M&A Trends for 2026 and Beyond

It is the best of times and worst of times for mergers and acquisitions.

After a decade of roll-ups, Vistage members have grown weary of private equity transactions and are wondering: Is this a good time to be a buyer or a seller?

According to PitchBook, Q1 of 2026 Private Equity sponsors closed roughly 5,100 deals worth nearly $482 billion, the strongest start to a year since 2021. However, the size premium has ballooned, with larger private companies commanding the lion’s share of deal value and higher valuations.

Middle-Market PE Deal Flow

The middle market’s share of U.S. buyout value fell to 39.9% in the first quarter, the lowest on record. Sitting behind it all is a record pile of capital. U.S. private equity dry powder has climbed to roughly $1.1 trillion, an all-time high that has nearly doubled over the past 5 years.

Key Factors Impacting M&A

The Size Premium is Front and Center

According to GF Data, which tracks private-equity-sponsored transactions between $10 million and $500 million, the gap between medium and large deals grew to 2.8 turns in early 2026.

Sellers are incented to grow quickly, as skipping to the next tier creates disproportionate value, including higher revenue and higher multiples.

The reverse is also true. For private company buyers, to do deals of a magnitude to build enterprise value, they have to pay the premium, and many are skeptical about paying 6x-8x to consummate a deal.

Deals By Enterprise Value

Source: GF Data, private-equity-sponsored transactions, 2025.

Private Company Valuations

Not all EBITDA is created equal, and sector valuations vary. Health care is the fastest-growing traditional sector (excluding technology).

Manufacturing reverted to its long-term mean near 6.5x as goods producers wrestled with trade uncertainty. Professional and business services ran about a half turn above their historical average at 7.5x, as buyers chased recurring revenue and asset-light models.

Construction is the outlier, as averages can be deceiving.

Data center construction is consuming much of the industry, and traditional construction companies and contractors are less appealing than those riding the AI wave.

For construction and specialty contracting firms, the mix of a backlog can impact enterprise value. Infrastructure, civil, and specialty work command a premium. Data center and power contractors are the belles of the ball right now, riding the AI and electrification build-out. Shift your backlog in that direction 18 to 24 months before a sale, and you can move your own multiple.

Multiples By Sector

Source: GF Data, 2025 Estimates (manufacturing, services, distribution, healthcare, retail).

Private Equity is Back, and the Clock is Ticking

For 2 years, private equity sat on the sidelines. That has changed, and the shift could be advantageous to those considering an exit. Historically, strategic buyers paid more, but the script has flipped.

PitchBook’s trailing data shows private equity paying a median of 12.8x EBITDA in U.S. deals, against 9.9x for corporate buyers. Sponsors are now the high bidders, as they try to put their capital to work.

They are also under pressure to act. U.S. dry powder sits at a record high near $1.1 trillion, and partners do not earn carry by holding cash. The more interesting squeeze is on the other side of the ledger. According to PitchBook, private equity firms are carrying a record backlog of unsold portfolio companies, more than 11,000 of which have been held 5 years or longer. Funds need to return cash to their antsy investors. More inventory could constrict valuations.

The lower middle market — companies between $25 and $100 million in value — has quietly been the best-performing band in private equity, returning a pooled 39% gross IRR since 2009, the highest of any size category. PitchBook calls it the segment to watch in 2026.

Buy the Supplier, not the Rival

For a century, vertical integration has been a focal point for public companies. It is an opportunity for private firms. With tariffs scrambling input costs and reshoring back in style, the smartest acquisition for many private companies is no longer a competitor down the street. It is the supplier 2 steps up the chain. Lock in supply, capture the margin you were paying away, and insulate yourself from the next disruption. Manufacturers are buying their fabricators. Contractors are buying their prefab shops.

This is also where smaller firms can level the playing field. A surgical acquisition that secures a scarce input or a skilled crew can matter more than three years of organic growth.

Get ahead of the curve. Register now for Marc Emmer’s Business Trends for 2027 and Beyond webinar to gain practival insights and sharpen you competitive advantage. 

Geopolitics Sets the Tone

For the first time in years, the thing keeping dealmakers up at night is not inflation. It is geopolitics. In the latest Capstone Partners and IMAP survey of investment bankers, the geopolitical environment ranked as the No. 1 factor expected to impact clients in 2026, displacing inflation, which had held the top spot from 2022 through 2024.

Tariffs are the obvious culprit. The April 2025 “Liberation Day” announcements froze the deal market in the first half of the year, before a flight to quality drove a sharp third-quarter rebound. Energy volatility from the conflict in the Middle East adds another layer, feeding directly into freight, input costs, and the financing math behind every leveraged deal.

Balance sheets are healthier too. According to Capstone Partners, average net debt-to-EBITDA across the middle market fell from 6.2x in 2024 to 3.4x in 2025, a sign that buyers are contributing more equity and relying less on cheap debt. This is a more disciplined market than the 2021 sugar high. However, public companies still trade near 20 times EBITDA, more than double what a comparable private mid-market business commands.

The Playbook for Sellers

If you are weighing an exit in the next few years, plan around these realities.

• Know your tier. The number that matters is your enterprise value band, not the headline market median. Anchor your expectations to reality.
• Engineer scale before you sell. Crossing from one size tier to the next can be worth more than a strong year of earnings growth. If you are near a threshold, getting over it, organically or through a tuck-in acquisition, may be the highest-return work you can do.
• Be the quality asset. Through all the chaos of 2025, quality held its value. Recurring revenue, clean financials, a management team that stays, and low customer concentration are what separate a premium multiple from a discount.
• Mind your mix. Especially in construction and manufacturing, shift your revenue toward the higher-multiple, higher-demand segments well before you go to market. Buyers pay for where you are headed, not just where you have been.

The Playbook for Buyers

For acquirers, stay disciplined.

• Hunt in the lower middle market. It is the least crowded and best-returning band in the market. Let the mega funds overpay for trophy assets at the top.
• Grow through add-ons. In a tighter credit market, bolt-on acquisitions are far easier to finance than transformational deals. Build the platform one tuck-in at a time.
• Integrate vertically. Secure your supply chain through acquisition before your competitors do. The company that closes its input gaps will carry a structural cost advantage into the next disruption.
• Use the new tax math. The 2025 tax changes meaningfully improve the cash-flow profile of leveraged deals. Make sure your model reflects it.

As Warren Buffett put it, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” In 2026, the wonderful companies are smaller than the headlines suggest. They are hiding in plain sight.

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