Market Intelligence

2026 M&A Outlook: Market Conditions, Valuation Trends, and Transaction Timing for Founders

Record private equity dry powder, around $1.2 trillion by late 2025, is chasing a limited supply of quality assets. For founder-led companies with $5M–$300M in enterprise value, that makes 2026 a favorable window, one that may not persist into 2027. This is Windsor Drake’s read on the forces, the multiples, and the timing.

What is the M&A outlook for founder-led companies? Roughly US$1.2 trillion in private equity dry powder was chasing a limited supply of quality assets by late 2025, and that imbalance defines the current sellers’ market in the lower middle market. This outlook is maintained by Windsor Drake, a boutique sell-side M&A advisory firm with offices in Toronto and New York. Reviewed August 5, 2026.

By Jeff Barrington, Managing Director · Windsor Drake · Updated June 2026

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Executive Summary

A favorable, but selective, seller’s market.

~$1.2T

Global PE dry powder, late 2025

~2,700

SaaS M&A transactions in 2025, a record

58%

Share of software deals involving PE buyers

~$195B

US PE deal value, H1 2025 (up ~8% YoY)

Market Drivers

Five forces shaping M&A in 2026.

PE dry powder and deployment pressure

Global private equity dry powder reached roughly $1.2 trillion by late 2025, with more than 40% of that capital over two years old, a new peak. US PE dry powder hit a record $1.3 trillion in December 2024 and stood near $880 billion by September 2025. Capital that must be deployed creates a supply-demand imbalance in favor of sellers of quality assets.

Easing financing conditions

After the constrained conditions of 2023–2024, declining rates and expected Fed cuts through 2026 lower the cost of debt. As financing eases, financial buyers can pay more, which supports valuations across the market.

Exit backlog and hold-period pressure

Median PE hold periods exceeded six years in 2024 and 2025, longer than at any point in roughly two decades. Secondaries transaction values set a record at $240 billion in 2025, up 48% year over year, as sponsors both buy and sell to return capital.

AI as a valuation catalyst and disruptor

AI is now a material valuation driver. Around 72% of all SaaS M&A transactions in 2025 referenced AI in the target. The result is a bifurcating market: AI-capable businesses command premiums while AI-vulnerable ones attract fewer bids.

Flight to quality and widening dispersion

Conditions favor sellers, but only quality, well-prepared businesses. The dispersion between what strong and weak assets command is the widest it has been, which is why preparation and positioning decide outcomes more than the macro backdrop.

Valuation Trends by Sector

What buyers are paying in 2026.

SaaS & software

Nearly 2,700 transactions in 2025, the strongest volume on record. Public SaaS medians run 6x–7x revenue; private-market medians settled near 3.1x by H2 2025. Businesses with Rule of 40, net revenue retention above 110%, and AI positioning command 8x–12x+ ARR, while sub-20% growth or weak retention trades at 3x–5x.

Cybersecurity

Global security and risk-management outlays reached $213 billion or more in 2025, with another double-digit increase expected in 2026. Cybersecurity remains the most resilient sector for valuations.

Healthcare services

Private equity participation rose to roughly 40% of total deal investment in early 2025, up from 25% the prior year, as platform consolidation accelerates.

Indicative 2026 EBITDA multiples by company profile
Company profile	Multiple
Under $5M EBITDA, average growth	4x–6x
$5M–$15M EBITDA, strong performer	6x–8x
Hot sectors or exceptional businesses	8x+
SaaS and software	Valued on revenue / ARR multiples, not EBITDA

The Buy-and-Build Cycle

Why add-on activity matters for founders.

PE-backed platforms are the most motivated and fastest-moving buyers in the market, and add-on activity has grown for five consecutive quarters. For founders with $3M–$20M in enterprise value in particular, the add-on dynamic is directly relevant: a well-run sell-side process should target the specific platforms consolidating your sector, where strategic fit can support a premium.

Transaction Timing

The case for moving in 2026.

Q1 2026, Prepare

Three to six months of structured preparation: clean financials, a defensible EBITDA or ARR schedule, an early data room, and a buyer map.

Q3–Q4 2026, Launch

A five-to-eight-month active process, outreach, management meetings, IOIs, LOI, and confirmatory diligence.

Q1–Q2 2027, Close

Signing and closing, with total engagement-to-close commonly nine to twelve months.

Risk factors. The window is not guaranteed. A reversal in rates, renewed tariff or trade disruption, a drop in CEO confidence, or faster-than-expected AI displacement could compress multiples before 2027. That asymmetry, limited upside from waiting against real downside risk, is the core of the timing case.

Preparation Priorities

What founders should be doing now.

Build a defensible earnings schedule

Document adjusted EBITDA or an ARR schedule that survives diligence, with add-backs you can support.

Clean, auditable financials

Buyers want at least three years of clean, auditable statements before they will underwrite a premium.

Open the data room early

Assemble contracts, cap table, customer and KPI data before launch so diligence does not stall momentum.

Address risks before buyers find them

Customer concentration, key-person dependence, and margin questions are cheaper to fix pre-market than to concede in negotiation.

Engage an advisor early

Founders evaluating strategic alternatives over the next 12–18 months benefit from engaging in Q1 to launch in the second half.

Frequently Asked Questions

2026 M&A market questions.

Is 2026 a good year to sell a business?

Structural factors, record dry powder, easing financing, and an exit backlog, favor sellers in 2026. But the market rewards prepared sellers; whether it is the right year depends on your specific company, not the macro alone.

What are EBITDA multiples in 2026?

Broadly stable to modestly firmer: roughly 4x–6x for companies under $5M EBITDA with average growth, 6x–8x for $5M–$15M EBITDA with strong performance, and 8x+ in hot sectors or for exceptional businesses. SaaS is valued on revenue multiples rather than EBITDA. See current multiples by industry.

How much PE dry powder is there in 2026?

Roughly $1.2 trillion globally by late 2025; US dry powder was near $880 billion by September 2025, down from a $1.3 trillion record in December 2024, with more than 40% over two years old. Around 70% of LPs surveyed in January 2026 planned to maintain or increase PE allocations.

Which sectors are most active?

Technology (AI-native software, infrastructure, and cybersecurity), healthcare services, business services, and home services. SaaS alone saw nearly 2,700 deals in 2025.

How long does it take to sell a business in 2026?

About five to eight months from launch to close, plus three to six months of preparation, so roughly nine to twelve months from engagement to close. See the full process timeline.

How does AI affect valuations?

AI is the primary driver of valuation dispersion. AI-capable firms earn premiums; AI-vulnerable firms attract fewer bids. Non-software businesses benefit indirectly through efficiency gains.

Should I wait for higher multiples?

Trying to time the market is a common and expensive mistake. Preparation and a competitive process matter more to your outcome than guessing the top of the cycle.

Confidential Inquiry

Evaluating your options in the current market?

Windsor Drake advises founders on sell-side transactions in the $5M–$300M enterprise value range, partner-led from first meeting to close. If you are weighing timing over the next 12–18 months, an early conversation is the highest-value step.

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All inquiries are treated as confidential. Windsor Drake operates from offices in Toronto and New York.