At this year’s ACG M&A South conference in Atlanta, dealmakers convened to unpack one of the most unpredictable cycles in recent memory. Datasite’s Paul Bennett, joined an expert panel to reflect on how 2025 unfolded and what macro, sector, and process trends will define dealmaking in 2026.

From tariff shocks to valuation pressures, financing tailwinds, and the accelerating role of AI, the panel made one theme clear: middle‑market M&A has adapted to constant change, but competition is more intense than ever.

2025: A Year of Stops, Starts, and Shifting Momentum

Paul Bennett opened the discussion by grounding the audience in what Datasite observed across thousands of projects: “2025 was the year of the mega deal. Over 20% of M&A volume took place across fewer than 70 transactions. For those working in the middle market, the experience was very different. I’d call it a year of fits and starts.”

Datasite’s data showed a strong burst of Q1 optimism, followed by rapid hesitation:
“We saw significant year‑over‑year spikes in Q1 project starts. But by Q2, many deals that had been set up early in the year were put on hold or withdrawn as uncertainty increased”. Activity returned by Q3 and Q4, but the slow start weighed on volume counts: “Optimism came back by year‑end. But that early drag made 2025 feel less successful from a deal‑count perspective, even though dollar volume remained healthy.”

Competition for Quality Assets Reaches New Heights

Panelists broadly agreed: the battle for high‑quality middle‑market assets is fiercer than ever. One private equity speaker noted: “Good core middle‑market platforms are scarce. There’s a tremendous amount of dry powder chasing deals, and we’ve had to get really aggressive on the right opportunities.”

Larger sponsors continued to move down market, intensifying bidding and forcing buyers to lean into creative deal structuring: “The word we kept hearing was ‘highly structured transaction’, how can we use structure to meet valuation expectations and still get our IC comfortable?” Earnouts emerged as one of the most common solutions to bridge valuation gaps throughout 2025.

Tariffs: The Unexpected Shock That Defined the Year

The panel spent considerable time on tariff‑driven disruption.

One panelist described the impact vividly: “As soon as the tweets started, every business with overseas exposure had a task force trying to figure out what was happening. It was painful.” Sectors most affected included: metals, fabrication, industrial equipment, building products, auto parts, and complex supply chains

“Tariffs are the new normal,” another participant said. “The companies that are managing best have invested in diversified suppliers and stronger communication with customers.” Consumer impact is still lagging due to inventory buffers and remains a key unknown for 2026.

Valuations Hold Firm Across Many Sectors

While some expected valuations to cool, panelists reported surprising stability, especially in: business services, healthcare and healthcare tech, consumer services, infrastructure‑linked categories. “There’s still a gap between seller expectations and what buyers will pay, but structure is closing that gap.” Infrastructure assets continued to command premium multiples.

Financing: Capital Markets Remain Wide Open

Despite macro volatility, lenders stayed competitive. “Private credit funds have raised so much capital that pricing and terms are especially favorable for strong companies,” one panelist explained. Another noted the unusual resurgence of dividend recaps: “We’ve had lenders begging us to do a dividend recap, which tells you how much supply is out there.” The theme was clear: capital is available, and financing is not the limiting factor on dealmaking.

Sectors to Watch for 2026

Across the panel, several categories emerged as hotspots:

• Business Services: Recurring revenue + fragmentation = continued consolidation.
• Healthcare & Healthcare Tech: Demographic tailwinds and attractive defensive characteristics.
• Selective Consumer: Especially Residential services, Team sports & youth activities, Better‑for‑you and high‑protein foods, Ethnic foods (Hispanic and Asian), Products targeting higher‑income consumers
• Critical Infrastructure: “If you can mention the word ‘data center,’ you’ll get a lot of interest.”
• Industrial Distribution & Re‑shoring: A compelling consolidation opportunity driven by OEM demand for domestic suppliers.
  

AI Transforms Due Diligence

This year’s discussion marked a clear shift: AI is no longer experimental, it's embedded. Paul Bennett shared how Datasite is integrating emerging capabilities: “We invested significantly in AI (acquiring Grata and Blueflame AI) to improve speed and accuracy in diligence and the entire deal cycle. We’re now meeting buyers where they are, as they get clearer about the areas where AI creates value.”

Other panelists described their own adoption curves: AI for contract review, desktop market research, dynamic financial modeling, workflow automation, speeding up first‑year analyst tasks. One panelist put it bluntly: “AI has totally transformed our business. What used to take analysts days now takes minutes.”

2026 Outlook: Cautious, Measured Optimism

As the session wrapped, panelists offered their one‑word(ish) outlooks for the year ahead:

• “Discipline.”
• “Optimistic realists.”
• “Cautiously optimistic.”
• “Measured.”
• “Déjà vu all over again.”

With capital available, valuations stable, and competition intensifying, 2026 could be a strong year, assuming macro conditions hold steady. Or as one panelist warned:
“All the kindling is there. But one tweet can pour water on it fast.”