Global M&A entered 2026 with high expectations, and the first six months largely delivered—at least on the headline numbers. Deal value rose approximately 28% in comparison to the same period in 2025, and megadeal activity reached levels not seen since the 2021–2022 boom. Those figures suggest a hot market, yet the recovery feels more cautious. Activity remains concentrated in the largest transactions, while broader deal volumes are subdued. Although it has improved to 84, BCG’s M&A Sentiment Index remains meaningfully below its long-term average of 100.
The sector mix explains much of the seemingly contradictory trends. Technology, media, and energy led in deal value, yet technology recorded the lowest reading in our sentiment index. The underlying cause is increasing divergence within the technology ecosystem. While much of the AI value chain—from power infrastructure to frontier models and AI-based applications—continues to command strong valuations, traditional software companies face mounting structural pressure. Over the coming months, additional large-scale technology IPOs will test whether the AI-driven valuations hold up in the public markets, especially as concerns about a possible AI bubble increase.
Nevertheless, the underlying strategic logic for M&A has strengthened across all sectors. AI is reshaping competitive dynamics faster than most companies can build capabilities organically, which increases the need for acquisitions, partnerships, and other forms of strategic investment. At the same time, the capital intensity of the AI buildout is pulling M&A activity across energy, semiconductors, and digital infrastructure, while portfolios accumulated through years of macro-driven caution are overdue for realignment. Given the intense level of competition, the window to acquire assets at reasonable valuations may already have closed in some sectors.
The result is a market driven less by broad optimism than by strategic necessity. Companies are pursuing transactions in areas where competitive pressure is greatest while remaining disciplined elsewhere. For many organizations that are prepared to move, the question as they head into the second half of the year is not whether to act, but where, when, and how.
A Recovery, with Reservations
For M&A practitioners, the first half of 2026 has delivered a firm start. Global deal value reached approximately $1.6 trillion, up 28% from the same period in 2025 and slightly lower than in the second half of 2025. This was the strongest first-half total since the 2021–2022 boom. (See Exhibit 1.)
The recovery is real, but it remains a normalization rather than a return to boom-era conditions. Deal value is rising, but volumes, especially for smaller deals, remain subdued, and activity is concentrated in a limited number of sectors and regions rather than broadly distributed across the market. (See Exhibit 2.) Confidence has yet to reach all parts of the deal landscape.
There were 31 megadeals (transactions valued at $10 billion or more) in the first half of 2026—up from 17 during the same period last year and the highest first-half total since the 2021 boom. Activity in large deals (those valued at or above $500 million) has softened to its long-term average, however, reflecting greater caution as compared to the second half of last year—and, perhaps, stronger valuation discipline among both corporate acquirers and financial sponsors. (See Exhibit 3.) Large deals continue to be carried out predominantly in North America or by North American acquirers.
Sentiment Is Mixed Across Regions
BCG's M&A Sentiment Index remained robust in the second quarter of 2026. The index combines fundamental drivers—such as business confidence, valuation levels, and interest rates—with GenAI-based analysis of corporate communications. The global reading rose to 84, an improvement from 79 entering the year but still below the long-term average of 100.
The drivers behind that reading are fairly clear. Corporate and private equity still hold nearly $2 trillion of undeployed capital, and financing conditions are workable despite rates above the post-2020 lows. At the same time, the need to transact is building: companies face growing urgency to realign their portfolios through both acquisitions and divestitures, while financial sponsors are under mounting pressure to exit portfolio companies and return capital to limited partners.
These tailwinds are counterbalanced by persistent headwinds. Geopolitical risk remains the defining constraint in 2026, with energy price volatility, trade friction, and conflict-related uncertainty complicating deal underwriting and extending timelines, particularly in energy-intensive, industrial, and cross-border transactions. Deal markets’ sensitivity to financing and macroeconomic conditions might be tested this year if central banks need to raise interest rates beyond current expectations or if growth expectations decline.
The more revealing story is the divergence in direction across regions. Europe holds the highest M&A Sentiment Index reading at 101—distinguishing it as the only major region currently above the long-term average—but momentum is softening, suggesting its recent sentiment uptick may begin to cool. The Americas, at 84, have drifted sideways, while Asia-Pacific, at 55, has rebounded a bit from its recent all-time low. (See Exhibit 4, left side.) Notably, Japanese companies have become increasingly active global dealmakers, a shift reflecting corporate governance reform and growing investor pressure to deploy underutilized capital.
