Global M&A industry trends

Momentum heading into 2026 suggests that global M&A is entering a new phase. A late-2025 surge in megadeals (transactions more than $5bn in value) and AI thematics have carried into the new year, pointing to a market that is structurally reshaping rather than simply rebounding from a subdued cycle. Deal value is expected to remain elevated in 2026 even as volumes remain muted, with headline-making activity increasingly concentrated in the largest transactions and among the best-capitalised buyers.

Three forces are likely to define what’s next for M&A. First, AI is accelerating strategic change across industries; pulling forward decisions on scale, capabilities, data, and talent; and reshaping deal strategy and execution. Second, global dealmaking is becoming more polarised and K-shaped, with strength concentrated in a small number of markets, led by the US. This concentration is also evident across a narrow set of sectors, most notably technology. Third, the macroeconomic backdrop of decelerating global growth, lower interest rates, and abundant capital is reinforcing a two-speed M&A market in which confidence has clearly returned at the top end, while activity elsewhere remains more constrained.

As we discuss below, our view of AI’s impact on dealmaking is nuanced. Investment in AI is being directed towards data centres, energy, and other infrastructure as well as technology development and customisation. In the near term, the scale of this multitrillion-dollar investment may divert capital and temper M&A activity. Over the medium term, however, AI’s potential to trigger an innovation supercycle is likely to reignite dealmaking as companies accelerate transformation, reposition portfolios, and acquire critical capabilities.

At the same time, AI is accelerating sector convergence, blurring traditional boundaries and reshaping deal activity. For example, technology companies are investing directly in energy and power infrastructure, while industrial and healthcare companies are acquiring data, analytics and software capabilities to embed AI across operations and R&D.

AI: relentless capital spending today, deal catalyst tomorrow

AI is spreading rapidly across industries, but its most immediate impact on markets is being felt through capital intensity. External estimates suggest that between $5tn and $8tn could be required over the next five years to fund AI technologies and the enabling infrastructure for them, such as data centres, chips, networks, and new energy capacity. To put that in context, global M&A values totalled around $3.5tn in 2025. The scale of this investment positions AI as one of the defining capital allocation challenges of the decade.

AI capital expenditures take priority over M&A—for now

The multitrillion-dollar capital expenditure supercycle required to build AI infrastructure and capabilities has the potential to divert capital away from M&A in the immediate future, particularly as hyperscalers, governments, sovereign wealth funds, private equity, and private credit all target AI at scale. This is one of the rare moments of broad global alignment in capital flows, with initiatives ranging from US-backed AI infrastructure programmes and Middle Eastern projects, such as Saudi Arabia’s Project Transcendence, to massive investments by Amazon, Google, Meta, Microsoft, Open AI, and Oracle, among others. This capital expenditure wave is still at an early stage and will continue to absorb funding that might otherwise flow elsewhere, including to acquisitions.

The AI supercycle becomes a catalyst for dealmaking

Over the medium term, however, AI is likely to spur a large increase in dealmaking. If the technology delivers even a portion of its promised productivity and transformation gains, it could trigger a powerful innovation supercycle, reshaping business models across industries and accelerating the pace of strategic change. By taking out costs and lifting productivity, AI has the potential to be structurally deflationary, easing pressure on interest rates and creating a more supportive financing environment. Historically, those conditions have been fertile ground for M&A.

Capital allocation choices intensify in the AI era

AI raises the stakes for capital allocation, forcing CEOs to make difficult strategy choices. This is intensifying portfolio reviews, with divestitures of non-core assets increasingly used to free up capital and prioritise higher-growth or more profitable areas. Beyond the traditional trade-off between organic and inorganic growth, leaders must now decide how aggressively to invest in AI and whether this should be through bespoke generative AI models, agentic AI, or large-scale transformation of core workflows. PwC’s 29th Global CEO Survey highlights that the biggest concern among executives is whether their business transformation is keeping pace with technological change, including AI. Despite AI being top of mind, fewer than one in four companies have built solid foundations for adoption, suggesting that significant transformation and disruption still lie ahead.

