Expert Spotlight: Disruption and deal momentum for US M&A

This year has been a rollercoaster for dealmakers in the US, defined by shifting sentiment, uneven activity, and a need to recalibrate strategy. At our recent Dealmakers Dialogues Chicago event, Sean Bennis, Stephanie Gaffin, Nick Hoffman, Jonathan Way, and Mike Sabutis discussed the forces shaping today’s deal environment – from geopolitical tensions to technological advancements to sector-specific opportunities – and how those dynamics are influencing deal structuring, valuation, and execution. Despite persistent headwinds, a clear theme emerged: success in this market hinges on adaptability, creative problem-solving, and a disciplined approach to identifying where real momentum is building.

Optimism meets obstacles
The year began with strong pro-business sentiment and expectations of a robust rebound in M&A. But that early optimism quickly gave way to a more complicated reality. Tariff-related uncertainty paused active processes, shelved others, and slowed decision-making across multiple industries. The impact showed up immediately in the numbers: deal volume fell 27.7% year-on-year in Q1 2025, and deal value declined 7.6%, the lowest quarterly tally in more than three years, even as valuations remained historically elevated.

One of the defining challenges of the year has been the lengthening of deal timelines. Closing cycles stretched to unprecedented levels as buyers dug deeper into diligence and sellers struggled to provide consistent forward visibility. Financial performance volatility and macro uncertainty have caused deals to stall. The market bifurcation also widened: upper-middle-market and large-cap deals continued to move, while lower-middle-market activity lagged as financing and confidence proved harder to secure.

Valuation alignment remained a persistent friction point, with sellers and buyers often at odds over price expectations. As a result, dealmakers increasingly relied on creative structuring, including equity earnouts, deferred consideration, and seller notes, to bridge gaps and manage risk. Meanwhile, the traditional reliance on EBITDA came under scrutiny, with buyers placing greater emphasis on quality of cash flow and strategic fit.

Adaptability and the impact of AI
As the year has progressed, the market began to stabilize and, in some areas, accelerate. In H1 2025, deal volume declined 17.7% year-on-year, but aggregate value rose 17.1% to nearly US$1.2 trillion. The shift became more pronounced in Q3: volume fell 14.6% year-on-year, while deal value surged 51.6% to US$817 billion, the highest level in four years. This divergence underscored the renewed momentum behind larger, strategically important transactions.

Several factors fueled this rebound, including a backlog of paused deals and increased pitch activity as buyers regained confidence. Resilient sectors, particularly consumer products, demonstrated strong adaptability, with management teams proactively navigating around tariff exposure and supply-chain volatility.

AI has also emerged as a game-changer in the M&A space, particularly in sectors like power and data centers. AI-driven growth stories have been remarkable, with small businesses experiencing exponential growth in EBITDA. However, this rapid growth presents its own set of challenges, particularly for family-owned businesses that may not be equipped to handle such expansion.

AI’s influence also extended to deal execution. Tools supporting diligence, data review, and financial analysis have become increasingly sophisticated, reducing cycle times in some stages. Still, human judgment remains central, particularly in negotiating terms, validating projections, and aligning stakeholder expectations.

The focus for the future
Looking ahead, several forces are expected to shape activity into 2026. A key inflection point will be the Supreme Court’s decision on tariffs, which could meaningfully alter deal assumptions in manufacturing, consumer, and industrial supply chains. Private equity’s pressing need to deploy capital, paired with rising LP expectations and aging portfolios, are expected to drive renewed focus on both platform and add-on activity.

Across the board, buyers are expected to prioritize strategic fit, cultural alignment, and operational resilience. The integration of AI and other technological advancements will also continue to shape the M&A landscape, offering both opportunities and challenges for professionals in the field.

For dealmakers, the mandate is clear for 2026: remain agile, embrace creative structuring, deepen sector expertise, and be prepared to move quickly when conviction strikes.

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