2026 M﹠A Outlook: Economy and Macro Concerns

Mergers & Acquisitions presents our week-long special series: The 2026 M&A Outlook. Throughout the series, more than 50 dealmakers and advisors from across the M&A ecosystem share how they’re thinking about the year ahead — from dealmaking conditions and financing markets to exits, fundraising, and the macro forces shaping how capital is put to work.

What is your outlook for the economy in 2026?

Jason Bordainick

Managing Partner and Co-Founder
Hudson Valley Property Group

“We expect the U.S. economy in 2026 to face ongoing headwinds. While inflation continues to cool and interest rates may begin to ease slightly, we’re not anticipating a dramatic shift in sentiment or liquidity. The market will still be digesting the effects of years of elevated rates and capital deployment will remain cautious. Resilient, needs-based asset classes like affordable housing should see steady demand and value appreciation, while riskier sectors, particularly those exposed to short-term debt or weaker fundamentals, will continue to face valuation pressure. This environment will reward discipline, capital efficiency and long-term alignment between sponsors and investors.”

Sean Epps

Managing Director
GenNx360 Capital Partners

“We expect the U.S. economy to remain resilient, though growth will likely be moderate compared to prior years. With inflation stabilizing and interest rates potentially easing, we anticipate improved capital availability and a constructive environment for middle-market companies, though uneven across sectors. Global geopolitical dynamics will remain an underlying variable that business leaders must navigate.”

Uk-Sun Kim

Head of Credit Originations – Middle Market & Sponsor Finance
TD Bank

“I expect a moderate-growth, higher-for-longer macroeconomic backdrop in 2026. Real GDP growth is likely to remain positive, but fall below the long-run trend, settling in the low-to-mid one to two percent range for the United States. The labor market is expected to stay tight, inflation should continue cooling without collapsing, and nominal interest rates will likely remain above the ultra-low levels seen in the 2010s. This combination will create an environment in which credit is available but more expensive, capital expenditures are pursued selectively, and companies focus on margin resilience and cash-flow generation rather than aggressive expansion. These dynamics will be driven by sticky structural demand for services and wages amid slower productivity gains, fiscal policy impulses shaped by recent tax and spending decisions and credit conditions that remain relatively tight for smaller firms.”

Louis Lehot

Partner
Foley & Lardner

“After four years of decline replaced by uncertainty, my view is that a scenario that includes lower interest rates, more deregulation, a more balanced budget, predictable terms of trade and with uncertainty over tax rates removed, should be a launching pad for an economic recovery.”

Paul Lisiak

Managing Partner & Chief Investment Officer
Metropolitan Partners Group

“We expect the K-shaped U.S. economy to persist in 2026. On the corporate side, the laws of financial gravity will reassert themselves and we anticipate that rising input costs coupled with limited pricing power will trigger more mini-black swan events in certain industries. We expect that most of these mini-black swan events will be sparked through the unwinding of over-levered businesses and private equity owners being forced to retreat and no longer delay loss recognition. This will lead to asset pricing dislocations and opportunities for under-levered businesses to shine.”

Mike Moore

Partner, Co-chair of the Corporate Practice Area
Barclay Damon

“Cautiously optimistic. If inflation can stabilize, assets that have been held back in light of political and market uncertainty may free up and unlock increased deal activity. More investment in, and deployment of, AI at an operational level could also motivate businesses to find and capitalize on synergies achieved through M&A.”

Kevin Mulligan

Managing Director
Monomoy Capital Partners

“I expect 2026 to be a year of gradual normalization rather than rapid expansion. As rate pressures ease and capital markets stabilize, confidence could improve across industrial and consumer end markets. Growth may still be modest early in the year, but I anticipate stronger momentum by mid-year as businesses resume deferred investments. Inflation should remain contained, and supply chains are more predictable than in prior cycles. Overall, we’re preparing for a steady operating environment, not without challenges, but one that rewards disciplined cost structures and well-positioned companies ready to capitalize on improving demand.”

Reuben Munger

Managing Partner & Chief Investment Officer
Vision Ridge Partners

“While 2026 is likely to be less turbulent than 2025, we think the capital intensity of the AI cycle will likely continue to crowd out investment across parts of the broader economy. Headline growth may look strong, but we believe underlying weakness is likely to persist in sectors that aren’t directly benefiting from AI-driven activity.”

Gunnar Overstrom

Partner
Corsair Capital

“Driven by continued strength in employment, consumer spending and capital investment, 2026 is likely to be a strong year for the domestic economy. While a low unemployment rate remains a tailwind, it is being driven in part by a declining labor pool due to lower immigration and an aging population. This is a trend worth monitoring because, if it continues, it will become a headwind to GDP growth. Consumer spending should remain healthy, though likely moderating from recent elevated levels. Capital expenditures will remain a key driver of growth, fueled by ongoing investment in AI and energy, the onshoring of supply chains and continued tax incentives.”

Amanda Zablocki

Partner, Co-Leader of the National Healthcare Team
Sheppard Mullin

“The year ahead will bring continued pressure across the healthcare sector. Organizations will face significant headwinds from multiple directions, including federal funding cuts and regulatory uncertainty, rising drug prices, competitive pressures and cost barriers to adopt and leverage artificial intelligence across all aspects of their business. While the environment will be challenging, like we saw during the pandemic, such pressures will be the catalyst for greater innovation and creative solutions, prompting organizations to reassess portfolios, pursue consolidation and form partnerships to stay competitive.”

