Editor’s note: This article is part of our 2026 forecast coverage. See our IPO market outlook here.

For years, industry observers have predicted an impending surge in startup M&A activity, largely attributed to a constrained IPO market that kept many venture-backed companies in private hands. As the long-anticipated IPO dam finally broke in 2025, the market didn’t immediately witness a dramatic spike in the sheer number of M&A deals. However, what did emerge was an extraordinary surge in the known value of these transactions, signaling a profound shift in dealmaking dynamics and a heightened appetite for strategic acquisitions.

Globally, 2025 saw approximately 2,300 M&A deals involving venture-backed companies, culminating in a collective known deal value exceeding an impressive $214 billion, according to Crunchbase data. It’s crucial to acknowledge that a significant portion of reported M&A deals do not disclose financial terms, meaning this staggering dollar amount is derived solely from transactions where a value was publicly provided. This slight uptick in deal count, coupled with the massive increase in value, unmistakably points to a landscape dominated by significantly larger individual deal sizes. The known dollar amount for 2025 represents a remarkable 91% increase from the $112 billion recorded in 2024, underscoring a rapid recalibration of market valuations and strategic priorities.

The United States emphatically led this M&A renaissance, asserting its dominance by comprising roughly 73% of all transaction values and 56% of global transactions. Within the U.S., nearly 1,300 deals accounted for a known value of $157 billion, a substantial leap from the $79 billion across approximately 1,100 transactions in 2024. A telling indicator of this trend towards mega-deals was that around 37 of these U.S. transactions were individually valued at $1 billion or more, per Crunchbase data. This concentration of high-value deals highlights a market where significant capital is being deployed for highly strategic assets.

Anuj Bahal, Technology, Media, and Telecoms Deal Advisory and Strategy Leader for KPMG US, expressed little surprise at this pronounced uptick in M&A deal volume and dollars. He posited a counterintuitive but well-established market dynamic: "A healthy IPO market tends to increase M&A activity rather than reduce it." Bahal explained that many companies adopt "dual-track strategies," simultaneously preparing for an IPO while actively exploring M&A opportunities. This approach grants them enhanced flexibility and considerable leverage in negotiations, with the potential threat of a public offering often serving as a powerful bargaining chip to drive up a startup’s sale price. Moreover, a robust IPO market injects a fresh wave of cash-rich public companies into the ecosystem, entities that "immediately look to acquisitions to accelerate their growth," thereby stimulating M&A demand across the board.

The Era of Mega-Deals: Valuation Soars

The year 2025 was punctuated by several landmark acquisitions that redefined historical benchmarks. Google’s staggering $32 billion purchase of cloud security unicorn Wiz not only marked the largest acquisition of a private, venture-backed U.S. company for the year but also became the largest such deal ever recorded. This deal dwarfed previous records, with the next-closest historical transaction being Meta’s 2014 acquisition of WhatsApp for $19 billion. Crucially, the overall surge in M&A value wasn’t solely attributable to this single behemoth; rather, it was indicative of a broader trend of significantly larger transactions across the board.

Other notable transactions contributing to this record-breaking year included Naver Financial Corp.’s $10.3 billion acquisition of South Korea fintech Dunamu, and Thermo Fisher Scientific’s $8.87 billion acquisition of Clario. These deals, alongside Google-Wiz, underscore a market willing to pay a premium for established, high-growth companies with strong market positions or critical technological advantages. Indeed, M&A exit numbers for unicorn companies reached an all-time high in 2025, with 36 deals collectively valued at $67 billion. This demonstrated that even highly valued, mature private companies were finding attractive exit opportunities through M&A, often after having patiently navigated the prolonged IPO drought.

