Thought Leadership

Recovery, interrupted

After a difficult 2024, deal markets entered 2025 with cautious optimism. Falling interest rates, more available debt, and active private capital suggested the volatility that had suppressed confidence for two years was easing. By late 2025 and into early 2026, that recovery was gaining traction, with stronger equity markets and private equity beginning to deploy the capital it had been holding back.

That momentum, however, has proved fragile. Tariffs returned to the political agenda, while tensions in the Middle East pushed oil prices sharply higher. The optimism is real, but confidence in deal markets is now more sensitive to geopolitical shocks than it was a decade ago.

The practical implication for advisors: clients considering a sale or acquisition cannot rely on timing the market. Advisors who help clients assess these conditions realistically, rather than talking confidence up, are providing genuine value.

The rise of private capital

One of the most significant structural shifts reshaping the deal environment is the expansion of private capital. With public markets slow to absorb new listings, businesses are staying private for longer. Private equity funds, sovereign wealth funds, private debt providers, family offices, and retail capital vehicles now represent a much deeper pool of investment than even five years ago.

Private equity alone has substantial dry powder, and secondary transactions have grown rapidly. Continuation funds, where assets are sold from one private equity fund to another, have expanded significantly, meaning businesses that have already had a private equity owner may still attract further deal activity.

For accounting firms, this matters because private equity transactions are structurally different from trade sales. Management incentive plans, rollover equity, earn-outs, and much more extensive due diligence are now standard. Deal timelines that once ran around six months can now often stretch to up and and beyond a year. Firms with the technical capability and patience to navigate these structures for their clients are better placed to serve this growing part of the market.

Where deal activity is concentrated

Technology, media, and telecoms remains the dominant sector by volume and value. Average deal sizes in TMT have increased materially as technology businesses have matured into scaled, cash-generative organisations. Financial services activity has also returned, driven in part by consolidation among larger institutions. Industrials and supply‑chain businesses remain active, reflecting near-shoring trends as companies reassess exposure to disrupted logistics routes.

Geographically, the European picture is broadening. The UK, DACH, and the Nordics remain important, but activity is increasing across southern and eastern Europe. Spain is forecast to be Europe’s fastest‑growing major economy in 2026, while Italy’s bond yields have narrowed significantly against Germany’s, signalling restored confidence that is beginning to feed into M&A activity. Central and eastern European markets, including Poland, are also seeing increased deal flow.

The US as a country remains the single largest buyer of European businesses, spending over €100 billion on EMEA targets last year. However, EMEA cross‑border activity is becoming less concentrated. Buyers from the Middle East, India, and Asia Pacific now account for a growing share of acquisitions, reducing reliance on a small group of Western European acquirers.

Consumer sector transactions are also elevated, though often for less positive reasons. Sustained cost pressures and changing spending patterns are pushing many businesses into stressed or distressed situations, keeping restructuring‑led M&A activity high. Deal volume, in this context, can signal strain as much as confidence.

The valuation question

Average valuations have remained broadly stable, but the range around that average has widened. Smaller businesses across many sectors typically attract lower single digit multiples, while larger businesses may command higher single digit or even double digit multiples of sustainable profits. This divergence has created a bifurcated market in which the experience of completing a deal varies significantly by business size, not just sector.

Artificial intelligence adds a further layer of complexity. Some AI‑labelled businesses have achieved revenue multiples stretching up to and above double digits, reflecting expectations of rapid growth rather than current profitability. Private equity is becoming more discerning about what genuinely constitutes an AI business, but froth has not fully deflated. For portfolios where valuations were set at the peak, this remains a clear risk as well as for sectors where AI is causing significant change in operational dynamics – e.g. traditional software development.

What this means for advisory firms

The 2026 M&A market presents a combination of genuine opportunity, rising complexity, and persistent uncertainty. That is precisely the environment in which trusted advisors add most value.

Three things stand out as particularly relevant for accounting firms building or developing a corporate finance capability.

• Complex deal structures are creating advisory work that sits naturally alongside existing relationships. Clients who trust their accountant are often willing to rely on that same firm both during and after a transaction.
• Broader geographic buyer interest gives real advantage to firms within global associations. Cross‑border reach is not just a membership benefit, but a practical tool in accessing the right buyers.
• Rapidly changing market conditions reward firms that stay current and develop a point of view — not only on execution, but on whether now is the right time to do a deal at all, and in which direction.