Mergers and Acquisitions: Crafting Value in Consolidation

As we approach 2026, the mergers and acquisitions landscape stands at a critical juncture, ripe with potential for transformative growth.

The momentum from 2025's record-breaking performance sets the stage for a year where strategic consolidation becomes imperative for survival and success.

Businesses must navigate this dynamic environment with precision, leveraging data-driven insights to unlock value.

This article delves into how to craft sustainable value through informed M&A strategies in an era of consolidation.

The 2025 Landscape: A Year of Robust Growth

2025 witnessed a remarkable surge in M&A activity, reshaping corporate strategies across industries.

US deal volumes over $100 million grew by 9% year-to-date through Q3, with corporate M&A up 10%.

This pace is on track to achieve 1,200 deals annually, surpassing the pre-pandemic average of around 900.

Total US deal value, including private equity and corporate deals, increased by 36% year-to-date.

It is projected to exceed $2 trillion in 2025, with corporate M&A value up by 23%.

The share of deals exceeding $1 billion rose to 27% in the first three quarters, up from the 2016-2019 average of 22%.

This indicates a skew toward larger transactions, including those over $5 billion.

Q3 2025 saw US aggregate deal value reach $598 billion, the highest in nearly four years.

This represents a 56% quarter-over-quarter increase, driven by four deals over $10 billion.

Three of these megadeals involved US companies, plus an $88 billion merger in July.

Through November 30, 2025, there were 10,333 deals worth $1.6 trillion.

This marks a 2% increase in volume and a 45% increase in value compared to 2024.

It represents the second-highest value ever recorded, fueled by the AI boom and private equity activity.

The US is on pace for a $2.3 trillion deal volume in 2025, a 49% increase from 2024.

Global volumes are up by 25%, with four US deals exceeding $40 billion year-to-date.

In contrast, there were no such deals in 2024.

Q3 2025 featured eight megadeals over $10 billion, the highest number since late 2018.

In the middle market, volume increased by 1.9% year-over-year in Q1-Q3.

This was driven by strength in Q1 and financial buyers, but public company deals declined by 16.5%.

Large cap deals with enterprise values over $1 billion saw a 36.8% year-over-year increase.

This builds on a 9.7% rise from 2023 to 2024, showing sustained momentum.

Financial buyers experienced a 23.5% quarter-over-quarter increase in deal value.

It averaged $83.9 million EV in Q3, while public strategics saw a 4.2% increase to $83 million.

Private strategics declined by 17.9% to $52 million, highlighting varied buyer dynamics.

Private equity and financial buyer volume grew by 4% to 1,484 deals through November 2025.

Value rose 54% to $536 billion, while corporate deals increased by 2% to 8,849 deals.

Corporate deal value rose 41% to $1.1 trillion, underscoring broad-based activity.

Historically, since 1985, over 325,000 US M&A deals have been announced.

They are worth approximately $34.9 trillion, with technology accounting for 19.9% of deals.

Financials and consumer sectors follow at 11.4% and 11.3%, respectively.

The largest historical deals include AT&T-BellSouth in 2006 at $72.7 billion.

Travelers-Citicorp in 1998 at $72.6 billion also stands out.

To summarize the key metrics:

This table highlights the robust growth trajectory observed in 2025.

It sets clear expectations for moderated yet positive expansion in 2026.

Looking Ahead: 2026 Projections and Scenarios

For 2026, projections indicate continued growth in M&A activity, albeit at a slower pace.

Total US deal volume is expected to increase by 3% compared to 2025.

This follows a 9% rise in 2025, reflecting a more stable environment.

Corporate M&A volume is projected to grow by 3%, after a 10% increase in 2025.

Private equity deal volumes are anticipated to rise by 5%, up from 8% in 2025.

Scenarios range from optimistic to pessimistic outcomes based on market conditions.

In an optimistic scenario, total deals could increase by 5%, with PE up by 13%.

A pessimistic scenario might see total deals down by 2% and PE by 7%.

Key insights from surveys show rising confidence among business leaders.

The EY-Parthenon CEO survey indicates deals in the next 12 months will be growth-driven.
Deloitte reports rising optimism for 2026 deal activity across sectors.
A Citizens survey of 400 respondents shows M&A strength at a six-year high.
58% rate it somewhat or extremely strong, with 69% of PE firms expressing confidence.
Acceleration is expected from the second half of 2025 into 2026.

PwC and Citizens highlight that PE firms expect increased deal flow.

This is driven by valuations, the economy, and the transformative power of AI.

The middle market is poised for gradual recovery through various catalysts.

