Optimism among leaders at U.S. middle-market companies and private equity firms has hit a six-year high, with 58 percent calling the current mergers and acquisitions environment strong, according to Citizens’ 15th annual M&A Outlook.
Although 42 percent of companies in the report said tariffs and trade policy made it harder to do business last year, the economy proved resilient, and businesses adapted to new market realities.
Most companies now point to economic growth and rate cuts as key tailwinds for business, and 54 percent of all respondents (including private equity firms) expect economic conditions to improve in 2026.That optimism reflects a clearer economic picture. Rising input costs and supply chain disruptions challenged businesses in 2025.
“Uncertainty chilled dealmaking early in 2025, but momentum returned as the year progressed,” says Jason Wallace, head of M&A at Citizens. “Recent megadeals are a clear signal of market strength, and greater economic clarity could unleash a broader wave of M&A activity.”
Mounting private equity confidence also supports the outlook. Just 48 percent of private equity leaders felt confident in M&A decision making in the first quarter of 2025. By the fourth quarter, that number soared to 86 percent. Sixty-nine percent say the current M&A environment is strong, and 90 percent expect deal flow to increase or hold steady in 2026, driven by improving economic conditions and attractive valuations across sectors.
“Private equity firms have been sitting on dry powder for years, and 2026 may finally deliver the conditions they’ve been waiting for,” says Wallace. “As confidence builds and valuations stabilize, sponsors are poised to unlock a backlog of deals.”
The pool of buyers and sellers also is growing in a market that is perceived as generally balanced. Seventy-nine percent of companies identify as potential sellers, up from 73 percent last year, while 61 percent see themselves as buyers, up from 56 percent.
Attractive valuations are the primary driver of sale activity, though trade and tariff pressures are also prompting some moves. Twenty-two percent of potential sellers cite rising raw materials and commodities costs as a key motivator and 20 percent point to supply chain challenges. For buyers, revenue growth is the leading motivator.
Other key findings from the survey include:
Sponsors are eager to get deals done before midterm election uncertainty sets in. The vast majority plan to initiate transactions in the first half of the year, with the second quarter emerging as the preferred window for activity.
AI will continue to drive dealmaking. Among PE firms expecting more deal flow, 39 percent cite the hunt for AI companies or assets as a driver of activity. This aligns with findings from Citizens’ recent AI Trends in Financial Management Survey, which revealed that 97 percent of PE firms view a successful AI strategy as an attractive trait in acquisition targets.
Succession planning could also be a deal driver. One in every five companies surveyed (19 percent) said their transition plan includes a sale, up from 14 percent last year. Another 30 percent have a succession plan in place, while 51 percent have no transition plan at all.
The survey was conducted among U.S.-based companies ($25 million to $1 billion in revenue), as well as PE firms (fund size less than $1.5 billion) that are active in the acquisition and sale of U.S.-based companies with revenue between $50 million and $1 billion. Business executives at 276 companies and 124 PE firms who are involved in decision-making related to M&A completed a phone or web-based survey in November 2025.
To download the full report, visit here.
