2026 M&A Market Outlook

With year-end and beginning of the year closings in the rearview, and 2026 firmly underway, it is appropriate to examine the factors, themes, and general outlook of the Mergers and Acquisitions market for the remainder of 2026. Although some trends from 2025 are expected to continue into 2026, other macro-level factors and evolving concepts represent new or reinvigorated considerations for buyers, sellers, and those in the dealmaking community. Below is a summary of what we expect to represent key forces in the M&A market for Greater Cincinnati and beyond for the remainder of 2026.

Private Equity Trends

Continuing from 2025 is the expectation that private equity and other funds are presently holding a substantial amount of so-called dry powder; capital that is ready and able to be deployed for investment, in this case through acquisition. One estimate places the amount of such capital (inclusive of not only private equity funds, but of other financial buyers as well) at over $4.3 trillion [i], potentially fueling financial buyers towards increased acquisition activity in 2026.

On the other side of the coin, funds and other investment mechanisms are not expected to be held in perpetuity, and although the life cycle of funds may differ, Morgan Stanley estimates that 55% of sponsor-backed businesses have been held for five years or more [ii] which represents an above-average holding period. Thus, just as the amount of dry powder may potentially spur acquisition activity on the buy-side, the need to provide a return and exit to investors at the end of the life cycle of the underlying funds may cause an increase in sell-side activity for financially backed portfolio and operating companies.  

Macro-Level Forces

M&A has always and will always be altered by headwinds and tailwinds at the macro-level, and 2026 is no different. While the last several years have featured lingering anxiety over interest rates, 2025 provided three rate cuts from the Federal Reserve, who also opened 2026 by holding rates steady [iii].  An improving, or at least a stabilized, rate environment can be seen as a tailwind heading into the remainder of 2026, although broader macroeconomic conditions can always alter the Federal Reserve’s course. Further, global geopolitical issues such as the continued usage of tariffs by the United States can be viewed as a potential headwind, although with professionals now having an additional year of experience navigating tariffs through 2025.

For smaller market and Main Street businesses, another year of the so-called “silver tsunami”, the expected deluge of baby boomers set to retire and thus need to sell or close their businesses, is expected to continue into 2026. Although by no means a new term or phenomenon [iv], another wave of retiree owners can be expected to sell or retire in 2026. This may or may not necessarily take the form of a third party sale, but could also lead to increased activity with respect to succession planning, ESOPs, and other mechanisms of business transition and wealth transfer.

Transaction Scrutiny and Diligence Tendencies

At the micro level, sellers should expect continued diligence and scrutiny from buyers and prospective buyers. Although due diligence, both financial and otherwise, has always been a substantial part of transactions, the ubiquitousness of the usage of quality of earnings and general increase in buyer sophistication across all levels means that sellers going to market must be able to demonstrate clean financials and accounting practices. Buyers have and will continue to see through escalated or inappropriate add-backs and other EBITDA adjustments, and will walk away or seek a re-trade if a seller’s financials cannot withstand the buyer’s diligence.

Further, and particularly with respect to lower market and transactions on Main Street, buyers continue to expect to see management teams in place such that the business is capable of being operated without the owner’s involvement, as excessive owner involvement is viewed as a future cost to buyers who will not be operators, but rather who will need to hire management. Additionally, customer concentration issues and over-reliance on a limited number of revenue generators will continue to be a red-flag to prospective buyers, as such overreliance enhances their risk.

Entrepreneurship Through Acquisition

Although predominantly limited to lower market and Main Street transactions, the burgeoning field of Entrepreneurship Through Acquisition (“ETA”) represents a new class of prospective buyers capable of providing an exit to owners [v]. ETA, although not new conceptually, has quickly gained traction on social media as well as in communities across the country, with younger buyers seeking a different path, workers and executives seeking to leave traditional employment behind, and alums of larger funds often leading the way. ETA buyers often seek to acquire stable businesses with re-occurring revenue, either with the intention of buying and holding, operating the business themselves or with a management team in place, or with the longer term goal of building their own holding companies complete with an array of portfolio companies.

ETA buyers often conduct a search for a series of months or even years to identify the correct business to acquire, and may be either self-funded or utilizing a search fund backed by investors to fund the acquisition and their search itself. However, the increased popularity of ETA means that buyers can expect more competition, with quality businesses regularly receiving numerous offers.

Further, as private equity backed firms and other financial buyers push further down the market and consider lower market companies as targets, either on their own as part of a roll-up of similarly situated companies, ETA buyers may experience competition not just from within their own circle, but from larger firms as well.

Business Wealth Transfer

Although the core of this article focuses on M&A transactions, business owners should be aware that there are a plethora of ways that they may be able to exit their respective business, and unlock or transfer the wealth held therein, in addition to by a traditional exit via sale. Depending on the circumstance, owners may consider transfers to the next generation of their family, sales to employees (whether outright to a key employee or manager, or to a broader pool via an ESOP), or something in between. Furthermore, owners need not exit all at once, as a thoughtful succession plan enacted over time may be the best option to properly transfer ownership in some cases.

Conclusions

There is reason for optimism as we begin 2026 that M&A activity has the potential to be healthy for the remainder of the year, fueled by the need of fund-backed companies to exit and by high levels of deployable capital in private equity and other funds, and further fueled by an aging population of business owners in the lower markets. However, changes to the macroeconomic environment, or a divergence from expected interest rate improvement could slow matters if unexpected macro-economic factors necessitate a change in course. Further, owners should be aware of the variety of options available to them with respect to exiting their business and transitioning the wealth held in the business, beyond just the traditional sale.

The Strauss Troy Corporate Department will continue to monitor these and other trends, and will continue to provide practical, efficient insights to buyers and sellers in 2026. If you have questions or would like to discuss any of these topics, or a potential transaction in 2026, please contact any of the authors.

Sources

[i] https://www.morganstanley.com/insights/articles/mergers-and-acquisitions-outlook-2026-activity

[ii] Id.

[iii] https://www.jpmorgan.com/insights/markets-and-economy/economy/fed-meeting-january-2026

[iv] https://blog.itreconomics.com/blog/silver-tsunami-effect-ma-landscape

[v] https://www.entrepreneur.com/starting-a-business/forget-the-startup-grind-millennials-are-taking-a/499927