Citizens’ 2026 M&A Outlook: Rate Relief, Firmer Valuations, and a Liquidity Push Set the Tone for 2026

Citizens Bank’s 2026 M&A Outlook argues the U.S. deal market is moving into 2026 on better footing than it has had in several years, with improving sentiment, easing financing pressure, and valuations that feel more workable for both buyers and sellers. The report is based on a survey of 400 U.S. corporate and private equity dealmakers evaluating targets with $50 million to $1 billion in revenue, a slice of the market where activity has been uneven as interest rates and operating forecasts stayed volatile.

Sentiment has improved, with private equity more optimistic than strategics
Citizens’ survey found that 58% of respondents described the current M&A market as somewhat or extremely strong, the highest reading in six years. Private equity respondents were notably more upbeat, with 69% of PE firms rating the market as strong.

Citizens views the second-half pickup in 2025 as an early sign of what could broaden in 2026. “We saw megadeals surge in 2025 as the operational environment stabilized, and we look at those transactions as leading indicators for the rest of the M&A market,” said Jason Wallace, Head of M&A at Citizens. “The outlook for good deal conditions suggests more activity to come for broader segments in 2026.”

For the middle market, that matters. The last two years have not been short on interest, but the combination of financing costs and bid-ask spread has kept a lot of would-be deals from clearing.

Rate cuts and growth expectations are doing heavy lifting
The report suggests 2026 planning is increasingly being shaped by expectations of a more stable operating backdrop. Companies cited U.S. growth rates (54%) and anticipated rate cuts (53%) as the top two factors expected to make operations easier in 2026, followed by global and central bank monetary policy (46%).

“The business environment is critical for M&A as buyers and sellers need to have greater certainty regarding performance and forecasts,” said David Dunstan, Head of Industrials, M&A Advisory at Citizens. “Economic growth, favorable interest rates and less volatile global trade dynamics set companies up for continued stability in the operational landscape.”

The message is not that uncertainty disappears; it is that visibility improves enough for buyers to underwrite forward performance without building extreme downside into every model.

Policy friction remains a real constraint
Even as sentiment improves, respondents pointed to ongoing operational pressure from policy and regulation. Tariffs and trade policy were cited by 42% of companies as making operations harder in 2025, followed by changes in tax policy (38%) and changes in immigration policy (33%).

At the same time, the report highlights areas where management teams saw real tailwinds. Interest rate cuts (59%) and increasing adoption of AI (56%) were among the most frequently cited factors that made operations easier in 2025, suggesting technology investment is being treated as a practical lever for productivity and cost control—not just a talking point.

Valuations are stabilizing, and sellers are showing up
Citizens Bank points to improving valuation conditions as a central reason the 2026 pipeline could be deeper than in recent years. In the survey, 39% of companies expected valuations to rise in 2026, while 49% of private equity firms expected the same.

“We hear a growing call for liquidity among private equity investors, and 2026 could deliver the right conditions to bring that backlog to market,” said Mark Lehmann, vice chair of Citizens’ Commercial Bank, citing valuation improvement across most sectors.

Citizens also found that the seller bench is building. Seventy-nine percent of companies indicated they could be potential sellers in 2026, with valuation opportunity cited as the top motivation, alongside pressures including tariffs and input costs.

Implications for private equity: exits matter again
For sponsors, the report’s findings reinforce a familiar setup heading into 2026: plenty of add-on appetite, but a growing need to reopen the exit window. If rate expectations hold and valuations remain firm, the year could bring a more functional market where sponsor-to-sponsor deals, corporate buyouts, and other liquidity events feel less episodic and more like regular throughput again.

Citizens Bank’s Corporate Finance platform provides capital markets and advisory services to middle-market companies and financial sponsors, with capabilities spanning M&A advisory, debt and equity capital markets, valuation advisory, and sponsor finance. The group supports acquisition financings, leveraged buyouts, recapitalizations, refinancings, and growth initiatives, and its Sponsor Finance team focuses on private equity firms with debt needs ranging from roughly $40 million to $500+ million. Citizens Bank is headquartered in Providence, Rhode Island.

To download a copy of Citizens Bank’s 2026 M&A Outlook click HERE.