Middle Market Mergers & Acquisition (M&A) Outlook for 2026
If you are a business owner contemplating selling your company or considering buying a business for growth you are probably wondering how challenging today’s market is for deal-making given the current geopolitical environment, especially with regards to cross-border trade and the potential upheaval of legacy workflows by increasing AI adoption.
How did the Mid-Market Fare in 2025?
2025 was a choppy and challenging year in the middle market, especially during the first half with the M&A landscape marked by extended deal timelines, broken or renegotiated deals, and widespread hesitation. The threat of a trade war hanging over the North American economy sent a chill through investors, putting deals on pause and making it harder for Canadian companies and investors to move forward with the deal. This is evidenced by the chart below:
Source: MNP Canadian Mid-Market M&A Summary Q4 2025
Even though activity slowed, we at Distinct Capital Partners continued to see demand for non-tariff impacted Canadian assets by local as well as international investors. We did see some potential sellers take a wait-and-see approach and remain on the sidelines.
Outlook and Key Drivers for 2026:
After lagging in 2025, middle-market M&A activity is expected to rebound in 2026 as deal-making confidence returns, backlogged opportunities restart, valuations stabilize, and financing conditions improve. The following chart as per Citizens 2026 M&A outlook echoes the KPMG Canada survey which indicates that dealmaking in Canada is poised for a pickup in 2026, with one third of business leaders planning major acquisitions amid a climate of favourable monetary and fiscal policy, economic optimism driven by nation-building and a stronger business outlook.
Source: Citizens 2026 M&A Outlook
We at Distinct Capital Partners believe that middle market activity will remain stable with a slight pick-up in face of the lingering geopolitical tensions due to favourable tailwinds such as:
1. Continued Retirement of Baby Boomers. A new study by the Business Development Bank of Canada reveals thousands of SMEs are expected to change hands in the next five years, creating a $300-billion opportunity for entrepreneurs and investors.
2. PE firms are sitting on a record amount of dry powder, which will likely spur M&A opportunities in the near future. Private capital reserves have continued to grow, and with much of this capital now several years old, there is increasing pressure to put funds to work.
3. Investors will be further encouraged to make moves in the industrials and materials sectors as the “Canada Strong” 2025 federal budget reinforces the government’s intention to help build out infrastructure, defence and security, and energy projects, among others. The uncertainty surrounding North American supply chains in 2025 has turned domestic manufacturing into a prime M&A driver. Corporations are increasingly looking to expand their Canadian and International footprint to mitigate trade-related risks.
Inquiries from business owners regarding the sale of their business continues to remain strong.
If you are considering selling your business, we at Distinct Capital Partners can help you navigate through this challenging environment. The Distinct Capital team will perform a high-level due-diligence at no cost to you to ensure that the business is ready for sale.
If you are interested in learning more, please contact Gerard De Souza, Managing Director – Business Development at GDeSouza@distinctcapitalpartners.com or our general enquiry email at info@distinctcapitalpartners.com.