After navigating three years of elevated interest rates and market uncertainty, the M&A landscape is showing signs of significant momentum heading into 2026. For business owners considering an exit, the data suggests this could be an opportune time to begin preparation.
Current Market Conditions
Global M&A activity has demonstrated resilience in 2025. According to EY’s latest M&A Activity Report, global deal announcements reached nearly $2 trillion in the first half of 2025, representing a 30% increase compared to the same period in 2024.
Private equity firms, in particular, have maintained active deal flow. Despite ongoing market volatility, private equity acquisitions increased more than 40% by value in the first half of 2025 versus the prior year.
What’s Driving the Market
Several key factors are creating favorable conditions for M&A activity heading into 2026:
Interest Rate Stabilization The Federal Reserve is expected to continue easing monetary policy through 2026. EY-Parthenon Chief Economist Gregory Daco notes that easing financial conditions should reduce valuation pressures on existing assets by narrowing discount rates and improving financing costs. Real GDP growth is projected to gradually rebound to 1.7% year-over-year in Q4 2026.
Private Equity Dry Powder Private equity firms continue to hold substantial capital ready for deployment. McKinsey’s 2025 Global Private Markets Report estimates dry powder at approximately $2.1 trillion in the first half of the year, providing significant acquisition capacity for quality businesses.
Corporate Acquirer Activity In the first half of 2025, private equity exits reached their highest levels in three years, with corporate acquirers becoming increasingly active buyers. Firms have shown greater flexibility on valuations to facilitate the sale of long-held portfolio companies.
Sector-Specific Opportunities
Certain industries are experiencing particularly strong buyer interest. According to PwC’s Private Equity Deals 2025 midyear outlook, dealmakers are favoring sectors that offer scalable growth with limited capital intensity, particularly enterprise software, healthcare platforms, and tech-enabled services.
EY’s research shows that technology continues to lead sector activity, accounting for 30% of deal volume in the first half of 2025, while healthcare maintains strong consolidation momentum as private equity firms pursue roll-up strategies in these fragmented markets.
The Preparation Timeline
Here’s what business owners need to understand: the M&A process typically requires 6-9 months from initial preparation to closing. If you want to capitalize on favorable 2026 market conditions, preparation should begin now.
Businesses that enter the market “transaction-ready” consistently achieve better outcomes. This means having clean financials, documented processes, a capable management team, and clear growth opportunities identified.
Key Considerations for 2026
Quality Matters More Than Ever According to a May 2025 PwC Pulse Survey, 30% of companies paused or revisited deals in response to market uncertainty. However, 51% of US companies are still actively pursuing deals. The takeaway is clear: quality businesses with strong cash flow and healthy prospects continue to attract buyer interest regardless of broader market conditions.
Valuation Dynamics Private equity firms are increasingly focused on operational value creation rather than financial engineering. Higher interest rates have raised the bar for returns, meaning buyers are conducting more rigorous due diligence and focusing on businesses positioned for growth.
Timing Considerations McKinsey’s 2025 Global Private Markets Report indicates that deal activity is expected to continue its upward trajectory, with many industry participants anticipating near-record levels of activity.
What This Means for Business Owners
If you’ve been considering an exit in the next 2-3 years, now is the time to start the preparation process. The market conditions are improving, buyers have capital to deploy, and quality businesses are commanding strong valuations.
However, success in this environment requires preparation. The businesses achieving premium valuations are those that have:
- Cleaned up their financials and can clearly articulate their value drivers
- Built management teams capable of operating without the owner
- Documented their processes and systems
- Identified and can articulate their growth opportunities
- Addressed potential red flags before entering the market
Moving Forward
At TREP Advisors, we’re seeing increased buyer activity across multiple sectors. The conversations we’re having with private equity firms and strategic buyers reflect optimism about deal flow in 2026.
For business owners, the question isn’t whether opportunity exists in the market. The question is whether your business is positioned to capitalize on that opportunity when the right buyer appears.
The owners who will achieve the best outcomes in 2026 are the ones starting their preparation today.
Sources:
- EY M&A Activity Insights, August 2025 – https://www.ey.com/en_us/insights/mergers-acquisitions/m-and-a-activity-report
- EY Private Equity Pulse, Q2 2025 – https://www.ey.com/en_us/insights/private-equity/pulse
- PwC Private Equity: US Deals 2025 Midyear Outlook – https://www.pwc.com/us/en/industries/financial-services/library/private-equity-deals-outlook.html
- PwC Global M&A Industry Trends: 2025 Mid-Year Outlook – https://www.pwc.com/gx/en/services/deals/trends.html
- McKinsey Global Private Markets Report 2025 – https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report
- EY US Private Equity Industry Insights – https://www.ey.com/en_us/private-equity/us-private-equity-industry-insights
