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January M&A activity showed selective strength despite overall softness.
January 2026 M&A activity reflected year-over-year (YoY) softness, with announced $100m+ transactions declining 7% in value and 21% in volume, though there were 10% more deals valued at $1b or more. Elevated geopolitical and macro uncertainty kept mid-market activity restrained, even as private equity (PE) showed renewed willingness to transact and deploy capital. Meanwhile, strategic buyers pursued scale and AI-driven capabilities, supporting megadeal momentum.
According to EY-Parthenon Chief Economist Gregory Daco, economic activity remains solid, though policymakers continue to balance lingering inflation pressures with evolving labor market dynamics. Inflation is expected to hover just below 3% in early 2026 before moderating toward 2.5% as tariff effects fade, while unemployment shows signs of stabilization alongside gradually softening labor demand. Markets anticipate roughly 50 basis points of easing through 2026, with the first rate cut unlikely before mid-year, reinforcing a cautious but supportive backdrop for continued expansion.
Deal value (US$100m+); Deal volume (US$100m+)
Source: EY Insights analysis and Dealogic
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Read moreOn a monthly basis, US M&A activity experienced a decline in January 2026, with deal value decreasing by ~49% and volume dropping by ~26%.
Scaling infrastructure and capacity to capture demand-led growth
A series of deals highlights a clear emphasis on investing in hard infrastructure and capacity expansion to take advantage of steadily increasing demand. Acquirers are prioritizing assets that expand physical throughput, energy generation, logistics or manufacturing capabilities, especially where demand is supported by long-term contracts or consistent consumption trends. This M&A market trend reflects confidence in sustained volume growth and a readiness to accept short-term capital investments for long-term cash flow stability.
Portfolio expansion into higher-growth or adjacency markets
Recent deals have focused on broadening product or service offerings into adjacent, faster-growing segments where companies can utilize their existing market presence, customer relationships and operational knowledge. Instead of making transformational investments, these transactions prioritize expansion into related areas to boost growth while minimizing strategic risks. This indicates a preference for steady growth strategies that can strengthen revenue resilience and reduce dependence on mature core markets, reflecting careful capital allocation aimed at diversifying revenue and gaining incremental market share.
US sector breakdown for top deals (US$100m+) – January 2026
Sectors that fueled this month’s deal activity
Source: EY Insights analysis and Dealogic
Sector highlights
M&A activity in January witnessed a mixed performance in both deal value and volume across sectors.
Technology
Tech M&A saw a rise (65% YoY) in deal value despite a decline (-36% YoY) in deal volume, reflecting a continued shift toward fewer, larger and more strategic transactions. Strategic buyers prioritized vertical integration and increasing computing power for AI applications, while financial sponsors targeted high-visibility software assets. Key drivers included accelerating AI adoption, rising demand for specialized silicon and cloud infrastructure and investor preference for market leaders amid a selective risk environment.
Life sciences
The sector experienced a slight decline in deal value (-3% YoY) and reduced M&A activity (-18% YoY), indicative of selective investment amid a cautious funding environment. Strategic acquirors focused on strengthening therapeutic pipelines and expanding high-growth platforms in cardiology, oncology, immunology and long-acting infectious-disease treatments.
Power and utilities
The sector recorded a sharp contraction in deal value (down 72% YoY) alongside an 11% decline in volume. Strategic activity centered on securing dispatchable generation capacity, scaling exposure to next-gen clean technologies and attracting institutional capital for energy transition platforms. The month’s activity reflected surging electricity demand from AI data centers, grid reliability requirements and long-term decarbonization ambitions.
Aerospace and defense, mobility
Deal value in the sector climbed 119% YoY, while volume expanded 67%, signalling strong acquirer confidence in aviation, defense and logistics assets. Strategic buyers focused on expanding aerospace supply chains, modernizing airline fleets and accelerating drone-enabled logistics solutions. Momentum was driven by strengthening global travel demand, imperatives to build more resilient supply chains and expanding adoption of autonomous and AI-enabled logistics platforms.
Oil, gas and chemicals
Deal activity remained muted, with deal value broadly flat (1% YoY) and volume declining sharply (78% YoY). Transaction activity centered on strategic upstream acquisitions and the strengthening of midstream and chemicals capabilities, reflecting a clear focus on securing long-term resource access, mitigating operational risk and directing capital toward high-margin or differentiated chemical assets.
Looking ahead
M&A activity is expected to regain momentum in 2026, and dealmakers are positioned for a broader upswing as financing conditions ease, valuations stabilize and pipelines refill across corporates and sponsors. PE firms are under pressure to monetize long-held assets while deploying elevated dry powder, reinforcing transaction pipelines.
Meanwhile, corporates pursue scale, innovation and AI-linked capabilities to accelerate growth. EY-Parthenon CEO Outlook 2026 shows that CEO sentiment remains positive, with most leaders planning transactions to enhance growth, acquire technology and build resilience. Leaders are prioritizing productivity and operational efficiency, including AI and digitalization, while remaining ready to reallocate capital quickly in response to geopolitical or policy shifts.
Sector momentum is likely to focus on technology, financial services, healthcare and industrials, with cross-border buyers showing renewed appetite for high-quality assets.
In January 2026, M&A activity softened year-over-year, with both deal value and volume declining for $100m+ transactions, while the M&A market saw mid-market restraint due to uncertainty. However, the number of transactions worth $1 billion or higher increased by 10%. Strategic buyers and private equity remained active, focusing on AI and infrastructure. Sector trends were mixed, with technology M&A activity showing a dip in volume but showing strong deal value.
Karan Chowdhary, Assistant Director and Sagar Garg, Associate Manager, from Ernst & Young LLP (India) contributed to this article.
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