As we enter 2026, we remain largely optimistic about the promise of the new year.
Notwithstanding some cautionary headwinds, liquidity is abundant, valuations are robust, debt and equity markets are performing well and upside exists for fiscal stimulus and “Big Beautiful Bill” benefits. These positives, coupled with a pro-business administration and accommodating regulatory leadership, make for a conducive dealmaking environment. We see a strong pipeline for dealmaking for corporates and the potential for enhanced participation by financial sponsors. We expect market activity to broaden beyond Big Tech, with more mid-market transactions alongside the mega deals. Barring any unforeseen geopolitical grey or black swans, 2026 should offer opportunities for dealmaking, whether initial public offerings (IPOs), mergers & acquisitions (M&A) or leveraged buyouts (LBOs), across sectors.
In spite of our optimism, we will be keeping our eye out for choppy waters resulting from uncertainty around interest rate policy, the impact of tariffs, geopolitics and the proliferation of AI. Consumers and executives alike remain cautious, with some companies pumping the brakes on hiring while the Fed wrestles with how to boost employment without fueling inflation. And there remain concerns around private credit defaults, which we believe to be largely idiosyncratic, as well as the circular and overfinancing of AI data centers. These potential issues would raise the risk of dampening an otherwise favorable dealmaking environment.
In light of this backdrop, Mizuho’s industry sector heads offer their outlook on the driving forces impacting their respective domains.
Consumer & Retail
by Jay Broaddus & Richard Steinman, Co-Heads of Consumer & Retail
Against the backdrop of economic uncertainties, tariffs, the government shutdown, proliferation of AI and rising unemployment, consumer confidence remains low and spending inconsistent across demographics. Reduced spending power from the growing number of unemployed recent college graduates and from lower-income demographics, coupled with broader affordability challenges, has weighed heavily on the sector. Scaled players, such as Amazon and Walmart, have continued to gain share and invest, making for a competitive operating environment.
While overall markets have done well, stock price performance has lagged for most consumer and retail companies. Though counterintuitive for a time of uncertainty, there has been an uptick in M&A activity as companies reshape portfolios to focus on longer-term strategic transactions that bring scale and additional capabilities. We also see more prevalent use of creative structures to consummate transactions, including contingent consideration and retained ownership to bridge valuation gaps. As corporates look for deals to grow their existing business, they have had a leg up on private equity (PE) firms that remain more cautious, waiting for the right transaction, at the right time, and with a clear exit path. Nonetheless, PE is showing incrementally more confidence in bringing businesses to market, with some M&A processes expecting to launch early in 2026 and others considering IPO or dual track exit strategies over the course of the year.
Demographic shifts cannot be ignored in the sector, as Gen Z and Millennials have distinct spending habits and preferences relative to older generations and are more likely to embrace disruptive brands. Taking advantage of this dynamic, well-capitalized consumer packaged goods leaders are moving aggressively to reshape portfolios, including acquiring newer brands that resonate with younger consumers and continuing to streamline businesses via divestitures of slower-growth assets or through more transformative spin-offs.
With so many factors at play, operators will need to stay nimble in 2026 and beyond, as consolidation is expected to continue with companies focused on AI and the pressure to build scale to compete and grow.
Energy
by Chris Getz, Head of Energy
Several factors in the natural gas market have created a value recalibration in gas-centric assets, which has yet to crystallize in-kind in the public corporate markets, making for an increasingly competitive market for those seeking new or incremental natural gas exposure. While the market eagerly awaits more than 20 billion cubic feet of in-process or contemplated Gulf Coast Liquefied Natural Gas (LNG) capacity expansion, there is also an increased focus on natural gas-fired power generation to support the numerous digital infrastructure projects underway. Simultaneously, international constituents are becoming increasingly active in sourcing physical gas molecules to marry up their contractual LNG offtake and mitigate margin compression. The strong natural gas backdrop has also tightened the natural gas infrastructure market—from the wellhead to water—and we expect to see even stronger competition for such assets in the next 12 plus months.
Crude oil and the crude/liquids infrastructure remain rather active, despite the persistent weakness in oil price, with the expectation that the second half of 2026 and beyond will see a re-balancing in crude supply/demand. We expect transportation and a renewed emphasis on domestic industrialization to drive crude demand for several years to come and reward clients that prioritize scale/consolidation to lower the cost of supply and delivery.
Financial Institutions
by Diane Ferguson, Head of Financial Institutions
Market dynamics and volatility are also creating challenges and opportunities in the Financial Institutions sector that should result in greater M&A and capital markets activity. Simultaneously, certain subsectors within the Financial Institutions space continue to converge, making deep expertise across verticals paramount to navigating market dynamics.
