Green Shoots in the Frozen M&A Market Point To a Better 2026

Stalemate has been the prevailing theme in private capital for the past two years. Private equity firms face growing pressure to sell assets — yet corporates, sitting on a record €2.6trn in cash reserves in Europe according to Oliver Wyman’s September Capital Currents report, remain hesitant to invest.

Valuation gaps, operational hurdles in speed and governance, and patchy awareness of private equity (PE) fund exit pipelines among corporates are all contributing to the gridlock. But there are signs that at least some of these pressures are easing as 2026 comes into focus.

One of the biggest obstacles to dealmaking has been the significant valuation gaps between buyers and sellers, particularly in sectors such as software, education, and healthcare. But the gaps have been closing of late as public markets trade higher and many PE assets continue to perform well, such as in the PE-heavy wealth management sector, where underlying asset growth is strong.

Informational and process hurdles have also weighed on transaction volume. Corporate buyers often lack visibility into PE portfolios and are ill-equipped for complex carve-outs, preferring to buy only one part of the business rather than the full entity. A mismatch in processes, meanwhile, also creates hurdles as a banker-led auction process doesn’t allow slower-moving corporate M&A departments to capture synergies quickly.

Geopolitics and tech disruption haven’t helped, either. Shifting tariff situations, uncertainty in the US, and questions on AI industry disruption are giving PE and corporate buyers pause. But these conditions aren’t likely to be permanent — and in the meantime there are beneficiaries of this uncertainty, with aerospace and defence assets being in high demand, and financial services continuing to trade well in a heightened interest rate environment.

Some sectors and PE assets are beginning to perform well, including financial services, aerospace and defence, and data and information services. Global private equity exits increased in October, with deal volumes reported by ION Analytics up 164% from the previous month. Some corporate buyers, including those with European headquarters, appear to be getting more active, as evidenced by the announced exit of WithIntelligence to S&P. Given that corporates represent approximately 50% of all PE exits globally, according to a recent report by Preqin, more effort and innovation from both sides is needed to unlock this full potential.

On the PE side, we expect sellers to do much more heavy lifting in articulating value creation synergies between their asset and corporates. This will take time, and engaging in exit options early, addressing regulatory concerns, and being flexible on deal structures, such as supporting partial exits and breakups, will be key. Liaising directly with other strategic buyers will also be critical to identifying barriers early and ensuring corporates can complete the transaction.

For corporates, capitalising on the PE backlog requires a proactive strategy. Buyers should map the PE landscape early to identify assets of interest, initiate direct off-cycle discussions with PE firms, and get creative with deal structures and flexibility to unlock value. One example would be WPP’s partial exited businesses of Kantar to Bain Capital, in which WPP kept holdings to benefit from asset appreciation under PE ownership. Expanding the adviser ecosystem can also offer unique market insight into potential obstacles. By engaging with the process early and being informed, both sides can overcome the current gridlock and speed up transactions.

In addition, geopolitical change presents new opportunities for dealmakers. In Europe, nations are being forced to step up defence spending considerably and are actively courting private investment in the sector. Ukraine, for example, is being seen as an active test bed for new technologies. While many assets are still small, there are clear roles for private capital to buy and scale future champions, backed by strong long-term government commitments.

Sport is another sector where Europe’s rich history of leagues and teams is opening new opportunities for investments, especially from the US and Middle East. As the sector professionalises, it is increasingly becoming a destination for global sports conglomerates such as Fenway Sports, owners of the Boston Red Sox, Liverpool FC, and several other teams.

Moving into 2026, more effort from corporates and PEs will be required. There is huge demand and cash from both PE investors and corporates and our recent research shows that 87% of European CEOs want to pursue deals in the next one to two years. The key to unlocking this full potential will be innovation with adapted strategies, flexible approaches, and much more intensive collaboration on M&A opportunities between parties.