M&A Momentum: Cross Sector Outlook for 2026

Chris (00:02): 

Welcome to Solomon Connects. I’m Chris Moynihan, a director in the M&A group. This episode is a cross-industry roundtable on what defined the M&A market in 2025, and what we expect will drive deal activity in 2026. I’m joined by three of our colleagues representing distinct industry coverage areas: Jon Pritti from Healthcare, James Butcher from Technology, and Alex DeOteris from Financial Institutions or FIG. Together, we’ll compare what we’re seeing across sectors, where momentum is building, what’s changing in the financing environment, and which themes are most likely to shape the year ahead. So, to kick us off, I’d like each of you to give a brief overview of your team and your coverage focus. Jon, why don’t we start with you? 

Jon (00:43):

Jon Pritti, I’m a Partner in the Healthcare group, leading our efforts in Healthcare Technology. Healthcare team is 35 bankers, including eight senior bankers. We’ve got active coverage and deep domain expertise in several key verticals, including healthcare services, med tech, and digital health in addition to healthcare technology.

James (01:01):

James Butcher. I’m a Managing Director in the Technology group. Technology group’s about 20 bankers, four partners and MDs, and continuing to grow. We cover software, data, and analytics — and I spend most of my time in and around the information services and marketing technology spaces.

Alex (01:19):

Alex DeOteris. I’m a Managing Director in our FIG group. I actually started here five years ago, and we launched what at the time was a specialist fintech effort. And earlier this year, we launched a more fulsome coverage of the financial services sector. So, we’re a little under 20 bankers, and bulk of our coverage really is around the insurance, insurance services space, and particularly my space, which is diversified financials, especially finance and fintech.

Chris (01:45):

So, let’s kick off. Looking back at 2025, what were some of the key themes that you saw in your sector? What was driving M&A activity? And what were the strategic decisions and priorities that your clients were facing throughout the year?

Jon (02:01):

2025 was really a tale of two cities. You had a flight to quality. So, the A assets were attracting a ton of interest. They were still trading at premium valuations. Anything that was slightly below that and not as high quality, maybe didn’t have growth, margin compression, had more challenges. Processes became elongated. There was still a bid ask between buyers and sellers around valuation. Cost of capital played a significant role, as it remained high throughout the year. We saw segments of the healthcare market facing increasing pressures, both on the top line and the cost side due to inflation and wage pressures. And that led to an over-rotation into what I’ll call healthcare light. So, assets that kind of play outside, direct healthcare, don’t have reimbursement risk, don’t have regulatory risk, have less technology risk. Those assets in the healthcare technology space, the pharma services space, they still attracted a tremendous amount of interest.

Chris (02:50):

Turning over to James, I know similar dynamics, especially with sponsors in your sector. Is it that same theme of the A assets versus the other assets? Any interest from strategics? 

James (03:01):

It’s very much the same as what Jon’s seen in healthcare. So, we’ve seen this kind of bifurcation between the flight to quality, the premium assets. And in tech, where what we’ve seen in terms of valuations is kind of even a premium to what we were seeing in 2021, which I think a lot of people would perceive to be the top of the market. I think for everything else, it’s been a lot slower. I think there’s been that mismatch between buyer and seller valuation expectations. Sponsors have been less willing to bring assets to market. As a result, we’re starting to see that change. And the other thing, which I know we’re also undoubtedly going to come on and talk about is AI.

It’s been a big, big factor in technology; and again, has had this impact on sort of the perceived winners and the perceived losers in the space.

Chris (03:41):

So, maybe hold that thought on AI and we’ll come back to it. Alex, last but not least, I wanted to get your thoughts. I know your sector’s a little bit different in specialty finance, but is it similar themes? Is it different?

Alex (03:53):

Yeah. I wish I could have an original lead-in here, but it’s a lot of the same as what my colleagues said here. It was a bit of a tale of two cities, and I’ll break that down in two ways. The first was that I think coming into ‘25, people were really bullish. There was great kind of energy in the markets, and then there was a pause around Liberation Day. In the financial services sector, there’s really two topics which are always pervasive. It’s going to be the rate environment and it’s going to be regulatory. So, Liberation Day, for better or worse, was when people hit pause. I think we’ve seen a return to form around Labor Day, as people have digested the impact of this regulatory policy, broadly in financial services. This administration’s thought to be easier to work with from an M&A standpoint. And then, obviously, there’s more conviction around the rate cuts.

