M&A activity was strong in 2025, driven by many of the tailwinds that we identified last January in our 2025 M&A Outlook. Both North American and global M&A experienced their second-best years on record, continuing a rebound that started in 2024 following the tepid M&A market of 2023. Our M&A outlook for 2026 reflects continued optimism for both strategics and financial sponsors as they focus on scale and strategic growth as well as divestitures of older portfolio companies and non-core assets, although M&A activity may be dampened if economic conditions, interest rates, or regulatory activity take an unfavorable turn.

Looking Back on 2025

M&A activity in 2025 accelerated globally and in the United States from the prior year. According to Mergermarket, global M&A in 2025 jumped 41% year-over-year while North American M&A activity increased 52% year-over-year. The number of deals increased too, but not by the same margin as the increase in deal volume (measured by value). M&A volume was also concentrated in technology, industrials, financial institutions, and healthcare. M&A started slowly at the beginning of the year as parties evaluated the political, regulatory, and economic landscape of the first year of the Trump administration. As the potential headwinds, including uncertainty from tariffs and trade wars and geopolitical conflicts, were digested by the market, dealmaking took off in earnest during the second half of 2025.

Some of the drivers for last year’s M&A market included easing of interest rates, narrowing of valuation gaps, overall CEO confidence, stronger debt markets, and a more favorable regulatory environment for certain industries. Not surprisingly, the tech sector continued to see high volumes of M&A. 2025 also saw numerous “megadeals” between large-cap strategics. According to Lazard, 30% of global deal value last year was attributable to transactions over $10 billion. Competition for certain business led to third-party “topping bids” on announced deals – most notably Novo Nordisk and Pfizer’s competition to acquire Metsera and Paramount Skydance’s pending attempt to break-up the Warner Brothers-Netflix merger.

Recent high-profile topping bids have put matching rights, termination fees, and other “deal protections” in the spotlight but have not appeared to deter competing offers.

Key Factors for Dealmaking in 2026

Financing Conditions. As always, M&A activity will be tied to the financing markets. M&A volume will likely rise and fall based on what the Federal Reserve does with interest rates, which may be impacted by the tension between the White House and the Fed Chairman. Acquisition financing and valuations will become increasingly attractive if the Federal Reserve continues to ease interest rates over the next year. Cross-border activity will also be impacted based on the strength of the US dollar.

Antitrust Enforcement. As we discussed last year, advisors are closely monitoring the Trump administration’s approach to antitrust enforcement. In certain sectors, there is a “now or never” attitude for attempting transformational combinations. Caution is warranted, however, due to bipartisan populist views in Washington, DC, political influences over regulatory processes, and general unpredictability as to how some regulators will review transactions. We continue to expect antitrust regulators to be more open to structural remedies and less likely to block mergers outright, but deals involving “big tech,” media companies, chip manufacturers, and AI may be viewed with greater skepticism. In addition, the new HSR rules and merger guidelines adopted by the Biden administration in 2023 remain in effect and have increased the burden on parties preparing HSR filings. Also, more states have enacted state-level filing requirements, the impact of which remains to be seen.

Last year, two states (Colorado and Washington) enacted state-level antitrust filing requirements, and other states are considering the same. While the federal government’s antitrust policy may be more business-friendly, states may become more active in enforcement.

Deregulation. Last year, there was wide speculation that dealmaking could be impacted by various deregulation efforts by the Trump administration. This was most acute in the banking sector, where we continue to expect increased M&A activity. Many regional banks feel that the shackles on their M&A activities are off, providing a window to add size to afford technology to compete with larger banks, private markets, and cryptocurrency firms. The dramatically shorter regulatory approval time periods from the Trump bank appointees has meant that announcing multiple deals between examinations is once again doable. Tightening liquidity and languishing loan growth also have encouraged M&A as a means to grab market share. Although pricing of publicly-traded bank stock has improved, buyers have remained disciplined, adhering to tangible earnback and pay-to-trade ratio orthodoxies. Nonetheless, the higher pricing has led to improved deal values thereby enticing would-be sellers to come to the table. Also noteworthy, both fintech and cryptocurrency firms have sought either limited purpose banking charters or de novo banks.

