Middle-market dealmaker sentiment has largely remained steady this year, with ACG and GF Data’s Q3 Market Pulse Survey revealing expectations for M&A and financing activity in the months ahead consistent with previous quarters.

However, survey responses indicated potential cracks in the middle-market M&A environment in the form of valuations and a possible recession, with “discipline” emerging as a theme for dealmakers through the end of 2026.

Surveyed at the start of Q3, 63% of respondents said they expect M&A activity to increase in the year’s second half, a slight increase from Q2. Outlook for financing also remained strong, with 49% agreeing the financing environment in the next six months will remain favorable, consistent with the previous quarter’s survey findings.

Q3, 63% of respondents said they expect M&A activity to increase in the year’s second half, a slight increase from Q2.

Valuation, Economic Concerns Persist

When asked about their predictions for valuation fluctuations in the six months ahead, most survey respondents said they expected valuations would remain steady.

Yet asset prices loomed large for some dealmakers as M&A risk factors: Mismatched price expectations between buyer and seller ranked second when respondents were asked about the greatest risks to middle-market M&A over the next six months. Political or geopolitical instability topped the list.

One survey-taker suggested a bifurcation in middle-market valuations has emerged, stating, “Multiples for A-grade targets are insanely high. Lower-grade companies are not getting bids.”

Both valuation levels and pressure to return capital to investors were cited by more than one-fifth of respondents as a key driver of M&A in the next six months. The finding signals a balance that dealmakers, particularly on the sell side, will have to strike between remaining firm on a desired valuation and compromising for the sake of the sale.

This pressure to transact comes from multiple sides. Timing and market conditions emerged as the top driver of M&A decisions over the next six months, with one respondent highlighting chatter of an impending rate hike by the Federal Reserve as a particularly important influence. There “could be pressure to get deals done now before rates go up,” the respondent stated.

A ‘Disciplined’ Market

Coming in third place when asked about the greatest risks to middle-market M&A was an economic downturn or recession, cited by 17% of respondents. One survey-taker noted that an interest rate hike could “lead us to recessionary waters,” potentially causing consumers to tighten their wallets even more.

Dealmakers have already seen the impact of dampened shopper sentiment, with retail once again named the industry most expected to see decreased M&A activity in the next six months. “Buyers are exercising extreme discipline,” wrote one respondent, “resulting in a pronounced contraction of deal volume and downward pressure on valuations across several specific industries.”

That discipline in buyer behavior will have to extend to middle-market investors, too, as another survey respondent suggested.

With dealmakers watching economic and geopolitical pressures closely, and bracing for a potential rate hike, the middle market will need to take a thoughtful, calculated approach to M&A.

It’s a “rebound with discipline,” as one survey-taker described M&A activity for the rest of 2026, adding that transacting today is a far cry from “the loose standards of the 2021 bull market.”

Another respondent echoed that sentiment, stating, “lower- and core-middle markets are experiencing a fundamentals-driven recovery rather than a speculative boom.”

ACG’s 2027 Outlook survey will open in October.

Carolyn Vallejo is ACG’s Senior Editor.

Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.