Middle-market M&A set to expand in 2026 as deal confidence hits multi-year high

Mergers and acquisitions activity in the US middle market is poised to expand in 2026, supported by rising confidence among corporate executives and private equity leaders after a year marked by uneven conditions and several high-profile transactions.

Citizens’ 15th annual M&A Outlook shows sentiment at its strongest level in six years, with 58% of respondents characterizing the current deal environment as strong. The findings point to a growing belief that the market has moved past the hesitation that defined much of the prior year.

Improved outlooks appear tied to greater economic clarity following challenges in 2025 that included elevated costs and supply chain disruptions. While 42% of companies said tariffs and trade policy negatively affected their business last year, many now expect economic growth and potential interest rate cuts to create a more favorable backdrop for transactions in 2026.

“Uncertainty chilled dealmaking early in 2025, but momentum returned as the year progressed,” said Jason Wallace, head of M&A at Citizens. “Recent megadeals are a clear signal of market strength, and greater economic clarity could unleash a broader wave of M&A activity.”

Private equity firms are expected to play a central role in that activity. Confidence among PE respondents climbed sharply over the course of 2025, rising from 48% in the first quarter to 86% by year end. Looking ahead, 90% of PE firms anticipate that deal flow will remain steady or increase in 2026, reflecting improved conditions and more attractive valuations.

“Private equity firms have been sitting on dry powder for years, and 2026 may finally deliver the conditions they’ve been waiting for,” Wallace added. “As confidence builds and valuations stabilize, sponsors are poised to unlock a backlog of deals.”

Nearly four in five companies view themselves as possible sellers, an increase from the prior year, while 61% say they could act as buyers. Valuation remains the leading reason companies consider selling, although supply chain pressures and higher materials costs are also contributing factors. On the buy side, revenue growth is the primary motivator.

Additional findings suggest many sponsors are aiming to complete transactions before political uncertainty intensifies ahead of midterm elections, with the second quarter emerging as the most active period.

Interest in AI-related targets continues to grow with 39% of private equity respondents citing AI as a driver of deal activity. Succession planning is also becoming a more prominent influence on transaction decisions.

The survey was conducted in November 2025 and included executives from US companies with revenues between $25 million and $1 billion, as well as private equity firms with funds under $1.5 billion that are active in acquisitions and divestitures.