Outlook for Middle Market M&A and Private Equity 2026

Many analysts are anticipating stronger and more active middle-market M&A activity in 2026, driven in part by private equity’s pent-up demand for exits, lower interest rates, less regulatory scrutiny, and more. But what can players in this space expect that to look like on a concrete level?

In a recent Expert Webcast roundtable, Robert Connolly joined experienced M&A advisors to unpack the middle-market M&A outlook for 2026. Insights include:

• Private equity and independent sponsor deal activity is off to a robust start—Following a few cycles of optimism that were thwarted by tariffs and political uncertainty, 2026 deal activity is booming and optimism remains high.  
• The gap between buyer and seller expectations has narrowed—The deals in the pipeline now are priced at more realistic levels than those a year ago.
• Buyers are investing in proper due diligence—Pre-covid rigor has returned to the process, and buyers are taking the time to make sure they understand the full picture before moving forward.
• Interest rates are declining—Most players welcome this long-anticipated shift, which is reducing costs and moving deals forward
• Following a flurry of uneasiness in anticipation of tariffs, the middle market is settling into a new normal—ompanies are pursuing on-shoring and near-shoring opportunities, both because of tariffs and in response to lessons learned during the pandemic about supply-chain vulnerabilities.
• Independent sponsors continue to demonstrate the strengths of their model—The bespoke nature of the independent sponsor model leverages flexible time frames and operational expertise that drives value creation opportunities.
• After years of patience with less-than-ideal balance sheets, lenders are starting to pursue defaults and foreclosures—Lenders are more likely to take action in these scenarios, which is another driver of transaction volume.
• Private equity and independent sponsors are showing more interest in distressed assets—These opportunities require a particular skill set but can be right for buyers with experience in the distressed market.

Wondering how trends in the middle-market M&A may impact your plans for 2026? Reach out to Robert Connolly or another member of LP’s Corporate Group.

For more information about LP’s independent sponsor practice, visit: Independent Sponsors | LP.