Despite predictions of a slowdown, mergers and acquisitions (M&A) defied expectations and surged in 2025. Now, with artificial intelligence (AI) driving massive deals, the question is whether a potential capital crunch will keep the M&A boom going in 2026.
Private equity now accounts for roughly 40% of global M&A activity, according to Goldman Sachs. Despite signs of stress in the private credit market — now valued at roughly $2.1 trillion — Goldman expects the asset class to more than double by 2030, broadening the pool of capital available to fund large transactions.
After years of growth-at-any-cost fueled by the AI narrative, the market is returning to a "tangible asset" philosophy. The most successful firms in 2026 will likely be those in the Healthcare and Financials sectors that use AI to optimize staffing, detect fraud, and reduce overhead.
Consider sectors with predictable cash flow
As investors shift towards "tangible assets," explore opportunities in sectors like Industrials and Financials, which offer more predictable returns compared to speculative tech investments.
Watch private equity trends
With private equity accounting for roughly 40% of global M&A activity, monitor private equity firms' investment strategies.
Be selective in tech investments
Given the market's weariness of massive capital expenditure in AI, focus on tech companies with clear paths to profitability and strong fundamentals.
Evaluate companies' AI strategies
As successful firms are those using AI to optimize operations, assess how companies are implementing AI to improve efficiency and reduce costs.
Stay informed on macroeconomic conditions
Keep an eye on macroeconomic conditions and interest rate environments, as these factors can significantly impact M&A activity and investor sentiment.
M&A activity surged in 2025, defying earlier predictions of a slowdown, as companies reassessed their portfolios. This resurgence was primarily fueled by the growing demand and influence of artificial intelligence (AI) across various industries.
AI is significantly influencing the M&A market by driving companies to consolidate and acquire new technologies to stay competitive. However, heavy capital spending on AI may constrain M&A activity as companies prioritize internal growth, dividends, buybacks, and R&D.
The pool of discretionary capital available to fund M&A deals is historically thin, leading to a capital squeeze. According to Bain & Company, the proportion of capital allocated to M&A hit a 30-year low in 2025, forcing executives to be more selective in their dealmaking.
Private equity firms are playing a more prominent role in M&A deals due to the funding crunch. These firms are deploying idle cash, and borrowers are increasingly turning to private credit funds for flexibility, with private equity now accounting for roughly 40% of global M&A activity.
Sectors like Industrials and Financials are seeing record inflows as investors become wary of the massive capital expenditure required to sustain the AI boom without immediate returns. These sectors offer predictable cash flows and deep-value cushions, attracting investors seeking a return to a "tangible asset" philosophy.
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