Here’s a brief snapshot of the M&A trends we’re seeing so far in 2026.
What We’re Seeing So Far in 2026
The buyer pool is far more varied than it looks.
PE funds were involved in just 11% of lower middle market deals in 2025; PE-backed portfolio companies (add-ons) accounted for another 24%. The majority of buyers are publicly traded companies, independent private buyers, and a rising wave of non-U.S. acquirers.
Companies are buying their supply chains, not their competitors.
With input costs rising, acquirers are buying two steps up their own supply chain – manufacturers acquiring their fabricators, contractors acquiring their prefab shops. It’s a way to lock in margin instead of just adding scale.
Multiples are flat while escrows and earnouts are rising.
Multiples have been flat all year. But look at deal structure and it’s a different story: escrow holdbacks on sub-$25M deals rose to 14.6% of transaction value in 2025, up from 13.3%, and earnouts now touch nearly 30% of the smallest deals.
Deal flow is up while great platforms are nearly extinct.
PE firms tell us the same thing every week: more deals crossing their desks than in years, and few are worth signing. The businesses buyers actually want (clean financials, real growth, low customer concentration) are hard to find.
Sell Side Group’s Q1 2026 M&A Market Report backs this up, describing the quarter in the lower middle market as “defined by selectivity.” There is plenty of capital chasing deals, but few companies that clear the bar needed to make an investment.
The irony: small deals have quietly been PE’s best bet all along.
Since 2009, the $25–100M range has outperformed every other PE size band, with roughly 39% IRR. Half of new PE funds in 2025 targeted the lower middle market, and senior dealmakers are walking away from big-name firms to build dedicated LMM shops.
What This Means
For nearly three decades, Aethlon has helped business owners navigate changing M&A markets, particularly when capital is plentiful, buyers are selective, and getting the structure right matters as much as the headline price. We bring experience, perspective, and discretion to every step of the process.
Whether you’re simply curious about what we’re seeing or know a business owner who’s beginning to think about a transition, we’re always happy to be a resource. Contact us and we’ll find a time to talk.
