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M&A outlook: stronger US deal market in 2026 despite mixed economic signals
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December sees strong annual growth in M&A activity compared to 2024.
December marked a robust conclusion to a resurgent year for US merger and acquisition (M&A) activity, characterized by strong year-over-year (YoY) growth, with the aggregate value of announced deals increasing by 111.5% for transactions exceeding US$100m and by 135.5% for those over US$1b.
Compared to Q4 2024, total deal value rose by 127.6%, and M&A activity increased by 19.1% for transactions exceeding US$100m. The stabilizing economic backdrop, characterized by softening interest rates and strong equity markets, provided a fertile environment for dealmaking.
According to EY-Parthenon Chief Economist Gregory Daco, US economic activity is expected to remain resilient but reliant on three core pillars: affluent consumer spending, AI-led investment and elevated asset valuations. Spending is expected to remain uneven, labor markets are likely to cool and inflation may stay sticky near 3% due to tariffs. While AI investment is likely to persist, broader business spending will lag. The Federal Reserve is expected take a cautious approach and deliver only two additional rate cuts during 2026, bringing the target range to 3.00%–3.25%.
Deal value (US$100m+); Deal volume (US$100m+)
Source: EY Insights analysis and Dealogic
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Read moreOn a monthly basis, US M&A activity experienced a decline in December, with deal value decreasing by 18.5% and volume dropping by 7.9%.
Vertical integration emerges as a strategic lever across M&A deals
M&A activity in December underscores a renewed emphasis on vertical integration as companies seek greater control over critical inputs, distribution channels and monetization pathways amid tightening margins and structural industry shifts. This theme was evident across media, consumer, industrials and technology-driven sectors, where ownership of content, manufacturing, data or distribution has become central to competitive differentiation. The trend signals a strategic pivot toward resilience and margin defense, as vertically integrated platforms are better positioned to manage volatility, enhance pricing power and sustain long-term value creation.
Scaling AI stack and infrastructure through targeted M&As
M&A activity also highlights an accelerating push to scale the AI stack and its supporting infrastructure through targeted acquisitions and investments. Acquirers and sponsors are strengthening control over critical layers of the AI value chain, spanning silicon and design IP, accelerated computing, data platforms, model development and AI-native infrastructure. The strategic intent consistently points to securing performance advantages, reducing architectural dependencies and scaling end-to-end AI capabilities to meet surging enterprise and hyperscaler demand. The trend underscores growing premium on assets that sit at critical AI bottlenecks and scale with long-term structural demand.
US sector breakdown for top deals (US$100m+) – December 2025
Sectors that fueled this month’s deal activity
Source: EY Insights analysis and Dealogic
Sector highlights
M&A market activity in December reveals a blend of high-value transactions across sectors:
Media and entertainment
Deal activity reflected a lower transaction count (down 25% YoY) but a pronounced increase in aggregate deal value (up 1,893% YoY), primarily driven by a single large transaction (US$82b). Strategic buyers prioritized content ownership and direct-to-consumer scale, alongside portfolio simplification through spin-offs and split-offs. The month also reflected continued interest in evergreen IP and branded content with long monetization runways.
Technology
Tech M&A recorded a strong jump in deal value (up 89% YoY) alongside a mild softening in M&A activity (down 8% YoY) on account of fewer but higher value (US$1b+) deals. Key drivers included accelerating AI adoption across industries, demand for scalable data architectures and continued consolidation to secure critical IP and talent in high-growth technology segments.
Life sciences
The sector posted robust gains in deal value (up 79% YoY) as well as a surge in deal volume (up 82% YoY). Strategic buyers concentrated on strengthening late-stage pipelines, expanding specialty disease portfolios and securing differentiated biologics manufacturing capabilities. Private equity (PE) participation remained selective, targeting medical technology platforms with stable cash flows.
Oil, gas & chemicals
The sector experienced a marginal uptick in deal value (up 5% YoY) and a healthy expansion in deal activity (up 39% YoY), mainly driven by continued consolidation across upstream and midstream assets. Strategic acquirers prioritized scale in core producing regions, integration of midstream infrastructure and upgrading the portfolio to improve capital efficiency.
Power and utilities
Growth in deal value nearly doubled in the sector (up 98% YoY) while M&A activity remained flat, anchored by investments across renewable generation, next-gen energy technologies and grid-scale assets. Key drivers included accelerating decarbonization mandates, rising power demand from data centers and electrification and growing investor appetite for scalable, tech-enabled energy infrastructure with long-term cash flows.
Looking ahead
The US M&A landscape was initially expected to maintain its momentum, supported by favorable macro conditions, abundant corporate and PE capital, and strategic imperatives to consolidate in high-growth sectors. However, escalating geopolitical tensions are increasing risks and contributing to oil price volatility, which may dampen cross-boarder deal sentiment, particularly in the energy and industrial sectors. In this evolving environment, dealmakers will likely need to account for heightened regulatory scrutiny, especially in strategic technologies, energy supply chains and defense-linked industries.
PE firms are entering 2026 with record-high dry powder, exceeding US$3.2t globally, including over US$1.1t allocated for buyout transactions, which will serve as a strong tailwind for M&A activity.
Large-cap momentum and AI-driven investment theses are likely to persist, while midmarket activity gradually reopens as valuation gaps narrow. Sectors such as technology (AI, data infrastructure, cybersecurity) and life sciences (Medtech, services) are expected to remain active, with carve-outs and portfolio reshaping continuing to drive M&A trends.
December capped a resurgent year for US M&A activity, with an increase in deal value and volume. Despite a monthly dip, the M&A market saw strong growth across sectors, notably in media and entertainment, technology and life sciences. Vertical integration and scaling AI infrastructure shaped recent M&A trends. Looking ahead, record PE capital and strategic sector moves are expected to sustain robust M&A activity and evolving M&A trends through 2026.
Karan Chowdhary, Assistant Director and Sagar Garg, Associate Manager, from Ernst & Young LLP (India) contributed to this article.
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