M&A Today: From Ambition to Discipline

Jeff Jacobs (00:02):

Welcome to Solomon Connects. This is our monthly M&A podcast where we break down the key market forces shaping deal activity. I’m Jeff Jacobs, head of M&A and COO of investment banking here at Solomon Partners.

Chris Moynihan (00:13):

And I’m Chris Moynihan, a director in the M&A group. Today, we’re discussing what’s changed in the M&A markets over the last several months. 2026 started with a relatively straightforward M&A story. Strategic buyers were active, financing markets were available, AI investment was creating urgency, and deal activity was tracking towards one of the strongest years in recent memory. But Q3 saw a notable pullback. The question now is whether that was the beginning of a broader slowdown or simply the result of some isolated stress on the economy. We’ll talk about how boards are evaluating acquisitions, why strategic demand remains strong, and how deal structures are evolving and what we’re watching as we head into year-end. So, Jeff, let’s turn to you and start with the big picture. The market entered 2026 with significant momentum. What’s changed?

Jeff Jacobs (01:03):

Well, Chris, I think the most important thing is that the strategic rationale for M&A hasn’t changed nearly as much as the financial backdrop has. Companies still want growth, they want technology, certainly they want AI capabilities, and they also want scale. Those objectives remain as important today as they were six or nine months ago. One thing appears clear, though, demand has not deteriorated, but the cost of capital has. We saw the 10-year treasury is now at its highest level since 2002. That means higher borrowing costs, lower leverage capacity, tougher valuation discussions and greater board scrutiny. Three months ago, boards were asking, “Do we want this asset?” Today they’re asking, “Do the economics still work?”

Chris Moynihan (01:42):

And that’s an important distinction. So, demand hasn’t necessarily weakened, but the hurdles have increased.

Jeff Jacobs (01:47):

Exactly. We don’t see widespread evidence that companies have lost interest in pursuing acquisitions. In many cases, frankly, the strategic need actually may be more urgent. Tariffs, technology spending, persistent inflation—all of these things are reinforcing the case for scale. Companies are investing heavily in technology. They’re dealing with a more complex operating environment, and scale can help address many of those challenges. It can improve purchasing power, eliminate duplicative infrastructure, and create greater operating leverage. So, while financing conditions have become more difficult, the rationale for consolidation really remains compelling.

Chris Moynihan (02:24):

The cost of capital is making deals harder, but the cost of standing still may make deals more necessary.

Jeff Jacobs (02:31):

Exactly. The reality is that standing still can also be expensive. If competitors are becoming more efficient, investing in new capabilities or expanding their scale, companies can’t afford to ignore those dynamics. That’s why we’re continuing to see strategic transactions move forward, even as boards apply greater scrutiny to valuation and to those financing assumptions.

Chris Moynihan (02:53):

Let’s talk about confidence more broadly. One theme we’ve been hearing from clients is that uncertainty has increased. How is that influencing decision-making?

Jeff Jacobs (03:02):

Well, Chris, as you know, confidence is incredibly important in the M&A market. Most acquisitions are ultimately long-term bets on future growth. Today, confidence has softened, but we’re not yet seeing that show up through canceled deals as much as longer decision cycles, greater valuation discipline, higher return thresholds, and more downside case analysis. It’s companies requiring more conviction before they move forward. Decision cycles are a little bit longer, return thresholds are a little bit higher, and management teams are spending more time evaluating downside scenarios.

Chris Moynihan (03:33):

So, if boards are becoming more selective, does that change the way deals get structured?

Jeff Jacobs (03:37):

Very much so. In many situations, the structure has become one of the most important tools available to bridge the difference between the bid and ask or the buyers and sellers. They may agree on the strategic merits of a transaction, but they might disagree on valuation or future performance assumptions. That’s where some of these creative structures come in.

Chris Moynihan (03:58):

What are some examples?

