Anyone tracking M&A news in 2026 could be forgiven for thinking the deal market has fully recovered. The headline numbers certainly look that way: year-to-date announced value has nearly doubled the 2025 pace, strategic buyers are pursuing transformational acquisitions and multibillion-dollar deals are showing up with increasing frequency.
Transactions of $5 billion or more are up more than 50% year over year, and deals above $10 billion accounted for roughly 40% of total announced global M&A value through July. Overall deal count has actually declined. For middle and lower-middle market business owners, investors and transaction professionals, the market can look and feel very different from the one making headlines.
Large-cap strategic buyers and the biggest private equity sponsors have stronger balance sheets, more liquidity and more ways to finance a deal than traditional middle-market buyers. AI and data infrastructure have added another wrinkle. When an industry is changing quickly, companies can pursue acquisitions out of necessity as much as traditional deal fundamentals — no one wants to be last. EY expects corporate M&A volume to increase approximately 11% in 2026, while private equity activity remains relatively flat. Bigger companies also have more scale to absorb geopolitical pressure, supply chain disruptions and higher financing costs.
In the 2009 to 2011 and 2020 to 2022 cycles, large-cap and strategic M&A recovered first, with sponsor-backed middle and lower-middle market activity following roughly 12 to 24 months later. Financing was part of the lag, particularly in the middle market, where private equity accounts for a greater share of acquisition activity and deals are more sensitive to the availability and cost of debt.
Activity picked up as the gap between what sellers wanted and buyers were willing to pay narrowed. Sellers stopped anchoring to recent peak valuations, buyers gained confidence in forward earnings and private equity firms faced more pressure to put dry powder to work while returning capital to investors through portfolio sales.
Interest rates remain higher than in previous cycles, and private equity firms are carrying a larger backlog of assets bought at higher valuations. But some activity is starting to move down market. Middle-market deal value rose more than 25% year over year in the first quarter of 2026, led by faster growth in the $250 million to $500 million upper-middle market. Private equity firms are also facing pressure to recycle capital, even with many assets still sitting at higher valuations. Most forecasts, though, still treat 2026 as more of a bridge year than the start of a steep middle-market recovery.
The rate-cutting cycle deal professionals have been waiting for now looks likely to be delayed further, if not temporarily reversed, although longer-term expectations still point toward easing. Getting inflation durably under control may matter even more heading into 2027, giving buyers a clearer view of forward earnings and CEOs more confidence in the broader economy.
Sponsors are also sitting on near-record amounts of capital, and enough pressure from limited partners to put that money to work and return capital could bring more assets to market. Then there is the variable previous cycles did not have: AI. Its impact remains uncertain, and investment so far has been concentrated among deeper-pocketed large companies. But if AI-driven productivity gains begin showing up in earnings and helping support today’s elevated valuations, buyers and sellers would have something working in their favor that previous recoveries did not.
The megadeals filling M&A headlines in 2026 could eventually give way to a broader recovery, but financing costs, inflation, valuations and pressure on private equity firms still have to cooperate. If the pattern of previous cycles holds again, deal activity could widen through the end of 2026 and pick up more meaningfully in 2027.
T.J. Wallace is a Managing Director at Hyde Park Capital with nearly 20 years of corporate finance experience, including more than 12 years in investment banking. With a particular focus on Healthcare and Industrials, he advises public and private companies on mergers and acquisitions, carve-outs, and equity and debt financings.