ expectations. For owners considering a future sale, this puts greater emphasis on preparation. Strong financial performance matters, but so do clean reporting, sustainable earnings, a defensible growth story, and the ability to clearly demonstrate what makes the business valuable.

Diligence Has Gotten Harder, Not Easier

Diligence is becoming more intensive, particularly for businesses with complicated financial stories. Buyers are pushing harder on aggressive earnings add-backs and placing greater emphasis on actual, verifiable cash flow. For sellers, preparing for diligence well before going to market can help uncover issues early and reduce surprises once a transaction is underway.

AI Is Reshaping Diligence Workflows, but It Cuts Both Ways

AI is helping deal teams synthesize diligence materials faster and prepare more thoroughly before an opportunity even reaches the market. That said, faster analysis does not necessarily mean less work. AI can help organize and analyze information, but the real value still comes from knowing which questions to ask, challenging assumptions, and developing an independent point of view about the business and the opportunity.

Real AI Adoption Is Starting to Show Up in Valuation

Buyers are becoming more discerning about how companies are using AI. Simply having an AI initiative or future roadmap is becoming less compelling. Buyers increasingly want measurable evidence that the technology is actually improving the business. The implication for business owners is important: AI only contributes to valuation when it can be connected to real improvements in productivity, margins, customer experience, or scalability.

The Secondary Market Continues to Grow

As private equity sponsors hold assets longer, continuation vehicles have become an increasingly mainstream way to create liquidity while maintaining ownership of businesses they do not want to sell at current valuations. Single-asset and multi-asset continuation vehicles have grown steadily since 2021. This trend reflects the broader pressure on sponsors to return capital to limited partners, particularly as some funds face challenges raising their next vehicle without stronger realized returns.

Roll-Ups Face Greater Integration Scrutiny

Acquisition-driven growth continues to attract attention, but buyers are looking more closely at whether prior acquisitions were truly integrated or simply collected under common ownership. Systems, operations, leadership, reporting, and processes increasingly matter when evaluating whether a roll-up has created sustainable value. For businesses pursuing a roll-up strategy, integration should therefore be viewed as part of value creation from the beginning.

Looking Ahead…

The outlook for the second half of 2026 remains active. Private equity firms have significant dry powder, corporate buyers have strong balance sheets, and elevated public equity valuations provide strategic buyers with additional currency for acquisitions. At the same time, uncertainty around interest rates, tariffs, geopolitical conditions, and AI continues to make it difficult for buyers and sellers to agree on what the future looks like, and ultimately, what a business is worth.

Conversations like this panel discussion reinforce that thoughtful preparation and proactive insight are often the differentiators between a transaction that closes and a transaction that creates lasting value.