Analysis: Shifting Market Dynamics Behind Stalled 2026 M&A Deals
M&A advisor Hugo Jimenez identifies how evolving AI strategies and operational performance are impacting deal success rates in 2026.
The 2026 mergers and acquisitions market is seeing a high rate of failed deals, driven by factors beyond interest rates. Hugo Jimenez of Performance Advisory Group notes that the primary tension stems from how businesses demonstrate their adaptation to artificial intelligence.
Earlier this year, investors grew cautious toward service-based firms, fearing that AI would displace labor or render service models obsolete. However, market sentiment has shifted to favor firms that use AI to enhance employee productivity and drive organic growth. Conversely, companies that fail to adopt AI or rely on it solely as a cost-cutting measure are seeing their valuations decline.
Sector performance remains uneven. Essential services such as home healthcare and skilled trades remain resilient due to their relative difficulty to automate. In contrast, the market for smaller marketing agencies has become saturated, leading to compressed valuations. Larger agencies with EBITDA exceeding $1 million continue to attract competitive interest.
A recurring issue in aborted transactions is the erosion of revenue during the due diligence process. When a company's financial performance declines between the decision to sell and the final offer, buyers typically adjust their valuations downward, often causing founders to abandon the sale rather than accept lower terms.