M&A Market Set to Broaden as Confidence Surges

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dry powder financial

Dry powder is the cash or liquid assets that investors or funds keep on hand and are ready to deploy into new investments or to cover obligations. Think of it like a firefighter’s reserve of water: it lets investors act quickly when bargains appear or when markets turn sour, so it influences a fund’s ability to buy assets, support portfolio companies, or weather losses.

01/06/2026 - 09:16 AM

Private equity optimism and economic clarity point to strong 2026 deal flow, Citizens survey finds

PROVIDENCE, R.I.--(BUSINESS WIRE)-- After a year of economic uncertainty and headline-grabbing megadeals, Citizens’ 15th annual M&A Outlook points to a broader U.S. dealmaking landscape in 2026. Optimism among leaders at U.S. middle market companies and private equity firms has hit a six-year high, with 58% calling the current mergers and acquisitions environment strong.

That optimism reflects a clearer economic picture. Rising input costs and supply chain disruptions challenged businesses in 2025. Forty-two percent of companies said tariffs and trade policy made it harder to do business last year. Yet 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% of all respondents (including private equity firms) expect economic conditions to improve in 2026.

“Uncertainty chilled dealmaking early in 2025, but momentum returned as the year progressed,” said 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% 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%. Sixty-nine percent say the current M&A environment is strong, and 90% 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,” added Wallace. “As confidence builds and valuations stabilize, sponsors are poised to unlock a backlog of deals.”

The pool of buyers and sellers is also growing in a market that is perceived as generally balanced. Seventy-nine percent of companies identify as potential sellers, up from 73% last year, while 61% see themselves as buyers, up from 56%.

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% 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% 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% 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%) said their transition plan includes a sale, up from 14% last year. Another 30% have a succession plan in place, while 51% 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 see more results from the survey or learn more about the methodology, please visit our website here. To register for our Jan. 22 webinar on the report, please click here.

Citizens is a trusted strategic and financial partner, consistently delivering clear and objective advice. The Citizens approach puts clients first by offering great ideas combined with thorough market knowledge and excellent execution, to help our clients enhance their business and reach their potential. For more information, please visit the Citizens website.

About Citizens Financial Group, Inc.
Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $222.7 billion in assets as of September 30, 2025. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a full-service customer contact center and the convenience of approximately 3,100 ATMs and approximately 1,000 branches in 14 states and the District of Columbia. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on X, LinkedIn or Facebook.