AI is already influencing today’s largest deals

AI is increasingly shaping why companies do deals. Our analysis of the 100 largest corporate M&A transactions from 2025 shows that approximately one-third cited AI as part of the strategic rationale. Technology, manufacturing, and power and utilities are the sectors where AI is mentioned most often, reflecting both demand for AI-enabled capabilities and the scale of investment required to support them. Within the technology sector, nearly all the largest transactions announced in 2025 referenced AI in their deal rationale.

M&A targets the capabilities needed to scale AI

As companies position themselves for the AI arms race, M&A is increasingly focused on acquiring the critical capabilities required to deploy AI at scale. This includes cybersecurity, which has become a prerequisite for scaling AI responsibly and safely, as illustrated by two of the largest technology transactions of 2025: Google’s $30bn acquisition of Wiz and Palo Alto Networks’s $25bn proposed acquisition of CyberArk. Beyond security, companies are also using M&A to build capabilities across data, analytics, platforms and infrastructure, including IBM’s $11bn proposed acquisition of Confluent to create a smart data platform for connecting, processing, and governing data for AI applications and agents; Thermo Fisher Scientific’s $8.9bn proposed acquisition of Clario to enhance clinical data and analytics capabilities throughout the drug development process; and SoftBank’s proposed acquisitions of ABB’s robotics business for $5.4bn and of DigitalBridge for $4bn to accelerate AI-driven automation and next-generation infrastructure.

AI becomes central to deal decisions

While adoption is still at an early stage, AI tools are already being used to accelerate target screening, enhance due diligence, and improve scenario modelling. Some investors are experimenting with AI-driven inputs into investment committee deliberations to improve speed, depth of analysis, and decision quality. General partners at leading private equity firms report that investment committees now spend as much as 30–40% of their time evaluating whether portfolio companies can harness AI to boost productivity and growth, or whether they face disruption if they fail to do so. In this environment, a company’s AI readiness is increasingly a key driver of valuation, not just a nice-to-have.

AI bubble or structural transformation?

Inevitably, enthusiasm for AI has raised questions about whether the market is in a bubble, often drawing comparisons with the late-1990s dot-com boom. While that period ended in a sharp correction, it also laid the foundations for the digital economy that followed. There are important differences this time. Today’s AI investment cycle is being led by some of the largest, most profitable companies whose substantial cash flows and clear commercial incentives enable significant investment in AI infrastructure. While misallocation of capital and volatility in valuations are inevitable, the scale, breadth and durability of investment suggest that AI represents a structural shift and is potentially the biggest technological transformation of our lifetime, not just a passing cycle. As with all major technology transformations, AI adoption is unlikely to be smooth. Valuation adjustments are likely along the way, potentially creating opportunities as AI’s long-term impact continues to reshape markets and investor expectations.

Hindsight will reveal the winners and losers at the company, industry, ecosystem and markets levels. But for dealmakers, the implication is already clear: AI is no longer just a theme influencing valuation or process. It is increasingly reshaping strategy, capital allocation decisions, competitive dynamics and the rationale for M&A itself. 

Megadeals, capital concentration, and an uneven recovery 

Confidence has returned to the upper end of the M&A market, but the recovery remains uneven. Global deal values rose sharply in 2025, driven by a resurgence in megadeals even as overall deal volumes remained flat. This divergence between value and volume signals the emergence of a K-shaped M&A market, where large, strategic transactions by well-capitalised buyers are driving activity, while the rest of the market remains constrained by valuation gaps, execution risk and lingering uncertainty.

The M&A K-curve: growth at the top, caution below

This K-shaped dynamic is most visible in the resurgence of megadeals. In 2025, 111 transactions with values above $5bn were announced, up 76% from 63 the prior year. While still below the pandemic-driven peak of 2021, the return of large-scale transactions has been sufficient to lift overall deal values, even as broader market activity remains subdued. This points to a recovery in M&A being driven from the top down, rather than by a broad-based rebound in volumes.