Even as traditional boundaries between banks, neobanks and fintech platforms erode, the core drivers of lender performance remain unchanged. As it becomes more evident that technology can optimize distribution, lower marginal servicing costs and bring efficiencies to collateral management, it still cannot offset short-sighted funding strategies or weak asset-level performance. Competitive advantage lies in leveraging technology to enhance efficiency, reduce losses and create durable economic value for stakeholders. Despite a year of uncertainty around monetary policy and trade tensions, borrowers have remained resilient across consumer and commercial specialty finance, with credit conditions returning to pre-pandemic benchmarks.
Premium rate moderation is challenging insurers’ traditional focus on organic growth, creating an environment where M&A becomes a critical lever, particularly for historically less acquisitive insurers. Several PE-owned brokers have also outgrown the private equity ecosystem and may seek to exit via the public market. While in asset and wealth management, semi-liquid private-market vehicles have reshaped distribution, and regulatory and operational hurdles are forcing managers to scale or specialize. This makes small and mid-sized managers, who cannot justify the build-out, natural consolidation targets for larger players looking to create “super-platforms” that own both product and shelf space.
Lastly, the intersection of insurance, specialty finance and asset management is accelerating with the convergence around private markets. Insurers are deploying balance sheets like private market platforms, anchoring origination in private credit and real assets. Asset managers are designing strategies tailored to insurer capital profiles, creating integrated ecosystems of shared origination, co-investment and capital solutions, effectively removing the line between insurer and asset manager. At the same time, asset managers increasingly search for differentiated products in private markets, seeking to build, buy or partner with specialty finance platforms that are optimizing their cost of funding.
Financial Sponsors
by Stancel Riley & Richard Park, Co-Heads of Financial Sponsors and Strategic Solutions
The increase in interest rates that began in 2021 has challenged the dealmaking environment for private equity, and typical LBO activity has yet to recover, especially sponsor-to-sponsor transactions that rely on the financing markets to drive returns. Fewer exits of portfolio companies have constrained the ability of limited partners to recycle capital and support new fund formations. In contrast, on the infrastructure side, there has been an increase in monetization, but the asset class is not immune to constraints on capital recycling.
As far as IPOs, we see a prevalence of the “hurry up and wait” approach as managers look to take advantage of favorable windows ahead of mid-term elections. Additionally, we expect to see continued growth in and focus on secondary offerings as PE seeks to return capital to LPs and increased creativity in the deployment of continuation vehicles. Sovereign wealth funds have shown willingness to play in large transactions, such as the LBO of Electronic Arts and Aligned Data. Similarly, off-balance sheet joint ventures with large corporates are expected to become normal course of business to address pressures of rating agencies, activists, large capex budgets and the need to optimize return on investment (ROI).
There is general acknowledgment that data center build-out activity globally will continue for the foreseeable future; however, concerns of oversaturation are creeping in, and the potential exists for data centers and AI generally to reach a choke point in terms of available financing. This bifurcated view held by leveraged capital markets on the risks associated with AI will increase focus on repayment risks and will facilitate more structured hybrid solutions as well as liability management exercises. This will drive an expansion of the parties that participate in capital formation, with banks potentially striking partnerships with private credit or investment managers as another creative way to get deals done. With the number of $30-40 billion deals now seen in the market compared to a handful of deals a few years ago at only around $3 billion, the market has exploded.
With debt markets in good shape and equities trading well, additional easing will serve as a catalyst for deals getting done and we are cautiously optimistic for a flurry of activity in 2026.
Healthcare
by Kevin Davies & Richard Jacobsen, Co-Heads of Healthcare
Recent lawmaking around Medicaid eligibility, coupled with the public policy debate on Affordable Care Act subsidy extensions, are causing a great deal of uncertainty within healthcare services as the industry grapples with the likelihood of fewer Americans being able to receive care or pay for it. Given the enormous percentage of healthcare payments that come in the form of Medicare or Medicaid, any cutback in government payments and reimbursements would have a significant impact on the services sector.
U.S. healthcare services M&A activity in 2025 is on pace for the lowest dollar and transaction volume in the past decade. In the first three quarters of 2025, healthcare services dollar volume as a percentage of overall healthcare deal activity was at one of the lowest levels in the past 15 years. Of those healthcare services transactions, over 60% of dollar volume involved healthcare information technology companies. Activity has been driven by a few large transactions.
