If you sit on an investment committee right now, it probably feels like the market flipped quite fast. Two years ago everyone complained about frozen processes, broken syndicated loans, and sponsors sitting on their hands. Now you are looking at packed sell side books, renewed megadeal chatter, and boards that suddenly remember they have an “inorganic growth” slide in their strategy deck.

Global M&A activity in 2025 did not just recover. It surged. Several studies put deal value up around 40 percent year on year, to roughly 4.8 to 4.9 trillion dollars, which would make 2025 the second busiest M&A year on record. Volume did not return to 2021 peaks, but the mix shifted toward fewer, larger transactions and a clear bias to scale, infrastructure, and AI-driven bets. That context matters, because 2026 is not a fresh cycle. It is the continuation of a rebound that is already in motion.

At the same time, caution has not disappeared. Many boards and deal teams remember how quickly financing windows closed in 2022. Global deal value is up, but is still more than 40 percent below 2021 levels in some datapoints, and activity is heavily skewed to North America and parts of Europe. Sponsors are under pressure to deploy aging dry powder. Strategics are under pressure to rewire portfolios for AI, decarbonisation, and supply chain resilience. Put simply, M&A activity in 2026 is not “back to normal”. It is a sorted market that rewards clarity of thesis and punishes undisciplined bidding.

So where is capital actually moving, and what does that mean for private equity and corporate buyers who do not want to be the last ones into crowded trades?

Global M&A Activity in 2026: High Value, Uneven Confidence

The first thing to understand about M&A activity in 2026 is that the headline rebound hides a very uneven pattern underneath. On a value basis, 2025 already reset the bar. One large study estimates global M&A value up about 41 percent from 2024 to 4.8 trillion dollars, with a record number of transactions above ten billion dollars. Yet deal counts rose only modestly. The market is being driven by big, conviction-led moves, not a broad-based frenzy.

The rebound is also regionally skewed. North America accounts for a majority of total value, with some data putting its share above sixty percent in 2025 and deal value there up more than a quarter year on year. Europe shows a more mixed picture, with strong pockets in the Netherlands, Switzerland, and parts of the Nordics, while the United Kingdom, France, and Spain lag. Asia Pacific remains subdued and has even hit ten year lows in some segments. For sponsors and strategics, that means “global M&A activity” is really shorthand for a few specific corridors where buyers and financing markets are open.

Confidence entering 2026 is cautious rather than euphoric. Reports from houses like Boston Consulting Group and PwC highlight a clear pattern. Dealmaking is back, but CEOs and investment committees are still pricing geopolitical risk, policy uncertainty, and the possibility that interest rates may settle higher than the last decade. Boards are not approving marginal acquisitions to “use cheap debt” anymore. They are focusing on transactions that can change the earnings profile or the strategic direction of a business.

Financing conditions explain part of this. Policy rates have come off their peaks in the United States and Europe, and credit markets have reopened for quality issuers, but nobody is pretending it is 2019. Lenders are still discriminating sharply by sector and sponsor. The result is an environment where megadeals in resilient, cash generative sectors clear, while middling assets in cyclical categories sit on the shelf. That split will continue to shape M&A activity in 2026.

Private equity adds another layer. Global PE transaction value is estimated at close to two trillion dollars in 2025, up from roughly 1.6 trillion the prior year, but with fewer overall transactions and a larger share of value concentrated in big tickets. Dry powder across private markets has started to decline from its 2023 peak, yet the proportion of capital that has been sitting for four years or more has risen to nearly a quarter of the total. That combination creates real deployment pressure on sponsors, especially those whose flagship funds are already several years into their life. They need exits and they need fresh deals that will still season before the next downturn.

The final macro ingredient is equity markets. As indices have recovered and AI-heavy names have re-rated, corporate boards again feel comfortable issuing stock for acquisitions or leaning on elevated currency to fund cash deals. US data for the end of 2025 shows deal value for transactions over one hundred million dollars more than doubling quarter on quarter, with nearly twenty percent more deals closing in the final quarter than the one before. That matters because strategics are once again credible bidders against sponsors in competitive processes, especially for high-quality assets in growth themes.

In other words, 2026 opens with M&A activity that is strong on the surface, concentrated underneath, and still very sensitive to narrative, sector, and perceived quality of cash flows. That is not a market where you can hide behind volume metrics.

Where M&A Activity Is Concentrated: Sectors That Are Actually Getting Funded

If you strip out the noise and just follow where large deals are clearing, you see a consistent pattern across most of the major outlook pieces. Technology, especially anything connected to AI and its infrastructure, continues to dominate. Energy, utilities, and broader infrastructure are close behind, with healthcare and financial services showing steady strength.