Recent corporate- and sponsor-led transactions underscore this pattern. Netflix’s $82.7bn bid for Warner Bros. Discovery and Kimberly-Clark’s proposed $48.7bn acquisition of Kenvue were among the largest corporate deals announced in late 2025. Private equity and principal investors have also been active at the top end, including the $55bn take-private of Electronic Arts announced in September 2025 by a sovereign wealth and private equity-backed consortium as well as AI Infrastructure Partnership’s proposed $40bn acquisition of Aligned Data Centers. These deals illustrate the growing influence of large, well-capitalised buyers.

Value growth driven by megadeals, not broad-based recovery

Strip out megadeals and much of the headline value growth disappears, exposing a market increasingly defined by its extremes. Mid-market and smaller transactions, which account for the majority of M&A volumes, remain subdued, with confidence uneven and dealmaking increasingly selective. For many corporates and private equity firms outside the top tier, caution continues to outweigh conviction.

Global deal values increased by 36% in 2025, driven by roughly 600 transactions above $1bn, while value across the remaining approximately 47,000 transactions was flat year over year. This contrast highlights the increasingly K-shaped nature of the M&A market.

Why the K-curve has emerged

Several structural factors are reinforcing this polarisation. Large corporates and scaled sponsors are benefiting from stronger balance sheets, clearer strategic priorities, and greater access to diverse financing sources. At the same time, AI-driven investment requirements and infrastructure economics are increasing the premium placed on scale, further advantaging the largest players.

By contrast, much of the mid-market continues to face headwinds, including valuation gaps, capital constraints, and uneven growth expectations. As a result, M&A activity is increasingly concentrated among buyers with both the conviction and the capacity to act rather than evenly distributed across the market.

Geography drives a domestic tilt to M&A

The K-curve is also reshaping where deals are getting done. In 2025, the US accounted for just less than one-quarter of global deal volumes but more than half of global deal value, reflecting the concentration of megadeals, deep capital markets and stronger domestic confidence. While dealmaking has picked up selectively in markets such as India, Japan and the Middle East, cross-border activity has grown more slowly than overall market value, highlighting a continued preference for scale, speed, and familiarity.

PwC’s most recent annual Global CEO Survey illustrates both the appetite for larger deals and the geographic divergence shaping M&A. Globally, 41% of CEOs plan to undertake a major acquisition within the next three years. Intent is strongest among CEOs in the Middle East (around 80%), solid among those in the US and India (around 50%), and more muted among CEOs in Germany and China (around 20%). Much of this regional variation reflects differences in confidence in domestic growth, as CEOs who are less optimistic about their home markets are also less inclined to pursue major acquisitions.

Megadeals concentrate in select sectors

Sector dynamics further reinforce this polarisation, with megadeal activity increasingly concentrated in a narrow set of sectors aligned with scale, innovation, and long-term growth themes. While technology remains a central pillar of this trend, megadeals are also emerging across banking, manufacturing, power and utilities, and pharmaceuticals and life sciences, where consolidation and structural investment priorities are driving deal activity.

Technology led megadeal activity in 2025 with 26 announced deals, the highest of any sector. The banking sector followed with 13 megadeals, and manufacturing ranked third with 11. As 2026 unfolds, technology is expected to continue attracting the highest deal values, supported by large-scale investment in AI, data, and digital infrastructure. 

Innovation, however, is not confined to technology alone. Advances in areas such as electric and autonomous vehicles, and pharmaceutical development, including in China, are reshaping competitive dynamics and driving strategic transactions. These shifts are accelerating sector convergence, with capital increasingly flowing across industrials, financial services, energy, and health into businesses positioned at the intersection of innovation, scale, and long-term growth.