Despite the softer environment, financial sponsors continue to be very active buyers and sellers of healthcare services assets, pursuing increasingly bigger targets and accounting for 48% of transaction dollar volume in 2024 and 42% this year. At the same time, sponsors are also selling assets at an increasingly high rate, with a record level of active sales processes. However, there are a large number of failed processes due to a lack of valuation harmony between buyers and sellers. We expect 2026 to look very similar, with a few deals driving volume and sponsors continuing to drive a significant amount of the activity. We also expect that some sponsor-held assets will become too large to sell in the coming years, driving an increase in IPO volume.
Uncertainty from public policy initiatives has also impacted the life sciences sector, with the impact of tariffs on companies that have their manufacturing facilities offshore, and the administration’s “most favored nation” pricing policies on pharmaceuticals of significant concern. While “Trump Rx” is expected to bring drug prices down, downward movement in pricing could also have an impact on launch strategies for newly approved drugs and may in fact end up raising the price of drugs outside of the U.S.
We expect 2026 to be an even better year in life sciences with the biotech market recovering dramatically in the second half of 2025. A robust M&A bid from large pharma and the inevitable failure of the many early-stage biotech companies that went public in the post-pandemic equity market boom set the stage to turn what had been the worst equity environment for biotech in years into one of the best. The return of capital to investors has allowed continued investment in high-quality companies that have had more positive clinical outcomes.
A lower level of uncertainty in the second year of Trump’s administration should be beneficial for equity and debt issuance, as well as M&A. While M&A will continue to be driven by strategic buyers in life sciences and sponsors in healthcare services, we expect transactions to be larger regardless of subsector, and with healthy equity markets and a more conducive regulatory environment, companies have far more options to create value for shareholders.
Industrials
by David Hunt, Co-Head of Industrials & Doug Jackson, Head of U.S. M&A and Co-Head of Industrials
Comprising almost a dozen unique subsectors, Industrials can be viewed as a “tale of two cities”, with the best of times continuing for the “haves” while more challenging times will continue for the “have nots”.
Companies that make equipment for AI infrastructure or aerospace and defense applications fall into the “haves” camp and have generally found solid footing, with several headline-grabbing developments expected to improve the long-term health of U.S. manufacturing. Notably, an uptick in industrial equipment investments is anticipated driven by data center build-outs as well as broader investment coming from re-shoring of U.S. manufacturing capacity. Similarly, geopolitical tensions playing out around the globe are fueling a massive increase in defense spending in the U.S. and importantly, in both Europe and Asia Pacific. Commercial aerospace is also expected to continue to benefit from a cyclical rebound in travel, amid an undersupply in the aircraft market, which should drive demand for new planes, benefiting the entire supply chain. These positives are expected to whet executives’ appetite to invest both organically and inorganically, with deep access to capital and M&A opportunities.
Several other industrial subsectors, including automotive, chemicals and building products, have not been as fortunate: chemicals, which have been in a prolonged downcycle that is expected to persist due to overcapacity and soft end-market demand; the automotive sector (both internal combustion and electric vehicles), which are expected to continue feeling the impacts of tariff policies; and building products, which continue to feel the impacts of uncertainty around the pace and magnitude of rate cuts. A reduction in rates should help improve residential construction over time; however, tariffs play a significant role in price impacts on building materials such as steel, aluminum, wood and others. Sector headwinds have impacted the ability of companies in these subsectors to access capital and the volume of M&A opportunities.
Power & Utilities
by Paul McNutt, Co-Head of Corporate Finance and Head of Power, Energy & Infrastructure
As demographic trends, onshoring of manufacturing and AI-related development create rising electric demand, the utility sector is experiencing unprecedented growth. On the back of this trend, utilities are announcing record-level capital budgets, with the latest guidance more than 50% higher than the previous 5-year average. This growth has driven strong valuations across the sector; however, affordability and financeability have become key considerations for investors. This has prompted management teams to focus on balancing their desire to increase capital/earnings growth with the impact on customer bills.
While the markets continue to be supportive of funding this growth, utility balance sheets remain stretched, and management teams are starting to look for creative solutions to reduce balance sheet stress during the construction period. M&A continues to be another accretive funding tool with companies divesting non-core assets or selling minority stakes. We are also seeing a return of stock-for-stock corporate M&A as management teams recognize the need for scale to capitalize on these growth trends and help manage affordability concerns.
Real Estate
by Noel Purcell, Head of Real Estate
We saw the gap between bid and ask begin to narrow in 2025, with deal activity in the sector increasing as the cost of underwriting debt has begun to move in a positive direction. However, the ripple effects of the concern for possible rising unemployment, a continuing higher interest rate environment, the lingering effects of elevated inflation and the volatility caused by the rise of the AI build-out will be felt across the sector in 2026.