Strategic Imperatives: The Hunt for AI, Cybersecurity, Talent

Lukas Hoebarth, EY-Parthenon Americas Technology Sector Leader, firmly believes that the 2025 M&A surge was predominantly driven by "strategic plays" rather than a wave of distressed sales. "Corporations are writing big checks for AI, cybersecurity, data acquisitions, and massive tech and talent deals," he observed. Hoebarth highlighted a dramatic shift in the scale of these "tech and talent deals," which "used to be worth tens of millions, and now we are in the billions." This signifies a fundamental re-evaluation of the intrinsic value of cutting-edge technology and specialized human capital.

Indeed, the pervasive "fear of missing out" (FOMO) emerged as a potent driving factor, particularly within the fiercely competitive AI sector. This environment fueled an unprecedented flurry of "acqui-hires," a strategy where companies acquire smaller startups primarily for their skilled teams and intellectual property rather than just their product or customer base. "On the one hand, big corporates are snapping up seed/Series A startups for talent and tech — we can call that the AI acqui-hire trend. Many teams with fewer than 100 employees have landed $100 million-plus exits," Hoebarth explained. This aggressive pursuit of early-stage AI talent underscores the urgency with which established players are seeking to integrate advanced capabilities and prevent competitors from gaining an edge. Concurrently, a "cohort of 3- to 6-year-old unicorns that stalled on IPO plans is finally selling," providing exit opportunities for companies that had matured significantly in the private market. Looking ahead to 2026, Hoebarth predicts that acquirers will increasingly pivot towards earlier-stage plays, aiming to scoop up emerging tech before it achieves significant scale, particularly within high-growth sectors like AI and cybersecurity. This proactive approach aims to capture innovation at a lower cost and integrate it more deeply into corporate strategies.

Lindsey S. Mignano, co-founder of SSM and a corporate attorney specializing in startups, corroborated the observation of increased early-stage acquisitions, though she emphasized that "more value is being transacted at later stages." Mignano elaborated on the acquirers’ motivations: "Acquirers are buying at an earlier stage to speed up to capability rather than build internally, as hiring the same team individually is slower and riskier." For seed and Series A founders, the current financing environment, coupled with a diminished stigma around early exits, has made selling a more palatable option. Mignano anticipates this trend will persist unless the financing landscape for early-stage companies undergoes a significant and equitable improvement.

The AI Divide: Valuation and Discipline

Itay Sagie, owner of Israel-based Sagie Capital Advisors, posited that 2025 effectively created a bifurcated market for startup pricing: "AI and everything else." In the AI domain, Sagie noted, "talent and IP value often dominate, including outsized acqui-hires that would be irrational in other sectors." This reflects a market where the potential future value of AI innovation and the scarcity of specialized expertise can command valuations detached from traditional revenue multiples. Conversely, in non-AI tech sectors, pricing remained firmly anchored in revenue multiples and public comparables, heavily influenced by unit economics and operational key performance indicators (KPIs). For 2026, Sagie anticipates "greater financial discipline across all sectors, including AI, with stronger emphasis on sustainable P&Ls and defensible unit economics." This suggests a potential maturation of the AI market, where initial speculative fervor might give way to more rigorous financial scrutiny.

KPMG’s Bahal echoed the sentiment regarding a fundamental shift in valuation metrics. While traditional metrics like revenue multiples still hold relevance, "acquisition prices are increasingly being dictated by the strategic value of a company’s talent and its intellectual property." He characterized this "fundamental shift toward valuing people and technology over pure revenue" as the "new reality in dealmaking," particularly as the "acqui-hire" trend intensifies to secure top engineering talent in high-demand fields like AI. Unlike Sagie, Bahal believes this trend is "not temporary." He predicts it "is expected to intensify through 2026 as the war for talent and unique technological capabilities continues to be a primary driver of value," suggesting that the premium placed on human capital and proprietary tech will only grow.