Jeff Jacobs (03:59):

We’re seeing increased use of earnouts. We’re seeing more rollover equity being employed, minority investments, staged acquisitions; certainly, stock consideration given where the markets are today; structures that allow both sides to share risk and participate in the future upside. These approaches can help transactions move forward when some of the traditional all-cash transactions become more difficult to justify. In many cases, I would say uncertainty isn’t killing deals, it’s simply changing how deals get done.

Chris Moynihan (04:29):

So, rather than walking away from transactions, companies are looking for ways to underwrite them differently.

Jeff Jacobs (04:34):

That’s exactly right. The response to uncertainty is increasingly not to abandon a deal, it’s to restructure it.

Chris Moynihan (04:42):

Another source of uncertainty we’ve been hearing about is the upcoming election cycle. Every few years, investors ask similar questions about whether the elections are going to materially impact M&A. What’s your view about the elections this year?

Jeff Jacobs (04:58):

Historically, elections themselves aren’t usually the problem. The issue again is uncertainty. Markets generally dislike uncertainty regardless of where it originates. Boards are trying to understand how future policy decisions could impact trade, regulation, taxation, and ultimately economic growth. Until there is greater clarity, some of these companies may delay execution on the deals that they’re looking at.

Chris Moynihan (05:20):

So, are you thinking there could be a slowdown in strategic activity between now and year end?

Jeff Jacobs (05:25):

Not necessarily. Demand remains present, pipelines are active. The question really is about timing. Some of these transactions that might otherwise have signed in the fourth quarter could end up shifting to early next year. We’ve seen similar patterns in previous election cycles. Companies often prefer to wait until they have greater visibility in the operating environment before making a final decision to close on a transaction.

Chris Moynihan (05:49):

Given everything we’ve discussed, what are some of the key indicators you’ll be watching over the next several months that will drive M&A activity?

Jeff Jacobs (05:57):

I’d really focus on three main areas. The first is interest rates—financing conditions clearly matter. If rates stabilize, it could provide an important boost of confidence and transaction activity. I would say the second is the sponsor community. The sponsor pressure from the LPs is still building, but higher financing costs are making exits, refinancings and new acquisitions more difficult. Many funds have held companies longer than anticipated, and we know there remains significant pressure to generate liquidity and return capital to investors. The question is whether that pressure begins to outweigh some of the caution we’ve recently seen. The last thing I would say is around transaction timing. We’ll be closely watching how much activity gets delayed versus canceled. There’s a meaningful difference between those two outcomes. If deals are simply deferred, in fact, what ends up happening is we start to see a pretty healthy environment going into Q1 and starting out 2027.

Chris Moynihan (06:49):

So, when you take a step back, this isn’t a story about disappearing demand, it’s really a story about deal discipline.

Jeff Jacobs (06:56):

That’s exactly how I would characterize it. For most of 2026, the market really rewarded ambition. In Q3, the market really started to demand more discipline. Companies still need growth, they need technology, they need scale. The question heading into year-end is whether those needs are strong enough to overcome the higher rates we’re seeing, the increased deal scrutiny, and some of this election-related uncertainty in the market today. That’s the debate happening in the boardrooms.

Chris Moynihan (07:21):

So, Jeff, as we wrap up, what’s the biggest takeaway for executives, boards, and investors listening to this episode today?

Jeff Jacobs (07:28):

I would say strategic drivers of M&A remain intact. Markets may be more demanding, financing may be more expensive, but companies still face many of the same competitive pressures they faced at the beginning of the year. The organizations that remain disciplined, flexible, and really proactive in evaluating opportunities, those are the folks that will likely be best positioned when confidence improves and activity starts to accelerate again.

Chris Moynihan (07:51):

Jeff, as always, we appreciate your perspectives and we’ll see how the rest of the year turns out for M&A.

Jeff Jacobs (07:56):

Thank you, Chris. Enjoyed the conversation.

Chris Moynihan (07:59):

And thank you to everyone tuning in. Be sure to visit solomonpartners.com for more market insights and M&A perspectives. We’ll be back next month with another edition of Solomon Connects.