Private equity urgency, valuation resets and selective financing are reviving deal momentum, but realism on price remains key.
After a prolonged period of uncertainty, dealmaking is showing signs of renewed life.
In an interview with InvestmentNews, Joe Donohue, vice-chairman of international investment bank DC Advisory, says the M&A market is slowly reawakening, driven less by macroeconomic shifts and more by mounting pressure inside private capital markets.
“Over the last year and a half, we’ve seen the M&A market slowly emerge from a period of uncertainty,” Donohue says. “While the start of 2025 was promising, volatility mid-year dampened activity. Now, there’s a sense that the market is waking up, driven not by a dramatic shift in the economic climate, but by mounting investor pressure, especially in private equity.”
That pressure is changing the behaviour of both buyers and sellers. “Sellers are increasingly motivated, and while buyers remain cautious, the overall mood is more optimistic than it’s been in some time,” Donohue says.
A key force behind this momentum is the urgency facing private equity firms to deploy capital and generate returns.
“Private equity firms are feeling the heat from their investors to put capital to work and clear a backlog of unsold businesses,” Donohue says. “This urgency is pushing them to be more active, even if it means adjusting expectations or being creative with deal structures.”
He adds that negotiation dynamics are shifting as both sides reassess risk and timing. “We’re seeing more willingness to compromise on timelines and risk, with sellers tempering their valuation hopes and buyers building value from the ground up.”
Despite this progress, Donohue cautions that activity has not fully normalised. “The need to deliver returns is driving deals forward, even if the pace isn’t quite where it needs to be yet.”
Valuation reset
One of the biggest hurdles in recent years has been valuation alignment following the post-2021 boom. Donohue says the reset is underway, but uneven.
“Valuations remain a challenge, but there are signs of a reset,” he says. “The market is split between ‘The Best’, star assets that attract fierce competition and high prices, and ‘The Rest,’ where deals take longer and require more negotiation.”
Seller expectations are starting to adjust to this reality. “Sellers are starting to accept that not every business will fetch a premium, and buyers are approaching valuations with a more realistic lens.” This slow recalibration is helping transactions progress. “This gradual adjustment is helping deals get done, even if some processes still fall short of expectations.”
Debt market conditions are also shaping deal outcomes, with lenders taking a more selective stance. “The debt markets are showing a clear divide: top-tier credits are attracting strong interest and favourable terms, while appetite for riskier assets remains low,” Donohue says. Still, quality businesses can access financing. “Lenders are selective, but for quality businesses, financing is available and competitive.”
This has created a two-speed environment. “This means that while the best companies can secure attractive leverage, others may need to be more flexible or patient.” Even so, Donohue views the broader backdrop as constructive. “The overall environment is supportive, but not universally so, success depends on the strength of the underlying business.”
Sector interest
Sector interest continues to concentrate around resilience and strategic fit.
“Tech giants and market leaders continue to command attention, with extraordinary valuations for standout assets,” Donohue says. “Across regions, sectors with resilient fundamentals, like technology and strategic industrials, are seeing the most activity, while others lag behind.” Ultimately, he adds, “The difference usually comes down to quality and strategic fit.”
International buyers are adding further energy and complexity to the market.
“International buyers, especially in markets like Japan, are playing a bigger role, often bringing fresh perspectives and capital,” Donohue says. “Their involvement is raising competition and, in some cases, valuations for high-quality assets. Cross-border deals also add layers of complexity, from regulatory hurdles to cultural considerations.” The result is “a more dynamic, but also more demanding, deal environment.”
For business owners weighing a sale, Donohue says there are clear indicators to watch. “Owners should keep an eye on deal volumes and pitch activity, both are picking up, suggesting momentum is building.” Valuation trends matter as well. “It’s also important to watch how valuations are trending, especially for businesses similar to theirs.”
He points again to private equity as a bellwether: “If private equity sellers are responding to investor pressure and adjusting their expectations, it could be a good time to enter the market.” Still, he stresses the importance of realism: “Ultimately, the window is opening, but success will depend on realistic pricing and readiness to engage with a market that’s still finding its balance.”