M&A as a Lifeline: The Impact of Down Rounds

Beyond strategic ambition, M&A activity in 2025 was also significantly propelled by financial pressures. Hoebarth pointed out that a common trigger event was a "funding crunch." With substantial capital flowing disproportionately into AI companies, it’s easy to overlook the struggles faced by many other sectors. "Many founders opted to be acquired when facing a down round or failed raise," Hoebarth explained. He noted that "startup down rounds hit a decade high — about 16% of deals — this year, so rather than accept significant dilution, founders did a pivot to M&A." These distress-driven exits, often overshadowed by the buoyant AI narrative, represent a crucial segment of the M&A landscape.

Mignano further elaborated on the "confluence of many" practical triggers that pushed early-stage founders to sell in 2025. These included the inability to raise subsequent funding rounds at all or on favorable terms, particularly if an AI company’s technology was not deemed "defensible enough" to secure the next investment. Founder fatigue after several financially strapped years also played a significant role. Another critical factor was the realization that "expansion and increased revenue metrics require a capital-intensive Go-To-Market (GTM) build that the current investors won’t fund and that a possible acquirer may fund post-acquisition," making M&A an attractive path to growth capital and market access.

Navigating 2026: Economic Currents and The AI Question

The trajectory of the M&A market in 2026, experts agree, will be inextricably linked to the broader economic climate. Bahal outlined a "bull case" scenario for M&A, fueled by the ongoing imperative for digital transformation across all businesses, a favorable regulatory environment, continued falling interest rates, and sustained economic growth. Such conditions, he argued, would instill confidence in dealmakers to pursue strategic acquisitions, especially within technology and AI. Conversely, a "bear case" would emerge from an economic downturn, characterized by persistent high inflation, increased regulatory scrutiny (particularly in areas like antitrust and data privacy), and heightened geopolitical uncertainty. These headwinds would inevitably cause both buyers and sellers to pause dealmaking, leading to a contraction in activity.

Hoebarth’s forecast for EY-Parthenon Americas predicts a "modest increase in M&A activity in 2026," though at a slower pace than 2025. U.S. M&A deal volume is expected to grow by approximately 3%, following a robust 9% increase in 2025. He listed key "bull case" factors as easing monetary policy, continued lower interest rates, strong corporate balance sheets, significant private equity "dry powder" (unspent capital), and sustained innovation in high-growth sectors like AI and cybersecurity. His "bear case" factors included a potential economic downturn, trade and tariff uncertainty, tight funding markets limiting liquidity, increased regulatory scrutiny (especially from China, the EU, and the U.K. on issues like competition and foreign investment), or geopolitical barriers slowing deal approvals. Hoebarth highlighted the "elephant in the room" as the ultimate fate of AI: "We do see early signs of a pullback in the AI space, which would have ripple effects far beyond the tech ecosystem," suggesting that any cooling of the AI frenzy could broadly impact investor sentiment and deal valuations.

Sagie emphasized that if the macro environment "stops getting in the way, M&A activity will take care of itself." He believes that "lower and more predictable interest rates, fewer regulatory surprises, and easing trade tensions would give boards and buyers the confidence to plan again." Under such conditions, consolidation would return naturally, "not because companies are desperate, but because buying becomes a faster and less risky way to grow than building from scratch." The "bear case," Sagie clarified, is not about technology failing, but "about hesitation." If interest rates remain high, geopolitical noise persists, or capital markets stay volatile, buyers will slow down. "Decisions take longer, deals get smaller, and only the transactions with a very clear strategic rationale actually close." The crucial differentiator, Sagie concluded, is "confidence." When executives can underwrite their plans for the next three to five years with a reasonable degree of certainty, M&A thrives. When that confidence is absent, even highly attractive assets struggle to find buyers.

In essence, 2026 is poised to be a year where the race for critical talent and transformative technology, particularly within the AI and cybersecurity domains, will continue to fuel strategic M&A. However, the pace and scale of this acceleration will be heavily influenced by broader economic stability, regulatory clarity, and the continued confidence of market participants. The lessons of 2025, particularly the premium placed on strategic assets and the readiness of founders to seek M&A exits, will undoubtedly shape the dealmaking landscape for the year ahead.