Implications of a polarised M&A market for dealmakers

For dealmakers, the implication is clear: M&A is reopening, but unevenly. Large corporates and well-capitalised sponsors are increasingly able to transact through complexity, while smaller players face a tougher environment unless they can articulate a clear strategic edge or differentiated value creation story. In a K-shaped market, competitive advantage accrues to those with greater access to capital who are operating in the fast lanes—markets, sectors, thematic areas with favourable tailwinds—and who approach dealmaking with a winner-takes-all mindset, while investors waiting for a broad-based recovery risk being left behind. 

Volatility persists, but confidence is rebuilding interest in M&A

Macroeconomic factors and geopolitics will continue to shape how, when, and where transactions move forward in 2026. Encouragingly, on the macro front, sentiment has improved. PwC’s most recent annual Global CEO Survey shows that 61% of CEOs expect global GDP growth to improve in 2026, up from 58% a year ago, signalling a modest but meaningful uplift in confidence. While economic risks to a broad-based recovery remain, this improving outlook is beginning to translate into greater strategic intent, particularly among companies seeking growth, capabilities, and resilience in an uneven global environment. A wave of deregulation affecting several sectors, including financial services, is reinforcing the direction of travel.

Deal values increased by 36% between 2024 and 2025, while deal volumes rose by just 1%. Growth in deal values was largely driven by an increase in megadeals, which climbed from 63 in 2024 to 111 in 2025, still well below the record 147 transactions recorded in 2021.

With much of the megadeal activity concentrated in the US, deal values in the Americas increased by 55% and accounted for 60% of global deal values. Deal volumes declined by 6% year over year as broader macroeconomic and geopolitical uncertainty continued to weigh on dealmaking confidence—along with a persistent valuation gap and still-elevated financing costs, which affected mid-market M&A.

In Asia Pacific, deal values rose by 10%, while deal volumes increased a more modest 3%. Several countries reported higher deal values in 2025 compared with the prior year, with China, India, Japan, and South Korea all posting double-digit growth. China also experienced a recovery in dealmaking activity, with deal volumes rising 22%, although levels remain well below their 2021 peak. Most other Asia Pacific markets reported year over year declines in deal volumes.

In Europe, the Middle East, and Africa (EMEA), deal volumes increased by 6% and deal values by 19%. The rebound in deal value was primarily driven by an increase in megadeals, which rose from 12 in 2024 to 20 in 2025. These megadeals spanned a range of sectors, with nearly half concentrated in financial services, particularly banking and insurance. 

• Bubble or no bubble, plan for volatility. Regardless of whether the AI boom proves durable, dealmakers as well as private equity and corporate executives should plan as if markets are in a bubble. This means scenario planning for a range of outcomes, including for a correction, and ensuring resilience through liquidity, flexible financing, and clear contingency strategies to help navigate even the most challenging of potential outcomes.

• Capital allocation discipline becomes mission critical. AI’s strategic importance brings both incremental operating costs and substantial capital requirements alongside the need for new processes, productivity enhancements, and revised market positioning. In a world of finite capital, executives must make deliberate choices on capital allocation. That means carefully evaluating short- and long-term returns, modelling multiple outcomes, and prioritising investments aligned with strategic objectives.

• AI is transforming everything, leaving dealmakers no choice but to act. AI is creating some of the most transformative opportunities in decades, fundamentally reshaping industries and competitive dynamics. Dealmakers must clearly articulate their company’s strategic vision, understand how AI is redefining their competitive landscape, and assess how acquisitions can accelerate differentiation and long-term advantage in this new environment.

• Make AI due diligence a core part of every deal. AI due diligence is now essential. Dealmakers should assess a target’s AI strategy and road map, estimate the potential impact of AI on the business over the next three to five years, evaluate operating and capital requirements, and test management’s ability to execute. Understanding how AI scenarios affect business viability and valuation is increasingly central to deal underwriting.

• Adopt a clear AI-thematic investment lens. The top companies and dealmakers are actively mapping how AI will reshape industries, subsectors, and geographies over time. A clear view of where AI creates disruption and opportunity is critical to building a differentiated investment thesis, generating above-market returns, and avoiding value erosion as business models evolve.