Despite underwhelming dealmaking in 2025, optimism for a resurgence remains strong, driven by elevated valuations and anticipated interest rate cuts by the U.S. Federal Reserve. The market adjusted to economic uncertainties, and large deals were executed, setting the stage for potential growth in 2026, according to a new report from S&P Global Market Intelligence.
Key Findings from the Outlook:
- Subdued Deal Volume: The volume of deals remained low in 2025, particularly in the middle-market segment. However, the total value of mergers and acquisitions (M&A) is on track for a second consecutive year of solid growth, largely due to significant transactions. This mirrors the trend in 2024, where transaction numbers rose by 5% and aggregate value increased by 17%.
- Market Adjustments Post-Tariff Announcements: The expected M&A revival in 2025 was initially hindered by the current Administration’s tariff announcements. Yet, the market adapted, and reactions to economic news became more muted.
- Interest Rate Cuts and Valuations: Ongoing interest rate cuts are anticipated to reduce financing costs and enhance valuations, encouraging dealmaking, especially among financial sponsors.
- AI and Critical Minerals Driving Activity: The demand for AI capabilities and consolidation in the critical minerals sector are significant drivers of M&A activity.
- Path to Increased Dealmaking in 2026: While unexpected shocks could disrupt the outlook, the path to increased dealmaking in 2026 appears clear. The combination of stable valuations, reduced financing costs, and strategic sectoral drivers positions the market for a potential resurgence in M&A activity.