The AI story is already moving beyond classic software. Dealmaking is increasingly tied to the physical backbone that makes AI possible. Data centres, grid assets, energy storage, fibre, and specialised chips are at the centre of M&A conversations. Investment banks and sponsors are underwriting theses that connect compute demand forecasts to power availability, permitting risk, and long term contracts. When a hyperscaler signs a decade long offtake agreement, it now influences not only project finance structures but also which platforms become M&A targets. Capital is flowing into operators that can deliver that capacity at scale and with some degree of regulatory predictability.

Energy transition and traditional energy are converging in interesting ways. Oil and gas majors are using M&A to rebalance portfolios toward lower carbon intensity, while still acquiring reserves and midstream assets that they believe will remain cash generative in any plausible scenario. At the same time, infrastructure funds and long-duration investors are competing aggressively for renewables platforms, grid reinforcement projects, and energy services businesses. Several law firm and bank outlooks point to continued consolidation in energy and natural resources as companies wrestle with the power demands of AI, electrification, and reshoring.

Healthcare sits in a different bucket. 2025 already saw an uptick in healthcare M&A activity, and advisers expect that momentum to continue through 2026. The drivers are familiar to any sponsor or corporate development lead in the sector: demographic trends, constrained public budgets, healthcare digitisation, and the hunt for scalable services platforms. Private equity and infrastructure funds are both active here, sometimes competing directly for the same assets. That is raising pricing in segments like outpatient care, diagnostics, and specialised services, which makes disciplined underwriting even more important.

Financial services and payments provide another pocket of activity. Here, the story is one part consolidation, one part tech convergence. Banks and insurers are still divesting non core units. Fintechs that raised capital at rich valuations in 2021 and 2022 are looking at strategic options. Large incumbents are using M&A to bolt on capabilities in embedded finance, risk analytics, and customer experience while regulators watch closely.

One more nuance is worth calling out for 2026. Some advisers expect that the sheer scale of AI related and infrastructure investment may temporarily divert capital away from smaller, more speculative M&A in unrelated sectors. For deal teams, that is both a risk and an opening. If capital is busy chasing the same obvious AI and power stories, high-quality but less fashionable assets in industrials or B2B services may quietly become more attractively priced. The sponsors and strategics who stay open to that possibility will have more interesting conversations in investment committee.

Sponsors, Exits, and M&A Activity: How Private Equity Is Using the 2026 Window

For private equity, M&A activity in 2026 is not only about new deals. It is about unclogging exits that have been delayed for two or three years and demonstrating that the model still works in a higher rate regime. LPs are watching DPI and exit quality as closely as they are watching deployment.

The data suggests that sponsors are finally getting some traction. One major analysis notes that private equity exit values in the first half of 2025 rose almost seventy percent year on year, with exit counts up nearly twenty percent, as corporates and other sponsors came back to the table. Trade sales gained momentum, secondary deals remained active, and PE-backed IPO value in the second half of 2025 nearly tripled relative to the first half. For GPs, that combination of channels is vital. It allows them to pick the path that best fits each asset rather than forcing everything into secondaries.

Deployment is also recovering, but in a different pattern than the pre 2022 cycle. An EY report puts private equity deployment at around nine hundred billion dollars in 2025, with notable growth in mega deals and a strong contribution from take privates. Sponsors are using public market dislocations, particularly in Europe and in smaller US names, to acquire listed companies that trade at valuations well below what they believe the underlying cash flows are worth. Those acquisitions often come with clear M&A follow-ons, whether through divestitures of non-core divisions or bolt-on acquisitions around the newly private platform.

Dry powder figures show that the pressure is still there, even if the absolute numbers have edged down. Research from groups like MSCI and Schroders highlights that overall private markets dry powder has fallen around 8 percent from its 2024 peak, with roughly a 6 percent decline in private equity alone, but a rising share of capital is now more than four years old. That ageing capital is pushing some funds to pursue larger, more concentrated bets in sectors where they feel they have a clear edge, rather than spraying small cheques across many platforms.

From a strategy perspective, sponsors are leaning heavily on M&A as a value creation lever inside existing portfolios. Add-on acquisitions account for a very large share of deal flow. That is not new, but the discipline around it is improving. Leading firms are increasingly explicit about which deals are “defensive”, designed to shore up a platform’s moat, and which are “offensive”, meant to reposition the business into a more attractive profit pool. That clarity matters when debt costs more and equity checks are under LP scrutiny.

