As 2025 comes to a close, the private equity marketplace continues to experience meaningful shifts that influence how buyers deploy capital and how sellers prepare for an eventual exit. Looking ahead, the foundation is being laid for renewed acquisition activity. Interest rates are retreating and dry powder remains elevated, thus activity is projected to increase. However, deals are taking longer, diligence expectations are deeper and structures continue to evolve to balance risk between buyers and sellers.

With firms showing cash returns ahead of what was initially predicted for 2025, buyers and sellers should prepare for a more active acquisition cycle in 2026. 

DEAL ACTIVITY IN 2025

Leaders in this industry have witnessed private equity assets under management significantly expanding in recent years, and 2025 was no exception. With more capital available, funds faced heightened pressure to complete deals and demonstrate realized returns, not just paper gains. That dynamic contributed to the rise in exits seen across 2025 and even 2024. 

2025 also saw valuations continue to cool, as interest rates increased and transactable companies became harder to find. Many funds diversified to balance exposure, with broader-strategy firms capitalizing on disruptions in entertainment and logistics, while maintaining positions in more stable sectors. Others with highly specific mandates adopted a patient approach, executing add-ons where possible and seeking operating stability until market fundamentals could shift in their favor.

HOW MARKET FORCES ARE SHAPING DEAL STRUCTURES

Rising interest rates and broader economic uncertainty of 2025 have reshaped the structure of many transactions. Debt availability has tightened, pushing funds to be more conservative in their financing and more rigorous in their diligence. Global variables — including tariffs and political dynamics — are pushing deal timelines further, requiring greater clarity on the operational, financial and commercial health of each target.

To address this, buyers are deploying a range of tools, from earn-outs and escrow arrangements to rollover equity and compensation-based structures. These mechanisms help manage downside risk while allowing buyers to remain competitive in a market where pricing continues to be a major (but not the only) factor. Earn-outs and seller financing are increasingly common, but each comes with trade-offs. Earn-outs can align incentives and defer tax impact; yet may encourage short-term decision-making or present challenges when sellers step away from operations. Seller financing offers buyers flexibility but reduces immediate cash proceeds for sellers and introduces credit and interest-rate risk.

WHAT SELLERS CAN PRIORITIZE GOING INTO 2026

Sellers preparing for a future exit can take several steps to increase valuation, reduce friction in diligence and create a more compelling profile for buyers.

Management continuity remains one of the most important factors. A business that can operate independently of ownership demonstrates stability and lowers perceived transition risk. Strong data capabilities — fast, reliable financial and operational reporting supported by systems such as CRM and ERP tools — give buyers confidence in the business and the team’s decision-making discipline.

Buyers also reward companies with well-developed business plans and thoughtful financial forecasts supported by granular, data-driven assumptions. Demonstrated margin expansion through technology, strategic focus and disciplined investment signals operational maturity. Most importantly, preparedness matters. Companies that enter a sale process with organized diligence materials, articulated growth plans and a well-understood vision for the future are far more likely to command premium valuations.

WHY DEALS FALTER — AND HOW TO AVOID IT

In the current climate, deal failure often stems from surprises in diligence, disagreements over valuation or structure, cultural misalignment or external macroeconomic shifts. In some cases, financing requirements force changes that sellers do not accept. The common thread is preparation and alignment. Both sides benefit when expectations are clearly set, diligence is anticipated and the strategic rationale for the deal is shared early and often.

As the market transitions into what is expected to be a more active deal cycle in 2026, disciplined preparation, flexible structuring and data-driven storytelling will remain critical for both buyers and sellers seeking successful outcomes. To discuss your approach to M&A in the new year, talk to GHJ’s Transaction Advisory Services Practice.