Looking back at 2025: A year of extremes

2025 proved to be a year marked by sharp contrasts. Equity markets delivered strong returns while dealmakers navigated persistent uncertainty driven by geopolitics, trade policy, and shifting regulatory signals. Artificial intelligence dominated headlines and capital allocation decisions, emerging as the single biggest driver of public market performance and strategic investment. At the same time, concerns around tariffs, private credit, and geopolitical volatility created hesitation, particularly in the first half of the year.

The state of the market today

Today’s M&A environment can best be described as cautiously optimistic. Confidence has clearly returned, particularly in boardrooms and among institutional investors, but it is paired with a higher degree of selectivity than in prior expansion cycles. Deal volumes rebounded meaningfully in the second half of 2025, and mega-deals re-emerged as financing conditions improved and regulatory pressure eased. However, this optimism is not evenly distributed across the market.

What’s driving the pickup in M&A activity?

Several tailwinds converged late in 2025:

1. Interest rate cuts
   Federal Reserve rate reductions in September, October, and December unlocked confidence, reduced financing friction, and expanded valuation overlap.

2. Dry powder deployment
   Private equity and private credit investors, having adjusted to regulatory and macro noise, began putting capital back to work.

3. AI as a cross-market catalyst
   AI spending lifted activity far beyond pure technology - benefiting industrials, infrastructure, energy, real estate, and services.

4. Regulatory normalization
   While not frictionless, the regulatory backdrop in the U.S. grew more predictable, reducing the chilling effect seen earlier in the cycle.

Policy signals: Help or hindrance?

Audience polling during the webinar showed most participants believe U.S. government policy will support increased M&A activity in 2026.

Panelists agreed, with caution.

• Antitrust scrutiny has softened, particularly outside megacap tech.
• Regulatory engagement and lobbying have become more active behind the scenes.
• Policy volatility, not policy direction, remains the primary risk.

Stability, not perfection, is what dealmakers want and for now, they appear to be getting it.

The return of mega-deals and a two-speed market

Mega-deals roared back in 2025, with 68 transactions exceeding $10 billion, driven by strong equity valuations, stabilized financing markets, and boards willing to make long-term strategic bets. Improved confidence allowed executives to underwrite multi-year growth narratives, particularly in technology and infrastructure-heavy sectors.

Yet this surge in headline-grabbing transactions belies a two-speed market. While large-cap deals contributed disproportionately to total value, middle-market activity recovered more gradually. In that segment, diligence timelines stretched, integration planning became more rigorous, and deal structures evolved to account for lingering uncertainty. Both tracks are moving forward, but at very different paces.

As one panelist summarized: “It’s a two-track market and both are moving, just at different speeds.”

Private equity: Pressure building beneath the surface

Private equity enters 2026 facing growing pressure to exit long‑held assets. With trillions of dollars in unrealized value and aging fund vintages, returning capital to limited partners has become a priority.

Panelists pointed to private credit, continuation vehicles, and strategic sales as important outlets for liquidity, with financing flexibility enabling deals that would have stalled just a few years ago.

Sector outlook: Where will deals happen?

When asked which sectors will see the most M&A activity in 2026, the audience voted:

Why TMT leads

TMT is expected to lead M&A activity in 2026, reflecting AI’s continued influence on capital allocation decisions. Beyond AI‑native companies, investment is flowing into software, cybersecurity, and data‑driven platforms that provide the infrastructure and workflows needed to compete in an AI‑first economy. For many acquirers, M&A remains the fastest way to secure those capabilities.

Industrial and energy sectors are also positioned for elevated activity, driven by infrastructure investment, supply‑chain reconfiguration, and rising demand from data centers and AI workloads. Power generation, grid capacity, and physical assets tied to execution certainty are attracting increased investor attention. Consumer M&A remains active but uneven, with stronger momentum in premium and discretionary segments and greater scrutiny on lower‑end, margin‑pressured businesses. Overall, sectors with clear structural tailwinds particularly those linked to AI and infrastructure are best positioned to drive deal activity in the year ahead.

AI’s dual impact: Deal flow and deal diligence

AI remains the dominant force shaping both investment priorities and M&A decision‑making. Capital is flowing rapidly into infrastructure, data centers, power generation, cybersecurity, and software platforms tied to AI adoption.

But AI is also reshaping how deals are evaluated. Buyers are increasingly focused on whether targets control proprietary data, own defensible workflows, and can leverage AI as a growth driver rather than face disruption.

As mentioned by one panelist, “AI is now a gatekeeper in diligence. Buyers are asking whether companies have defensible data and workflows or if they’re exposed to being disrupted faster than they can adapt.”

In some cases, insufficient AI readiness has been enough to stop a deal entirely, underscoring how deeply the technology is embedded in valuation discussions.

One word for 2026 M&A

When asked to sum up 2026 in a single word, panelists said:

• Selective
• Booming
• Alert
• Narrative

The unifying message?

The environment is constructive, but outcomes will be shaped by execution, positioning, and how convincingly companies tell their growth story.

The audience broadly agrees with this and anticipates an increase in M&A activity in the coming year.

But the next deal cycle isn’t about momentum alone. It’s about clarity of strategy, speed of execution, and confidence in the story you’re telling.

For those prepared, 2026 looks wide open.