A Divided Picture Across Sectors
At the sector level, deal sentiment has diverged sharply. (See Exhibit 4, right side.) Financial services leads the field at 108, comfortably above the overall long-term average, while technology has fallen to the lowest reading at 52, despite having generated more first-half deal value than any other sector. Health care (92) and energy and utilities (90)—which has seen the greatest improvement in momentum over the year to date—sit just below the average, both underpinned by durable structural drivers. The consumer sector (71), though still subdued, has also displayed strengthening momentum. Taken together, the readings describe a market that is continuing the slow recovery it began in 2023 but has not yet achieved full momentum: too many headwinds remain in play, and dealmaking has not yet found a single decisive catalyst.
One catalyst may come from the public markets. SpaceX has recently listed, with OpenAI and Anthropic expected to follow. This wave of large-scale technology IPOs may have the potential to reset risk appetite across the broader deal market. Successful listings at scale would validate private valuations, reopen a primary exit channel for financial sponsors, and signal to boards that the window for ambitious strategic action has reopened. In the subsections that follow, we examine where conviction is strongest, where activity is concentrated, and where dealmakers are moving with greater caution.
Technology, Media, and Telecommunications
Technology recorded the lowest sentiment rating (52), even as the technology, media, and telecommunications sector led first-half deal value. That gap between activity and confidence is the clearest expression of the market's defining paradox: buyers are committing capital at pace while questioning AI-driven valuations and the sustainability of the capital cycle they are feeding. The unease is especially strong in business models—such as software as a service—where exposure to AI disruption is greatest.
AI remains the primary deal driver, and its reach extends well beyond technology itself as companies across industries acquire capabilities that they cannot build fast enough organically. The defining dynamic is bifurcation: infrastructure-layer assets—data centers, computing, and power—command extraordinary valuations on the basis of visible demand under contract, while the valuations of application-layer companies are correcting.
As a result, M&A activity in the second half of the year could shift toward the application layer, where entry valuations are more attractive and potential synergies are easier to quantify. But success will depend on rigorous diligence. Buyers need to distinguish between companies that are primarily beneficiaries of AI enthusiasm and those that possess genuinely differentiated capabilities, such as seamless integration with companies’ workflows and data layers, and price assets accordingly.
Cybersecurity continues to attract strong M&A interest as AI-enabled threats expand the attack surface and regulatory requirements become more demanding. Defense and digital infrastructure, meanwhile, have emerged as a separate investment theme. Supported by sustained national security spending, these assets are increasingly subject to influence from industrial policy, sovereignty concerns, and government priorities. The result is a distinct set of valuation drivers, diligence requirements, and regulatory considerations.
Media was another M&A bright spot in the first half of 2026, with several high-profile transactions underscoring continued momentum across the sector.
Industrials and Automotive
Industrials present a more nuanced picture than the headline sentiment might suggest, with performance increasingly diverging across subsectors. Defense and aerospace remain the area of highest conviction. The structural increase in defense spending—supported by rising budgets and multiyear procurement programs—has created a durable demand backdrop, and dual-use technologies continue to command premium valuations. Automation and robotics form a second area of strength as companies increasingly embed AI in industrial applications, attracting interest from both strategic and financial buyers.
Two other themes are adding to deal activity: the build-out of electrical and power equipment, as electrification and data-center demand strain supply chains; and supply-chain reconfiguration driven by reshoring and tariffs. Traditional manufacturing, in contrast, remains subdued, with activity concentrated in carve-outs, portfolio rationalization, and other types of strategic restructuring rather than in large-scale transformational deals.
Automotive remains the outlier. The sector faces structural rather than cyclical challenges, including persistent overcapacity, the capital demands of the EV transition, the shift toward software-defined vehicles, and growing competitive pressure. As a result, necessity, not opportunity is the predominant driver of dealmaking. Activity is concentrated in targeted acquisitions of software and digital capabilities, partnerships and joint ventures that spread investment risk or share assets and capacity, and consolidation among pressured suppliers.
Looking ahead to the second half of 2026, the contrast is likely to persist: conviction-driven dealmaking in defense, automation, and power infrastructure versus restructuring-driven dealmaking in automotive.
Financial Services
Financial services is the only sector where strategic imperatives clearly outweigh macroeconomic caution. With the highest sentiment of any industry (108) and among the strongest deal pipelines in the market, the sector benefits from a common dealmaking motivation: incumbents are acquiring the scale, capabilities, and technology that they can’t build quickly enough on their own.
In European banking, the case for consolidation is increasingly compelling. Scale disadvantages, margin pressure, rising digital and AI investment requirements, and a more permissive regulatory environment are steadily eroding the economics of remaining independent. The challenge is not strategic rationale but execution, as transactions often face lengthy and politically sensitive approval processes. In North America, fintech M&A has rebounded following a valuation reset, regional bank consolidation continues, and asset and wealth managers are racing to expand their private-market capabilities.
