Increasing US IPO activity adds momentum to M&A market

US IPOs are giving dealmakers another reason to pursue M&A after years of subdued activity.

Total M&A deal values in the US rose nearly 50% year over year to $1.111 trillion in the first half of 2026, according to S&P Global Market Intelligence data. Transaction volume ticked down close to 1%.

The IPO market saw volume increase by 68.6% year over year in the first half. The massive 452.3% year-over-year increase in amount offered was largely due to the public debut of SpaceX.

IPO tailwinds

A stronger IPO market has revived public listings as a viable exit pathway for investors looking to sell private company holdings. Growing enthusiasm for public listings is boosting confidence and supporting valuations for potential M&A deals, rather than denting the pool of acquisition targets.

"What the IPO window reopening is really doing is validating pricing across the board," Paren Knadjian, partner and member of the transaction advisory services practice at Eisner Advisory Group, said in an email. "It's a valuation tailwind for M&A rather than a competitor to it."

Capital raised through successful IPOs is also being recycled into public and private markets in search of new opportunities.

"That may be doing more to strengthen buyer confidence than the mega-IPOs are doing to expand target availability," Knadjian said.

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Exit pressure mounts

Improving market sentiment and renewed capital flows could encourage dealmakers to more actively pursue acquisition opportunities as private equity firms own a large inventory of aging portfolio companies awaiting exits.

Global private equity and venture capital firms announced 1,504 exits in the first half of 2026, down 6% year over year, according to Market Intelligence data.

"There are 13,000 unsold companies that sponsors are holding right now," said Uk-Sun Kim, head of credit originations for middle market and sponsor finance at TD Bank. "That is going to start unwinding in the next year or two, either by force because the fund requires it or because limited partners are starting to ask for their money back."

Dealmakers may also feel more urgency from a changing market outlook. Markets entered 2026 expecting interest rates to decline over the course of the year. However, the Middle East war and rising energy prices reignited inflation concerns, pushing Treasury yields higher and prompting investors to scale back expectations for rate cuts.

"People were waiting for lower rates, but now realize they can't wait much longer," Kim said. "We have to manage through whatever the next six to 12 months looks like on a probability basis, and to me, it's that inflation is going to still be higher for longer."

The combination of stronger market sentiment and growing pressure on investors to return capital could help narrow valuation gaps that have stalled transactions in recent years.

"There's some wind behind our back, and impatience is one of them," Kim said. "There's too much supply and too much demand for return of money, and at some point, those things will converge to where that 5x valuation misalignment gets to 3x or 2x and then they suddenly execute."

M&A selectivity remains

A more accommodating IPO market will not necessarily persuade a company to choose a public listing over an acquisition, particularly given the cost and preparation required to go public.

"For investors of companies that want more control over their return profile, especially if they've struggled to raise a fund, if they can get a lucrative M&A offer, that could be more attractive than an IPO," said Tasneem Dohadwala, founding partner of Excelestar Ventures.

While IPO and M&A activity may improve this year, volumes are unlikely to return to the levels seen in 2020 and 2021 as investors and boards become more selective about which portfolio companies are suitable IPO candidates, Dohadwala said. Corporate boards have also tightened acquisition standards.

"A decade ago, some companies that were very acquisitive didn't pan out the way they thought they were going to pan out," Dohadwala said. "While company boards know that they have to do deals, they have become much more diligent about which deals are done and how much they're going to pay and how to structure those deals."