The second dichotomy in our sector, which I would mention, is that there’s businesses in the financial services sector who take balance sheet risk and asset risk, and then there’s the services businesses. And I think one of the dynamic trends is that a lot of the old-guard private equity has gravitated towards asset-light services businesses. And so, you have a core constituency of companies that are in the more balance sheet-intensive business. They need to find a home for their assets. And, a lot of times, the private equity firms are no longer the best buyer. You’re seeing other forms of capital come to the fore.

Chris (05:11):

Maybe just double-clicking on that one theme: Why are they shifting to those services businesses, the private-equity buyers?

Alex (05:18):

These guys would know well. I think it’s about velocity on the entry and exit is that you’re able to get, when you aggregate scale, the cash-flow margins are very strong. And so, you’re able to command a premium multiple in the market. It’s not to say that running any business is easy, but I think if you’re in the business of taking credit risk and you’ve got a CapEx element to your balance sheet, and then you’ve got to run the other parts of your operating business, it’s complex. They can be very, very high return on equity and can be very lucrative, but it’s a more complex business model. And, usually, those business models also have more to do with the regulatory environment as well.

James (05:54):

To jump in, I think in tech, it is another theme we’re seeing that technology investors are looking for those services or tech-enabled services businesses. And I think it’s a function of a few things that the pace of innovation is accelerating, the ability to use some of these new technologies to drive change in these businesses and ultimately drive that kind of uplift in multiple — between when you enter and when you exit — I think is attracting a lot of interest and a lot of sponsor capital.

Jon (06:16):

And I think that look, the shift towards more service-focused businesses relative to pure software and technology business, I think AI is driving a lot of it. I think investors are looking at those businesses and saying, “What can we automate?” How can we drive increased efficiencies through AI? If you think about what AI is good at, it’s very good at process recognition. It’s not so good at judgment. And what does that play well into? It plays well into a service-based business where there’s a lot of repeatable workflows that can be automated.

Chris (06:42):

AI is one of the big trends that we’re seeing across all the sectors at Solomon. It’s influencing M&A activity. It’s influencing strategic decision-making for corporates, boards, CEOs, and private equity. What are you all seeing in your sectors? How is it influencing M&A activity for you and your clients. And what do you expect in 2026?

Jon (07:04):

Within most of the deals we’ve been involved in, it comes up in every deal, right? People are trying to figure out, is this company on the right side of AI? I. e., is this something that’s going to be disintermediated by AI, or is this something that’s going to be a net-beneficiary of AI? Specifically, within healthcare, I think it’s going to play very much on the administrative side as opposed to the clinical. And it goes back to the point earlier around very good at process recognition, less so around the judgment aspect, and you still need a lot more judgment on the clinical side. The other dynamic I think you’ve got going on in healthcare is you’re going to see increased focus on the outsourcers, right? The folks that are actually providing services outside of the administrative aspect of the providers. You’re not going to get the full benefit if you’re investing in a pure AI solution, if you’re a provider and you’ve got two people in your administrative team.

If two people are now as efficient as 20, you don’t get the benefit of the incremental 18. So, you’re seeing the outsourcers and that’s driving a tremendous amount of interest in the revenue-cycle management sector, the tech-enabled sector playing into healthcare. The other element where it plays in healthcare is data aggregation, and that’s where it kind of touches clinical, but it’s not going to necessarily be drawing judgements. It’s just going to be aggregating data.

Chris (08:09):

James, maybe I’ll give you a chance to return to your opening comments. So, I know leveraging data in your businesses and the clients that you cover is a key theme, and AI is definitely influencing that. Do you want to talk about those perspectives, and is that driving deal-making activity as well?