The double whammy of the concern for elevating unemployment and rate uncertainty will cause several commercial and residential real estate markets to struggle. Urban office space has seen modest recovery in several major markets due to return-to-work initiatives, but significant space will continue to remain empty in many major cities. Home sales have been in a slowing trend in 2025, and this is expected to continue in 2026 as many consumers struggle with affordability. While the costs associated with purchasing a home in a high-rate environment would normally strengthen the rental market, if unemployment sees an uptick, rental markets may also suffer. Despite this, the multi-family housing market remains a generally favored asset class, while the need for affordable housing units continues to be a priority in every major market.
The AI build-out was a catalyst for data center growth this year and will remain so in 2026. That said, the explosive development we saw in 2025 raises concerns regarding the power needs on a go-forward basis. Priority and cost related to institutional vs. consumer demand will remain a challenge in the near term. The longer-term concern of possible over-building vs. the near-term computing and power needs will continue to be an issue the industry will struggle with in 2026.
With caution identified, many bright spots exist, and we will continue to be aggressive in areas where we see solid opportunities, including street retail, student housing, warehousing and distribution as well as with the better prepared sponsors in the AI build-out. While we remain bullish about healthcare facilities and certain areas of senior housing, we are closely watching for uncertainty around government support for programs like Medicare.
We expect to continue to see solid liquidity in multiple sectors of the market which should only strengthen if rates come down and the chances of a recession are forestalled. Solid credit fundamentals remain for industry stalwarts, allowing for a market where they can exploit their profile. While the overall equity markets surged this year, they were not as kind to REITs in 2025. This may change in 2026 as U.S. REITs typically outperform overall U.S. equities in rate cutting environments.
Technology, Media & Telecom
by Andy Laszlo, Head of Technology, Media & Telecom
What a difference a year makes! From all TMT eyes having been focused on the incoming administration’s regulatory approach and tariff policies, Google’s dominance in search and data privacy/cyber security amidst elevated political tensions then; to now focusing almost entirely on the AI ecosystem, with some 2024 themes still in existence.
The race for AI dominance has seen over $400 billion allocated to capital expenditures in 2025, with numerous reports predicting more than $5 trillion will be spent by 2030 on building-out the AI infrastructure. This includes building costs: land, construction, cooling and power connection; and the computer hardware needed to run data centers: GPUs/accelerators and memory. This extraordinary capital allocation is generating excitement, as the imagination ponders the possibility of massive advances in medicine and science, efficiencies in the workplace and more. Yet, it also raises concerns as we remember the fiber build-out approximately 25 years ago, which enjoyed a similar euphoria only to end relatively badly. Furthermore, there are many unanswered questions around the impact of AI on employment, the overall costs associated with the build-out and the financing being used to fund it. Indeed, most AI bulls will say this time is different because it fills an existing shortage of demand—to which there seems no end in sight—while fiber was a “build it and they will come” strategy.
The circular financing being used to fund much of the build-out is concerning. While many investment dollars come from high cash flows or fortress balance sheets of investment grade companies, some are also using leverage to raise capital. This may eventually change the complexion of those companies, as we have seen credit risk insurance get materially more expensive for several companies in the AI ecosystem that have made large capital expenditure commitments and/or take on leverage to meet those commitments.
We enter 2026 with anticipation, as it is certain to be a year of exciting opportunity and likely momentous announcements, with TMT capital raising expected to remain robust and the Magnificent Seven continuing to feature prominently. But we also have an appropriate level of prudence, as there just seem to be more questions than answers. What kind of revenue generation is needed to justify these investments? The short answer: potentially hundreds of billions of dollars annually, many multiples of where we are today. What is the impact on the labor force and unemployment rates? Does AI disintermediate traditional search? In software, does it accelerate development, but shrink the need for traditional coders/developers? What are the ancillary ways to invest in the growing AI economy? Obviously, semiconductors have enjoyed a renaissance, while power is perhaps the next-most needed asset given the incredible demand to power data centers, some of which are forecast to be as big as Manhattan.
As companies look for an AI hook to garner valuations, we expect to see continued investment dollars into this new frontier with players circling the wagons to stake a claim. We believe this will result in increased strategic partnership and M&A activity in the coming year, yet like any new frontier it will be interesting to see how things have unfolded when we reassess this time next year.
Closing Thoughts
Despite the many conflicting forces that exist in today’s operating environment, the economic fundamentals remain strong. We expect to see a broadening of high-quality transactions in the coming year but advise a long-term strategic approach that employs diligence and rigor, rather than chasing the headlines. The importance of relying on the guidance of experienced advisors who possess the breadth, depth and expertise to assess your strategic and financing needs cannot be understated.
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