Pressure to Return Capital to LPs Mounts for Q4

From chatter at the water cooler to panelist discussions on ACG event stages, the topic of longer hold periods and limited partners’ lengthy wait for returns is prolific in today’s M&A environment.

ACG and Grata’s latest Market Pulse Survey is adding to that dialogue as dealmakers predict that pressure to return capital to LPs will be a driver of dealmaking in the coming quarter.

Ahead of ACG’s 2027 Outlook Report release in January, ACG Insights is offering a sneak peek into the findings of our Q4 Market Pulse Survey and dealmakers’ expectations for the coming months. In addition to tailwinds of M&A activity, explore what the survey reveals about industry trends, M&A risks, and more.

Cautious Industry Optimism

Through Q4 and into the new year, dealmakers are feeling tepid optimism about the dealmaking environment. Eighty-seven percent of survey respondents said they expect M&A to either “increase slightly” or “stay the same” over the next six months, while most (53%) said they expect valuations to stay the same.

Last quarter, political or geopolitical instability was cited as the top risk to middle-market M&A activity; the factor once again emerged as the top concern for dealmakers, cited by 62% of respondents.

Overall timing and market conditions, meanwhile, was cited as the greatest driver of M&A decisions for the six months ahead, cited by 73% of respondents. The survey revealed aerospace and defense, business services, and manufacturing are expected to see increased M&A activity in the near future, coming in at first, second, and third place, respectively.

An M&A Pressure Cooker

Pressure to return capital to LPs surfaced as a common thread throughout survey responses.

Sixty-three percent of dealmakers surveyed cited that pressure as the greatest driver of M&A decisions in the coming months, making it the second-top response.

One survey respondent highlighted what they described as “the PE exits pressure valve” in their outlook for 2027, predicting that demand for returns will drive “secondary buyouts, carve-outs, and strategic sales” as dealmakers look for different exit avenues.

AI Disruption Ahead

This year, ACG and GF Data introduced new questions to the Outlook Survey around artificial intelligence, both around how respondents use AI in their dealmaking processes and how AI might impact M&A activity.

More than three-quarters of respondents said they will “definitely” use AI in their M&A workflows through the rest of the year and into 2027.

While the technology can support a more efficient and accelerated deal process, AI was also cited as a major risk to getting deals done. When asked which AI-related factor is most likely to reduce their valuation of—or cause them to walk away from—a potential acquisition next year, the top response emerged as the “risk that AI will disrupt the company’s business model.”

As 2027 approaches, our Outlook Survey reveals plenty more about how AI will influence dealmaking, which industries are expected to see fluctuations in dealmaking volume, and additional factors disrupting middle-market M&A.

The 2027 Outlook Report will be out in January 2027.

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.