James (08:25):

Yeah. So, I think maybe just taking a step back and then I’ll address that specific point. So, I think much like Jon in tech, AI is having a profound effect, and technology companies are benefiting both on the cost side –so, the ability to take out coders and developers and replace that with LLMs or agentic models — but also on the revenue side: the ability to launch new products, drive up, sell, drive, cross-sell and drive revenue growth. I think where we see companies really standing to benefit is where they have data underpinning to your question. So, where you’ve got that proprietary data or some sort of moat around your data, you’re extremely well positioned to kind of train your own specialist LLM. And that’s the way we see the industry going: an increasing demand for specialist kind of use-case-driven LLMs as opposed to the generic broader base sort of ChatGPT models.

And the companies that can benefit from that have that data underpinning but also have a software component. So, they have a sort of sticky workflow-type relationship with their clients, where they’re embedded in their decision-making, embedded in their processes, and then they can capitalize on some of these AI tailwinds.

Chris (09:29):

Alex, I know you have a slightly different perspective on AI. Do you want to give your thoughts?

Alex (09:33):

This is a bit of a counterintuitive narrative, but AI in some shape or form has been around a little bit longer in the financial services sector than I think you would perceptively intuit at a very high level. And the reason I say that is because when you think about financial services businesses, whether it’s insurance, whether it’s banking and lending, whether it’s investment management or trading, whatever it may be, the core business model is understanding how to underwrite price risk, particularly downside risk. And so, these business models have always used correlations between data, particularly seemingly unrelated correlations to help engineer effective underwriting or effective risk management. And so, there were threads of that, which certainly came out more pervasively in the early 2000s in the dot-com era, but really after the financial crisis, you had a host of fintech companies that said, “We can’t compete with the incumbents head-to-head. So, how do we win?” And the answer was always kind of using data, using technology to deliver either better product experience, a more seamless transaction experience, or frankly, just figuring out how to get that same type of deal done more efficiently, more quickly, and wind up in the same place, because for the most part, the incumbents are late to the game. And so, technology has always been a great equalizer in innovation and risk management for financial services companies.

Chris (11:00):
 You all mentioned the green shoots that you’re already seeing today: increased pitch activity, clients interested in deal-making. Do you expect a wave of deal activity immediately at the beginning of the year or for it to be kind of phased out over the course of the year? Alex, I’ll turn it to you.

Alex (11:16):

I’ll say this. I always thought being the weatherman was a great job because you could be wrong and no one really held you to it. So, every year, the wise men say that this is going to be the year of M&A. We heard that coming into ’25, and to some degree ‘24, because obviously in our sector, it was quite cold in the post- COVID period. But I do think that there’s a lot of the proverbial green shoots for 2026. As I mentioned before, there’s two topics that just really are pervasive in our sector. And so, as you start to get conviction around the rate cuts, the slope of the rate curve — and then you’re seeing this already, particularly in the heavily regulated parts of the financial service sector like banks and insurance — there’s just been a buoyancy in M&A, which we would expect to continue in ‘26.

Chris (11:57):

James, same themes.

James (12:00):

Same themes, but I think we feel optimistic that we’ve touched on some of the sponsor dynamics, the backlog that exists, particularly in tech, which has a lot of sponsor activity. AI did have something of a chilling effect on the sector last year, as people, investors, tried to unpack the implications. A number of large investors, historically in the space, just basically put investment activity on hold. Some are still cautious, I think, and still trying to figure out the implications, but, generally speaking, we think investors see more opportunity and less risk from AI. So, that is also becoming more of a tailwind. I think the one thing that does keep me up at night is this risk of some reset in the tech valuations. We’re not convinced there’s an AI bubble, but certainly the valuations of AI-related stocks have really shot up. Interestingly, other stocks across the tech sector haven’t really changed so much.

In some cases, they’ve gone down, but we worry that if there is that reset, it could have broader implications for the sector.

Chris Moynihan (12:49): Jon

Jon (12:50):

We’re cautiously optimistic. I think overall it’s going to be a good year. I do think it’s going to be a little slower start, and I think that’s going to be driven mainly by … I think one of the lessons learned from 2025 was people wouldn’t get priced off full-year numbers, right? So, historically, it was you would go out in January or February and try to value the business off full-year 2025 numbers. I think now people have recognized that the environment we’re in, buyers and investors weren’t willing to do that. So, I think we’re going to see — and you saw it in the pitch cycle with pitches getting pushed more towards later in this year — you’re going to see a whole host of folks coming out in April and May, because I think at that point you’ll have visibility into full-year ‘26 numbers.