Private equity deployment and exits will play a key role.
Spillover from large cap deals will foster broader activity.
Interest rate cuts and rising CEO confidence are additional drivers.

Deal value and size trends suggest a continued rebound in megadeals.

Momentum from large cap growth will support this trend into 2026.

Activity is expected to broaden beyond megadeals into mid-market segments.

This will create a more inclusive growth environment for diverse businesses.

Key Drivers Fueling the M&A Engine

Several factors are propelling the M&A market forward in 2026.

Understanding these drivers is crucial for crafting successful strategies.

Economic and macro tailwinds: Resilient GDP and low credit spreads support deal-making.
Rising valuations and easing financial conditions, such as rate cuts, enhance affordability.
Strong corporate balance sheets provide the capital needed for acquisitions.
Private equity activity: Abundant dry powder and reopening exit markets boost transactions.
Accommodating debt environments and outbidding strategics on EBITDA multiples are key.
AI and tech boom: This drives significant deal flow, with many firms seeking AI assets.
Four out of ten private equity firms are actively pursuing AI-related opportunities.
Valuations: Firming up near 2020 P/E highs encourages transactional activity.
40% of companies and 50% of PE firms expect higher valuations in 2026.
Strategic shifts: CEOs are positioning for growth and transformation agendas.
This includes de-conglomeration, focused portfolios, and buy and build strategies.
Policy environment: A pro-merger antitrust stance under the current administration aids deals.
Tariffs and geopolitics, while headwinds, also spur M&A for supply chain resilience.
Succession and exits: An increase in PE exits, with 19% planning sales in 2026.
This compares to 14% in 2025, indicating a growing exit momentum.

These drivers create a fertile ground for value-creating transactions that redefine industries.

They enable businesses to leverage opportunities for sustained competitive advantage.

Sector Spotlights: Where Opportunities Abound

Certain sectors are thriving in the current M&A environment, offering targeted opportunities.

Others face challenges but provide selective avenues for value creation.

Aerospace, Defense, Government, and Security (ADGS): Volume increased by 21.7% year-over-year in Q1-Q3 2025.
This indicates strong growth and resilience in government-linked sectors.
Industrials: Facing a 30% decline in volume due to tariffs and supply chain issues.
However, US-sourced and low-tariff assets attract buyers seeking stability.
Services and opportunity zones: Experiencing double-digit volume growth and premium multiples.
This reflects high demand for service-oriented businesses in evolving economies.
Technology: Historically accounting for 19.9% of deals, with AI fueling activity.
The tech sector remains a hotspot for innovation-driven consolidation.
Financials and consumer sectors: Remain active, with acquirers outperforming non-acquirers.
In the first nine months of 2025, acquirers showed better share price performance.

This diversity underscores the need for sector-specific strategies to maximize value.

Businesses must tailor their approaches based on industry dynamics and trends.

Navigating Risks: The Challenges Ahead

Despite the positive outlook, several risks and challenges could impact M&A success.

Addressing these proactively is essential for resilient deal-making.

Policy uncertainty and market volatility can disrupt transaction timelines.
Tariffs and geopolitical tensions introduce complexities in cross-border deals.
Inflation and global conflicts affect economic stability and confidence.
Regulatory and geopolitical risks require earlier integration planning for scale.
Middle market struggles in some areas, with over 20% declines in segments.
Public dealmaking is down, indicating a shift in preferred transaction types.
Sector nuances demand careful analysis despite aggregate market strength.

Managing these risks with proactive scenario planning is crucial.

It ensures businesses can adapt to changing conditions and protect value.

Strategic Imperatives for Value Creation

To craft value in consolidation, businesses must focus on key strategic areas.

These imperatives provide a roadmap for successful M&A execution.

Growth and transformation roadmaps: Tie every deal to long-term strategic positioning.
Align acquisitions with business transformation goals to drive sustainable growth.
Integration planning: Start due diligence early to ensure seamless integration.
This fosters long-term growth post-acquisition and minimizes disruption.
Portfolio optimization: De-conglomerate by divesting non-core assets.
Make complementary add-ons to strengthen core businesses and enhance focus.
Financing and valuation playbook: Leverage rate cuts and abundant dry powder.
Use premium multiples to structure favorable deals that maximize returns.
AI as a value driver: Incorporate AI technologies to augment portfolios.
Drive operational efficiencies and innovation through strategic tech investments.
Scenario planning: Prepare for both optimistic and pessimistic outcomes.
Stay agile in changing market conditions to capitalize on opportunities.
Buyer types comparison: Understand differences between PE and corporate strategics.
Analyze volumes, values, and multiples to choose the right partners for deals.