According to Reuters, a new survey from Citizens Financial points to a significant rise in mergers and acquisitions among midsize companies, driven by newly confident private equity firms. The survey of about 400 executives found that 58% expect M&A volume to climb in 2026, with large corporate deals having dominated 2025. A striking 86% of private equity executives felt confident in their M&A decision-making in Q4, a huge jump from just 48% in Q1. The main drivers are strong economic growth, expected interest rate cuts, and attractive valuations, with over half of PE firms planning to initiate deals in Q2 ahead of U.S. midterm election uncertainty. Sectors like technology, media, telecom, and financial services are expected to see the biggest valuation increases, and 39% of PE firms see AI assets as a key M&A driver.
Confidence Is Back
Here’s the thing: that jump from 48% to 86% confidence among private equity dealmakers isn’t just a statistic. It’s a massive shift in psychology. For over a year, the story has been about high interest rates freezing the buyout machine. PE firms were sitting on record amounts of dry powder but couldn’t justify the math. Now, with the Fed signaling rate cuts and the economy holding up, the calculus has changed overnight. They’re not just optimistic; they’re operational. They’re moving from watching to doing. And that planned Q2 sprint? That tells you they want deals locked in before any potential political volatility later in the year. They’re not just predicting a wave; they’re trying to catch it early.
The Middle Market Moment
So why the middle market? Basically, the megadeals of 2025 cleared the runway. Those huge, headline-grabbing transactions among large corporations often require a different kind of capital and face intense regulatory scrutiny. The middle market is where private equity thrives—it’s more agile, less scrutinized, and packed with companies that are ripe for operational improvement or a strategic roll-up. Citizens’ Jason Wallace specifically called out wealth management as a hot area. That makes perfect sense. It’s a fragmented industry where scale matters, and integrating a bunch of smaller firms under one tech platform is a classic PE playbook move. This is where the real, nitty-gritty dealmaking happens.
The AI Angle and Sector Bets
It’s fascinating that 39% of PE firms pointed to AI as a driver. But I think we should be skeptical about what that means. They’re probably not chasing the next OpenAI. For private equity, “AI assets” likely means companies that have valuable data, or existing businesses where AI can be applied to boost margins—think logistics software, marketing platforms, or yes, those financial services firms. They’re looking for applied AI, not pure research. The sector focus on TMT (Technology, Media, Telecom) and financial services is a bet on digitization and consolidation. Real estate and leisure? That’s a pure play on the consumer staying resilient. It’s a diversified but focused strategy.
What This Means Going Forward
If this survey is right, we’re about to see a very busy deal pipeline. This isn’t just good news for bankers and lawyers. It means a lot of midsize companies are going to get a call. For some, it’s a lucrative exit. For others, it means a new, financially-driven owner focused on efficiency and growth. It also signals broader economic confidence. Private equity doesn’t spend unless it sees a path to returns. Their sudden willingness to pull the trigger suggests they see stability and growth ahead. Now, the big question is whether the valuations they’re willing to pay will align with what sellers expect. That’s where the real drama will be.