Government Policies Towards Investment. We continue to monitor the Trump administration’s approach towards investment in the US as well as US investment abroad. According to Mergermarket, Japanese and Saudi Arabian investors contributed substantially to inbound M&A in the US last year. Looking forward, US government support for—and even investment by the government directly in—critical minerals, infrastructure, and chip manufacturing could drive interesting deals. The Trump administration, for example, has taken an unprecedent approach towards direct government investment in the private sector as evidenced by the government acquiring ownership stakes in Intel and MP Materials. The Trump administration has also announced a new, fast-track program for clearances by the Committee on Foreign Investment in the United States (CFIUS) of inbound investments, though details remain sparse and no rules have yet been announced. CFIUS review will continue to be a significant concern for foreign investors seeking to invest in the US following landmark cases in 2025 (TikTok and Nippon Steel) and shifting national security priorities that raise the stakes for investors. The Comprehensive Outbound Investment National Security Act of 2025 was signed into law in December and will require attention from US investors considering foreign acquisitions and investments in certain countries and sectors.

In June 2025, the US government was issued a “golden share” in US Steel as a condition to approving its sale to Nippon Steel. The share grants the US government a veto right over a variety of key business decisions.

Key Industries, Including Energy and Infrastructure. Energy and infrastructure continue to be a high priority for investment and growth. This includes deals focused on datacenters (despite concerns over a potential bubble) and broader acquisition strategies focused on meeting energy consumption forecasts in the US and abroad. Statistically, O&G M&A was down last year, with upstream deals accounting for the largest portion of transactions by value.

In looking at particular industries, Hunton’s leading energy practice and professional services M&A team are poised for significant activity this year. Our mortgage M&A practice also expects to see further deals following a strong 2025.

AI. Despite some investor concerns about over-spending in AI research and development, businesses and consumers are starting to witness the power of AI tools coming to market. We expect AI-driven M&A to accelerate over the next few years. For one, we expect ongoing venture capital and private equity investment in AI companies or in companies that need capital to incorporate AI into their businesses. For another, there will be many companies looking to acquire businesses that will expand their AI capabilities. We also expect to see some AI companies pursue M&A, particularly as certain of these companies begin feeling pressure to produce revenue and demonstrate profitable, sustainable business models.

Politics. As noted above, uncertainty over the political environment – including the prospect of trade wars and tariff uncertainty – caused many market participants to delay dealmaking at the start of 2025. Presumably, the White House will want to champion a strong economic environment in 2026 in the run up to midterm elections. Nevertheless, political uncertainty is likely to persist and may dampen the market, including from rising geopolitical risks (e.g., Venezuela, Ukraine, Middle East, Greenland, etc.), and the apparent escalation of Trump’s dispute with Federal Reserve Chairman Jerome Powell.

As one example of political instability impacting dealmaking, the November 2025 government shutdown led to delays in regulatory approvals and filings (including antitrust review and SEC staff review of merger-related filings).

We see the following market participants and deal structures playing a potentially large role this year:

Private Credit. Private credit has played an important role in corporate financing. This will continue in 2026, albeit possibly less so if the cost of traditional bank debt goes down. There have also been reports that some private credit funds have underperformed. For now, private markets have provided significant capital to drive global M&A, and major private capital investors are actively looking to expand in the private credit space.

Shareholder Activism. Activist campaigns hit record levels globally and in North America last year. Activist hedge funds are poised for more campaigns in 2026. Many of those campaigns will be M&A-driven by pushing for a sale of the targeted company or one or more of its business lines.

Activist-initiated M&A is likely to increase. Merging parties also need to prepare for activist “bumpitrage” challenges to pending deals.

Private Equity. Private equity M&A picked up in 2025 relative to the two years prior. Numerous private equity portfolio companies have been held beyond typical fund lifecycles. Look for financial sponsors to take many of those assets to market in 2026 or look to continuation funds to return capital to LPs. Private equity firms also retain significant amounts of “dry powder” that needs to be deployed. Greatly increased competition among financial sponsors to raise capital will raise the stakes on successful M&A execution.

Continuation funds have emerged as a common tool for financial sponsors – their use has grown considerably over the past decade.

Divestments. Corporations are expected to continue exploring divestments of non-core assets and business lines for strategic repositioning, to unlock value, or to generate capital to invest elsewhere in the business. According to Lazard, 2025 saw a 50% year-over-year increase in large ($1B+) divestitures. If interest rates decline, divestments will become easier to underwrite with more attractive returns for financial sponsor acquirers.