Insurance is gaining momentum globally, too, with specialty, reinsurance, and life-and-annuity platforms attracting interest from strategic acquirers and private capital. Across all segments, AI is accelerating the need for scale, technology investment, and capability acquisition.
In the second half of the year, financial services is likely to remain the highest-conviction sector for M&A. The primary risks lie outside the sector: renewed macroeconomic or geopolitical volatility could dampen activity, but otherwise the principal constraint involves regulatory and political friction rather than limited buyer appetite.
Health Care
Health care sentiment has shifted from cautious to constructive, and its index score of 92 places it among the fastest-improving sectors. The primary driver is large pharmaceutical companies, which face a looming wave of patent expirations later in the decade and are increasingly turning to M&A to replenish growth pipelines that internal R&D alone cannot replace quickly enough. Competition in the GLP-1 market has heightened interest in metabolic, cardiovascular, and related therapeutic areas, while oncology, immunology, and rare diseases remain enduring centers of deal activity.
The prevailing pattern favors bolt-on acquisitions over transformational mergers, with biotech serving as the primary hunting ground. Companies with validated platforms and clinically differentiated assets command premium valuations, while earn-outs, contingent value rights, and other contingent structures offer ways to bridge valuation gaps.
Medical technology and diagnostics constitute a second source of momentum. AI-enabled diagnostics, robotic surgery, and remote-monitoring technologies are reshaping care delivery as treatment increasingly moves beyond traditional hospital settings. AI is both an accelerant and a source of disruption across the sector, influencing everything from drug discovery and clinical development to diagnostics and patient care.
The key risks in health care are regulatory rather than strategic. Drug pricing reforms, reimbursement uncertainty, and antitrust scrutiny remain important variables, but they are unlikely to derail activity. The sector appears well positioned to maintain its dealmaking momentum through the second half of the year.
Energy and Utilities
Energy and utilities sentiment is not far below the overall long-term index average at 90, but the composition of activity in this sector has shifted decisively. The renewables-and-transition themes that defined the period from 2023 to 2025 have been superseded by a more urgent one: power availability is now the binding constraint on AI-driven growth, and securing it is reshaping the sector's M&A.
Data center demand is the thread pulling capital across the entire power value chain, as hyperscalers move from contracting for power to owning the generating capacity behind it. Power infrastructure is now the fastest-moving subtheme, and nuclear—both existing assets and small modular reactors—has moved from the periphery to the center. Oil and gas companies, meanwhile, retain strong balance sheets and significant acquisition capacity, even as majors continue to shed assets. Private capital is an increasingly active buyer across the sector.
The principal challenges in energy and utilities are execution-related rather than strategic. Geopolitical uncertainty can delay investment decisions and cross-border transactions, and permitting and grid connection constraints often become the critical path to value creation. Despite these headwinds, the power-demand thesis remains intact and should continue to support elevated levels of deal activity through the second half of the year.
Consumer
Consumer remains below its long-term average, with a sentiment score of 71, but the market is increasingly divided. Mass-market brands with limited pricing power and exposure to more value-oriented consumers face ongoing pressure from cautious spending patterns, while premium and differentiated brands remain relatively resilient.
That divergence is driving two distinct streams of deal activity. On the sell side, mass-market brands are generating a steady flow of carve-outs and divestitures as companies rationalize portfolios and exit categories where growth prospects are relatively weak. On the buy side, premium, health-and-wellness, and direct-to-consumer brands continue to attract intense interest, drawing both strategic acquirers that want to upgrade their brand portfolios and financial sponsors that have consumer expertise.
Several themes are reinforcing the trend. The adoption of GLP-1 therapies is prompting portfolio repositioning across food and beverages, while beauty, pet care, and AI-enabled personalized consumer brands remain among the most sought-after categories. The result is a bifurcated market: sellers have opportunities to divest underperforming assets, while buyers face intense competition for scarce growth platforms. In this environment, disciplined portfolio management is a defining source of advantage. We expect divestiture-led activity and continued competition for premium assets to persist through the second half of the year.
Private Equity and Venture Capital
Private equity has reemerged as a key driver of deal activity in 2026. Flush with nearly $2 trillion of undeployed capital and conscious of mounting pressure from limited partners for distributions, sponsors find themselves increasingly compelled to put their capital to work. More attractive valuation levels have widened the opportunity set, supporting renewed activity across technology-enabled services, health care, and financial services. Add-on acquisitions, take-private transactions, carve-outs, and continuation vehicles all feature prominently as sponsors pursue both deployment and portfolio optimization. A sustained reopening of the IPO market would act as an additional catalyst by helping clear the backlog of mature portfolio companies that are awaiting exit.