For deal teams, the implication is straightforward: M&A activity in 2026 will be judged on its ability to turn assets, not just deploy capital. That means underwriting every acquisition against an exit story that can plausibly clear in 2028 or 2029 under several macro paths. It also means understanding where strategics are likely to be buyers. A sponsor that builds a platform with an obvious home in three to five years will have more options than one that builds a collection of assets that nobody quite knows how to value.

If you sit inside a GP, the question to ask of any 2026 deal is less “can we get this done” and more “who will thank us for owning this in three years, and at what multiple”.

To keep that honest, many PE investment committees are pushing for a more explicit checklist before they greenlight M&A around portfolio companies. For example:

• Does this transaction clearly improve the quality or predictability of cash flows.
• Does it make the eventual exit story simpler to tell, not more complicated.
• Are we using leverage and structure to support a clear operating plan, rather than to cover for a thin thesis.

Those are simple questions, but they look very different when you answer them in a market where capital still has alternatives.

Strategics, AI, and Infrastructure: Why 2026 M&A Activity Will Reshape Competitive Positioning

Strategic buyers were slower to return than sponsors after the 2022 slowdown, but they now sit at the centre of many of the most important deals. Healthy balance sheets, strong equity currencies, and board pressure to show credible AI and energy transition strategies are all combining to push corporates back into active M&A mode.

In technology and data driven sectors, large incumbents are using acquisitions to accelerate their AI capabilities faster than internal build alone would allow. This is not only about buying model companies. It is about acquiring data sets, domain specific applications, and distribution channels that allow them to embed AI into workflows. You see this in software, in industrial automation, in financial services, and in healthcare information systems. For corporates, the trade off is clear. Move now, when valuations have come off peak, or risk paying more later once targets have been scaled by somebody else.

Infrastructure heavy sectors are seeing a similar strategic push. Utilities, tower companies, and network operators are using M&A to secure sites, grid connections, and rights of way that will be painful to replicate later. Energy and natural resources groups are acquiring both traditional assets and transition platforms to position themselves for a power system that looks very different by the mid 2030s. These are not opportunistic trades. They are long dated positioning moves that will define who controls key bottlenecks in the AI, electrification, and logistics economy.

For strategics, the quality bar on M&A activity in 2026 is higher than in the last cycle. Investors and regulators are alert to empire building or unfocused diversification. Boards are being asked to show that each deal fits a coherent capital allocation framework and that integration capacity is not being overstretched. That pressure is healthy. It forces companies to distinguish between deals that genuinely strengthen the core and those that simply chase fashionable themes.

The interaction with private equity is also shifting. In 2022 and early 2023, many sponsors complained that corporates were largely absent from competitive processes. Now, trade buyers are back and often willing to pay for synergies they can capture that sponsors cannot. At the same time, strategics are increasingly willing to partner with sponsors on joint ventures, minority stakes, or carve out structures that let each side do what it does best. For example, a corporate may sell a non core division to a sponsor while retaining a meaningful commercial relationship or even a minority stake, effectively outsourcing the heavy operational work while preserving strategic optionality.

If you sit in corporate development, the key question for 2026 is how you use this window to reshape your portfolio before the next policy or rate shock. The market is open, but it is not forgiving. Buying assets that fit a clear AI, infrastructure, or healthcare thesis and that your organisation can actually digest is very different from buying whatever is marketed as a “transformational” deal.

For both sponsors and strategics, the common thread is this. M&A activity in 2026 is not just another up year in the deal cycle. It is a filter on who has a coherent view of where profit pools are heading and who is still reacting to headlines. The deals that clear this year will show up in competitive dynamics for the next decade.

M&A activity in 2026 sits at an interesting intersection. The numbers signal a strong, high value market, with global deal value rebounding sharply, private equity exits finally unblocking, and corporates back in the game. Underneath that, though, the pattern is selective. Capital is concentrating in AI related assets, energy and infrastructure platforms, and healthcare and financial services businesses that can prove resilient cash flows and strategic relevance. For sponsors, the window is an opportunity to deploy ageing capital into assets that can still season before the next downturn, but only if they underwrite with exit clarity and disciplined use of leverage. For strategics, this is likely to be one of the most important periods in which to reshape portfolios around AI, power, and digitisation. The buyers who treat 2026 as just another busy year in M&A will end up with expensive complexity. The ones who treat it as a chance to align acquisitions tightly with strategy, capital structure, and integration capacity will still be happy with their 2026 deals when the cycle inevitably turns.