Private equity dealmaking is heading into 2026 defined less by a broad-based rebound and more by a widening split between blockbuster transactions and a quietly resurgent mid-market, according to Deloitte’s latest M&A Trends Survey.

The report, based on responses from 1,500 corporate and private equity executives, finds that while sentiment remains firmly positive, expectations have become more cautious after a year marked by extreme volatility and policy-driven uncertainty. More than 80% of PE respondents expect both deal volumes and values to rise in the next 12 months, but confidence has shifted decisively towards modest growth rather than a sharp acceleration.

That caution reflects the experience of 2025. Volatility surged repeatedly during the year, with the VIX index jumping more than 200% in April and spiking again later in the year amid tariff concerns, geopolitical tensions, AI-driven disruption, and uncertainty around US monetary policy. Despite this, macro fundamentals stabilised in the second half. US GDP rebounded from a 0.6% contraction in Q1 to growth of 3.8% in Q2 and 4.3% in Q3, while equity markets posted strong gains, with the S&P 500 rising 15.8% and the Nasdaq up 19.6%.

That recovery fed directly into deal values. US M&A activity accelerated sharply in the second half of the year, with aggregate deal value jumping 50% quarter-on-quarter in Q3 to $584bn and rising again to $714bn in Q4. However, Deloitte’s data shows that this rebound was overwhelmingly driven by a small number of very large transactions. Twenty deals accounted for 33% of total US deal value in 2025, with overall M&A value reaching approximately $2tn, the third-highest annual total of the past decade.

For private equity, this concentration has sharpened the case for looking beyond the headline numbers. Deal volumes remained largely flat, signalling that opportunity in 2026 is likely to be concentrated in smaller and mid-sized transactions rather than in a renewed wave of mega-deals. Deloitte argues that this segment has been underexplored in recent years and could benefit from pent-up demand, particularly as corporate sellers seek liquidity and focus by divesting non-core assets.

Capital availability remains a supporting factor. High cash balances and substantial private equity dry powder are expected to keep transactions competitive, even as financing conditions remain challenging. While private credit continues to play a central role in deal financing, its use declined by six percentage points year-on-year in 2025, falling into a tie with all-equity deals. Cash financing, by contrast, rose to 40% of respondents, up from 33% a year earlier.

That shift reflects growing caution around leverage. Deloitte notes that 61 middle-market borrowers received CCC ratings in 2025, the highest number on record, highlighting mounting stress among weaker credits and reinforcing concerns about default risk in private credit portfolios.

Technology is emerging as both a tool and a target for PE investors. Nearly all respondents report active AI use across the M&A lifecycle, from screening and diligence to post-acquisition integration. Looking ahead, 83% of dealmakers expect AI to have at least a moderate impact on M&A decision-making within two years, with more than a third anticipating a significant effect.

At the same time, private equity is becoming more domestically focused. The share of respondents whose dealmaking is primarily cross-border fell to 24% in 2025, down from 36% the year before, as geopolitical risk and trade tensions weigh on international expansion. Deloitte expects this trend to persist into 2026, with increased divestments of overseas assets by multinational sellers creating selective opportunities for PE buyers.

Across all strategies, the defining theme for 2026 is adaptability. Uncertain market conditions were ranked as the top challenge to deal success by nearly 30% of respondents, while 85% of dealmakers reported having altered their targeting strategy over the past two years. 

For private equity firms navigating a bifurcated market, the winners in 2026 are likely to be those that remain agile, disciplined on valuation, and prepared to deploy capital where scale matters less than execution.

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