The outlook, however, is not without risks. Pressure continues to build in parts of the private credit market, and some investors are becoming warier about software-heavy portfolios. At the same time, an increasing number of buyouts that were completed at peak 2021–2022 valuations face refinancing in a higher-for-longer interest-rate environment.
Venture capital, meanwhile, is concentrating more and more around AI, attracting capital at a pace reminiscent of previous technology booms. For both private equity and venture capital, the central question for the second half of 2026 is whether exit markets will begin to validate the confidence already reflected in deployment activity.
Winning in the AI-Shaped Deal Market
The paradox at the center of today’s market provides the clearest guide to strategy. Technology generated more first-half deal value than any other sector, yet it also recorded the weakest deal sentiment of any sector—a sign that dealmakers are investing aggressively in the AI theme while remaining cautious about opportunities beyond it. The AI boom is pulling capital into data centers, chips, cybersecurity, and cloud computing at a pace that rewards boldness but punishes lack of discipline. In this environment, rigorous due diligence and long-term thinking, supported by scenario analysis, are more important than ever. For dealmakers seeking to create value, four imperatives stand out.
Define your AI deal thesis before launching an acquisition process. The most effective acquirers start by doing the hard strategic work of assessing how AI is likely to reshape their competitive positions and profit pools. They identify the AI capabilities they need, evaluate build-versus-buy tradeoffs at current valuations, and define a credible integration path for AI-native targets. Acquirers that approach AI-related targets without having first established this foundation risk overpaying for narratives and underestimating the costs of making the acquisition work.
In the second half of 2026, as application-layer valuations correct and a wider range of targets become available, both the premium for having a clear thesis and the penalty for not having one are higher than at any prior point in the AI deal cycle. Success depends on defining the specific competitive use cases that a prospective acquisition would unlock and stress-testing valuation assumptions against more than one demand scenario. It also requires a willingness to use flexible deal structures such as stepwise stakes, joint ventures, or earn-outs to avoid paying peak prices for unproven economics.
Build speed and optionality, not just strategic intent. Macro uncertainty is an argument for preparation, not inaction. Companies that have performed systematic target screening, maintained active relationships with potential partners, and developed prenegotiated financing structures are in a far better position to move decisively when a window opens.
The historical evidence on this point is incontrovertible: companies that make selective, well-prepared acquisitions during periods of uncertainty consistently outperform those that wait for perfect conditions to arise. In a market where AI-driven urgency, macroeconomic volatility, and shifting valuations can move deal economics quickly in either direction, the ability to advance from a strategic decision to a signed term sheet in weeks rather than months is itself a source of competitive advantage.
Treat integration as an always-on strategic capability, not an afterthought. The most common source of M&A value destruction is not overpayment at signing, but underperformance in postdeal value creation. This is especially true for AI-related acquisitions, where talent retention, technology stack alignment, operating model, and cultural integration between fast-moving targets and established enterprises pose genuinely difficult problems that no term sheet can solve.
Building integration capability—dedicated post-merger integration teams, standardized playbooks, and day-one readiness protocols—is the highest-return M&A investment that most companies can make to prepare for an anticipated acceleration in deal activity. Organizations that treat integration as a strategic capability rather than as a postclose project management exercise consistently create lasting value from their deals.
Adjust your approach to value creation. Not all AI-related acquisitions should be evaluated through a traditional M&A lens. Although some transactions warrant a well-defined integration playbook and a focus on revenue and cost synergies, others are primarily about securing tactical control over scarce assets. In addition, AI-related dealmaking often requires more flexible structures, including joint ventures, partnerships, minority investments, and even alternative arrangements that involve an exchange of strategic resources, such as computing capacity for equity participation. In many cases, full ownership and control is neither feasible nor desirable. For these reasons, implementing the right governance structures is critical to success.
The first half of 2026 has established the defining characteristics of this M&A market: a selective recovery in which activity is concentrated where strategic necessity is greatest. Whether the recovery broadens in the second half will depend in part on whether a new wave of AI-related IPOs validates the valuation assumptions that underpin today’s deal activity. Regardless of that outcome, sectors supported by durable structural tailwinds—including financial services, energy and utilities, and parts of the AI ecosystem—are likely to maintain momentum.
The companies best positioned to succeed will be those that have already done the strategic preparation—developing a clear deal thesis, identifying priority targets, forming a disciplined view of AI valuations, and establishing a credible plan for creating value after closing. In a market defined by selectivity rather than broad optimism, competitive advantage will belong to dealmakers that combine conviction with discipline.