What are your top macro concerns that could impact your business next year?

Jason Bordainick

Managing Partner and Co-Founder
Hudson Valley Property Group

“Political polarization is creating more volatility in housing policy, particularly around rent control, property tax frameworks and development incentives. These policies can create both challenges and opportunities but add uncertainty that complicates capital deployment. We’re also keeping a close eye on insurance cost inflation and continued pressure on operating margins. Even as interest rates begin to stabilize, cost structure remains tight. In this environment, execution certainty and long-term alignment between public and private partners will be more important than ever.”

Jeff Buettner

Managing Director
Butcher Joseph & Co.

“Our biggest concerns are persistent interest rate volatility, geopolitical uncertainty and an election year that could delay decision-making among buyers, sellers, and lenders. In the mid-market, even modest shifts in credit spreads or tax expectations can meaningfully affect transaction timing and valuations. We’re also watching demographic trends and their downstream impact on ownership transitions. Many business owners are aging into liquidity events just as capital becomes more selective.”

Jason Colodne

Managing Partner
Colbeck Capital Management

“Factors like rising capital costs, inflation and evolving regulatory capital requirements all have the potential to directly impact non-sponsored deal flow and borrower resilience. While interest rates are expected to stabilize, any unexpected shift such as prolonged higher-for-longer policy or rapid cuts will have an obvious and immediate impact on deal pricing and borrower behavior. Regulatory and policy shifts such as changes in banking regulations or private credit oversight could also alter competitive dynamics and increase compliance costs.”

Gregory Fine

Member and Co-Chair, Private Equity Practice
Mintz

“Rising discount rates and cautious acquirers are depressing valuations, creating bottlenecks in exits and extending holding periods for portfolio companies. Compounding these challenges, many institutional investors remain overallocated to private markets and are committing capital more selectively, making fundraising slower and more competitive. Together, these forces are reshaping the private equity landscape, favoring firms with strong operational capabilities, patient capital and proven track records, while putting pressure on over leveraged assets and newer managers.”

Hendrik Jordaan

Partner
Nelson Mullins Riley & Scarborough

“Talent markets, especially at the management team and operating partner level, remain competitive. The ability to secure strong leadership is becoming as critical as securing capital.”

Uk-Sun Kim

Head of Credit
Originations – Middle Market &
Sponsor Finance
TD Bank

“One key risk is the persistence of higher-for-longer interest rates, as sustained elevated policy rates increase funding costs, compress valuations, particularly in growth and technology sectors, and slow the pace of mergers and acquisitions. Another concern is geopolitical fragmentation and rising trade frictions, with export controls, investment screening measures and supply-chain decoupling driving higher capital expenditure and sourcing costs. A potential credit-market repricing or liquidity event also poses risk, as stress in commercial real estate, non-bank lenders or concentrated private credit exposures could lead to tighter corporate lending conditions. Finally, regulatory shocks related to AI and data could emerge, with new rules around data governance, AI safety or competition abruptly altering compliance costs and product development roadmaps.”

Aaron Kless

Chief Executive Officer & Chief Investment Officer
Andalusian Credit Partners

“For private lenders, uncertainty around the path of interest rates is a constant, and 2026 will be no different. Should the Fed slow its pace of rate reductions to get inflation closer to its target, we and others in the private credit industry will need to operate under a higher-for-longer, potentially more volatile rate environment. That would affect everything from debt pricing and covenant design to ongoing portfolio monitoring. On the other hand, if political dynamics undermine the Fed’s independence, and interest rate decisions become perceived as politically motivated rather than data-driven, the set of economic risks becomes far more complicated.”

Kevin Mulligan

Managing Director
Monomoy Capital Partners

“My top macro concerns remain demand consistency, cost volatility and labor availability. While industrial activity has stabilized, a slowdown in key end markets could delay the operating leverage firms like Monomoy worked to build. Input costs, particularly raw materials, freight and energy, remain unpredictable due to evolving trade policy, and tight labor markets continue to create wage pressure in certain regions. We’re focused on agility: adjusting pricing, procurement and workforce planning to maintain resilience. The combination of disciplined execution and cost efficiency will be critical if growth proves slower than expected.”

Reuben Munger

Managing Partner & Chief Investment Officer
Vision Ridge Partners

“The AI cycle continues to dominate capital flows within the energy sector, and we believe it is likely to increasingly collide with supply chain constraints and policy uncertainty. The combination of those two factors has the potential to create renewed inflationary pressures and impact investment planning across the market.”

Matthew Rosen

Head of Real Estate Asset Management
Balbec Capital

“Rising unemployment on the back of increasing automation and AI adoption could strain consumer finances, in both first and second order effects. While this also creates opportunities, it heightens vigilance around existing portfolio risks. Trade tension and tariffs remain a concern as well, as they could stoke inflation and weaken the dollar, further pressuring household budgets. In addition, the political environment remains uncertain, which could influence social support programs and immigration policies with potential effects on overall economic growth, structural demand for housing and labor supply/wage dynamics.”

Jason Ruggiero

Co-Chief Investment Officer, Senior Portfolio Manager
EJF Capital

“Digital bank run risk: Rapid information flow via social media increases the risk of sudden deposit flight among large, uninsured business accounts. Until deposit insurance is updated to cover larger balances, banks remain vulnerable to these online-driven liquidity events.”