5 trends driving dealmaking in 2026 for the middle market

This will be a year of transition, pressure and opportunity as conditions for robust merger and acquisition activity are finally aligning.

While deals continue to be tested by lower, more stable interest rates; geopolitical pressures; inflation volatility; and trade tensions, the middle market is preparing for the opportunities ahead. Money is abundant, and with artificial intelligence affecting every deal, assets that weren't premium targets five years ago are now commanding attention.

Here are the trends that will drive dealmaking in 2026:

Trend 1: Private equity dry powder is about to explode

With an estimated $2.2 trillion in global dry powder (over $1 trillion in the U.S.), according to S&P Global Market Intelligence, pressure to deploy capital will be intense. While the urgency is high, selectivity remains. Expect firms to accelerate exits and pursue continuation funds to unlock liquidity. Deployment will focus on value-creation strategies, including digital transformation and AI-driven efficiency across portfolio companies. 

In addition, the most successful firms won’t just source deals. They will arrive with operational playbooks demonstrating how they will drive AI adoption, optimize pricing and improve supply chain resilience.

Trend 2: Corporate buyers will mind the gap

Corporate acquirers will actively reshape portfolios by doubling down on strategic capabilities and shedding assets that no longer align with long-term growth objectives. They will prioritize acquisitions that fill capability gaps—particularly in AI, data analytics and digital transformation—or expand geographic reach.

Expect a surge in add-on deals to strengthen core platforms and accelerate innovation. Companies will also take proactive steps to bolster resilience and security, including supply chain stability and cybersecurity, often through strategic acquisitions.

Trend 3: Successful deals start with good hygiene

Success starts with financial and operational hygiene. Audit-ready financials and clean, organized data are nonnegotiable. Companies must ensure that data is accurate, accessible and well-structured.

Sellers will need to define a data-supported value-creation strategy and demonstrate operational resilience, including inflation management and supply chain stability. Buyers will also scrutinize technology readiness, so companies should articulate a clear AI strategy and show how it drives efficiency or growth.

Trend 4: AI is a dealmaking dynamo

AI will transform the M&A process itself, streamlining diligence, accelerating integration planning and improving risk assessment. Companies that leverage AI-driven insights early in the deal cycle will gain speed and confidence, setting a new standard for efficiency in transactions. 

AI will also be a defining force as companies will pay a premium for demonstrated AI-driven efficiency, not simple PowerPoint promises. There will be significant capital investment in AI infrastructure, including data centers and cloud platforms, as companies race to build capabilities. The cost of falling behind on transformation exceeds the risk of moving quickly. 

Trend 5: The roll-up engine keeps humming along

Roll-up strategies will remain strong in sectors such as health care services, professional services and consumer/residential services. Private equity groups will also double down on sector specialization, targeting industries where operational improvements and technology integration can deliver outsized returns.