I also think there’s going to be a number of just one-off deals. There’s a backlog in sponsored portfolios. And now, as we get below kind of the A assets, you’re going to see people circling back to some of the assets that went to market in 2024, 2025, didn’t get a deal done. Those businesses have now grown. The multiple might not necessarily be higher than what they would have traded at in ‘24 or ‘25, but it works from a return perspective for the PE owners because now they’ve got a higher EBITDA that they’re valuing the business off of.

Chris (13:52):

So, you think that it will be a valuation reset that will unlodge those assets and get them sold?

Jon (14:061):

The evaluation reset mainly driven by the fact that the earnings have grown. So, you’re going to get a higher aggregate valuation, but a similar multiple.

Chris (14:06):

Got it. It’s definitely one of the themes that you’re all touching on is the absence of sponsor transactions in the last couple of years. And it sounds like pitch activity for all of you is increasing. You’re seeing a lot more of that activity come to fruition. Jon, you mentioned maybe it’s a mid-year thing. Do you all share a similar perspective that that’s when you’ll start to see sponsor activity return in the same sort of fervor that we saw in ‘20 and ‘21?

Alex (14:31):

I certainly double down on what Jon said. Just in the last couple weeks alone, we’ve been successful in converting things that we were pitching for a while. And I think there’s a common theme through a number of them, which is this ability to be able to market off this forward run-rate style earnings. And so all of these processes have really come to fruition, or at least the pitch processes have come to fruition the last couple of weeks. And the thought is that we’re going to go out some point in the middle of the year when, to a certain degree, a part of our forward earnings are baked, but we’re going to try and get that valuation uptick by looking a little bit into ‘27 as well.

James (15:08):

Yeah. I think, I mean, I can just echo really the same comments from the tech group’s perspective, you know pitch activity’s up dramatically. Obviously, sellers can always change their minds if something happens out there, but it feels like things are aligning for a pickup around sort of Q2.

Chris (15:24): 

I want to end just with one question, given that we’ve brought you all together from different sectors. Are there ways that you’ve been working cross-sector at Solomon that you’d like to talk about? One of the interesting value-added differentiation is that our partners work together, especially for clients that might not fit cleanly into one sector. So, if you have an example or something that you’re exploring, planning to explore, that would be great to hear.

James (15:49):

As someone that joined the firm in the last year, or just over a year ago, I should say, it’s been impressive, the ability to collaborate and partner with across teams and across products. And Chris, you and I have obviously worked together on a couple of opportunities. We work together with our capital advisory team, where we see, increasingly, sellers looking for sort of creative alternatives around different capital solutions. There’s a couple of founder-owned businesses we’ve been spending time with recently who are looking just for something slightly different to that vanilla sponsor deal, partly because that vanilla sponsor deal may not have been there. And then, I think from the tech group’s perspective, as we grow, there’s plenty of opportunities to collaborate with other sector teams — healthcare being a good example.

Alex (16:27):

I’ll just tell one anecdote is that Jon and I worked together on something recently and in taking Jon through the financial services part of this business with just the healthcare sector, Jon said, “Stop talking,” at one point, because he said this is a different language. But when Jon started talking about the healthcare ecosystem, it was all very foreign to me. And so, I think at a place like Solomon, we’re sort of incentivized A) to be domain experts; we’re not meant to be all things to all people; but B), given the fact that we’re a partnership model, we wanted to bring Jon into that room, because we don’t want to show up and not have that domain expertise. We’re encouraged to do it and it feels very much like an organic thing versus anything forced here.

Chris (17:06):

Agree. I think, as an 11-year veteran of Solomon, one of the things that we’ve always done well is bringing those various domain expertise — and now, having all that different sector expertise, you’re really able to approach a lot more clients and have more interesting, productive conversations. So, thank you all for joining me today. And to our listeners, thank you so much for tuning in. For more insights on our sectors, please visit solmonpartners.com.