M&A in 2026: Carve-Outs, AI, and a Return to Strategic Growth
The global mergers and acquisitions (M&A) landscape is entering a new phase, marked by renewed confidence but also increasing complexity. A recent KPMG International survey of 700 dealmakers reveals a market poised for growth in 2026, driven by strategic portfolio reshaping, the rise of artificial intelligence (AI), and a focus on mid-market deals.
The Rise of the Carve-Out
One of the most significant trends identified in the KPMG report is the increasing prominence of carve-out transactions. Companies are proactively simplifying their portfolios, shedding non-core businesses to focus on areas with the greatest potential for durable growth. 71% of private equity (PE) dealmakers are actively pursuing portfolio separation, compared to 21% of corporate dealmakers.
This isn’t simply a reaction to short-term market conditions. Dealmakers are citing operational efficiency (52%), enhanced valuation of remaining businesses (42%), risk reduction (35%), and capital reallocation (33%) as key drivers. Organizations are looking to unlock value by separating businesses that dilute strategic focus or absorb disproportionate management attention.
Pro Tip: When evaluating a potential carve-out, focus on the standalone viability of the business unit. A clear path to profitability and a strong management team are crucial for success.
Mid-Market Momentum
Although optimism is high, deal sizes are remaining disciplined. A substantial majority – 95% of PE dealmakers and 83% of corporate dealmakers – anticipate their next transaction to be valued under US$1 billion. The sweet spot appears to be between US$250 million and under US$500 million, favored by 50% of PE firms and 32% of corporations.
This suggests a shift away from mega-deals and a greater emphasis on strategic acquisitions that offer clear synergies and integration opportunities. Smaller deals can often be executed more quickly and with less risk, making them particularly attractive in the current environment.
AI’s Transformative Impact on M&A
Artificial intelligence is no longer a futuristic concept in the M&A world; it’s becoming integral to the entire lifecycle. AI is improving speed and efficiency, but more importantly, it’s enabling previously uneconomical analysis. This includes exhaustive contract review, continuous integration risk monitoring, deeper competitive benchmarking, and stronger pattern recognition across deal history.
Did you know? AI-powered due diligence can reduce the time and cost associated with identifying potential risks and opportunities in a target company.
Strategic Drivers Fueling Deal Appetite
The primary motivations behind M&A activity in 2026 are focused on long-term growth and competitive advantage. Expanding into new markets or geographies (58%), growing core businesses (57%), and acquiring technological capabilities or talent (46%) are the top strategic drivers. This indicates a move towards acquisitions that strengthen core competencies and support sustainable growth, rather than short-term opportunistic plays.
Navigating a Complex Environment
Dealmakers are operating in a more complex world, facing challenges such as legislative and regulatory volatility, evolving trade regimes, global conflicts, and changing tax frameworks. Despite these headwinds, the overall outlook remains positive, with both corporate and PE firms expressing confidence in the market’s potential.
FAQ
Q: What is a carve-out?
A: A carve-out is the separation of a business unit from its parent company, often through a sale to a third party or an initial public offering (IPO).
Q: Why are mid-market deals becoming more popular?
A: Mid-market deals offer a balance of risk and reward, with faster execution times and clearer integration opportunities.
Q: How is AI changing the M&A process?
A: AI is automating tasks, improving due diligence, and providing deeper insights into potential targets.
Q: What are the main drivers of M&A activity in 2026?
A: Expanding into new markets, growing core businesses, and acquiring technological capabilities are the top drivers.
Want to learn more about navigating the evolving M&A landscape? Explore our other articles on strategic acquisitions and due diligence.
