What Business Owners Need to Know in 2026
At the start of 2026, the lower middle market is showing steady and disciplined M&A activity.
Deal flow remains active, capital is available, and buyers are engaged. What has shifted is not demand, but how decisions are being made. Buyers are more deliberate, diligence is more thorough, and fundamentals are carrying more weight in transaction outcomes.
That shift has been building over several years. As Viking M&A President Jay Offerdahl explains, “Buyers are paying a premium for premium businesses, but they’re careful not to make any hasty decisions.”
In other words, the capital is there. The scrutiny is higher.
2026 in Four Words: Less Timing, More Optionality
The defining advantage for business owners in 2026 is optionality.
What Optionality Looks Like for a Business Owner
Optionality means having the ability to choose, not the obligation to act. It is the difference between exploring a transaction because it is the right strategic move and being forced into one because time, energy, or circumstances decided for you.
Owners with optionality can credibly say:
- I could sell this year, or wait, and still be in a strong position
- I could take partial liquidity and keep building
- I could bring in a partner, or stay independent
- I could exit fully, or structure a second-bite opportunity
The point is not which option you pick. The point is whether you have real options.
Stability Has Replaced Anticipation
In 2025, much of the market commentary focused on rates and affordability. In 2026, the shift is toward stability and predictability.
The Federal Reserve’s December 2025 Summary of Economic Projections points to moderate growth and inflation continuing to cool toward the longer-run target, with the median participant projection for the federal funds rate at 3.4% at the end of 2026.
Those are projections, not promises, and the Fed is explicit about uncertainty around all forecasts. Still, in the M&A world, predictability helps. Buyers can underwrite with fewer “maybe” assumptions, which makes diligence feel less like a debate and more like a process.
That return to measurable conditions supports a steady message for owners: buyers are not pricing deals on what rates might do. They are evaluating whether your business can support a transaction under conditions that closely resemble today’s.
Capital is Moving, But Standards are Higher
If 2025 was about “dry powder waiting,” 2026 is about capital deploying with a sharper filter.
That aligns with broader deal-market expectations. EY-Parthenon’s Deal Barometer has projected deal activity improving through 2026, reflecting a more constructive environment even as the market remains selective. PwC has also pointed to private equity buyouts and exits as a potential “swing factor” for 2026 in the middle market, given dry powder and aging portfolio companies that will need liquidity paths. PitchBook’s 2026 U.S. Private Equity Outlook similarly reflects cautious optimism, with continued activity and evolving deal dynamics.
On the ground, Jay sees the same thing: buyers are engaged, but less forgiving.
At Viking, the buyer mix stays diversified: private equity, strategic acquirers, and individual buyers each represent meaningful slices of activity. The common thread is diligence.
“They’re doing a very deep dive,” Jay explains. “Buyers review financials, legal, HR, and every industry challenge to make sure that they are making a wise purchase.”
What Buyers are Screening Earlier in 2026
These items show up again and again in diligence:
- Customer concentration and churn risk
- Margin stability and labor exposure
- Working capital swings
- Depth of management beyond the owner
- Financial reporting quality and clean add-back support
- Legal, HR, and compliance issues that can create post-close surprises
In 2026, buyers are not disappearing. They are simply saying no faster.
That creates a widening gap between prepared and unprepared sellers.
Valuations in 2026: Strong, But Earned
The defining theme of 2026 is differentiation.
Premium businesses are still commanding premium valuations. But buyers are paying for proven durability, not potential that requires repair.
In practice, the gap often comes down to fundamentals that buyers can validate:
- Recurring or repeatable revenue, not one-off wins
- Strong second-tier leadership
- Clean financials that hold up under scrutiny
- Operational maturity and documentation
- A growth story that does not require heroic assumptions
Timing Helps, But Readiness Wins
Succession is still a major driver, and personal factors lead the decision
The succession wave did not crash. It is still rolling in.
Jay explains: “Around half our clients are selling to retire, which follows the 10,000 people per day turning 70 through 2034. The other half are selling for many other reasons. Some have burned out, or they’re hitting their invisible ceiling. Some have health challenges, some go through domestic or corporate divorce, and some just want a new challenge.”
Owners rarely sell purely because “the market is up.” They sell because life happens, energy changes, or the next chapter starts calling louder than the current one.
Jay also raised a strategic factor that deserves careful treatment: taxes. He noted that a meaningful increase in long-term capital gains rates would materially change net proceeds for many owners, potentially altering retirement math in a big way. His guidance is not alarmist. It is pragmatic.
“We never try to sell people on selling. We’re ready when you’re ready. But if you’re thinking about selling, my recommendation is you ideally close your sale before the second quarter of 2028.”
Patterns, Not Predictions: Where Activity Concentrates
Buyer appetite continues to show up in familiar places, especially where earnings are resilient and revenue is defensible:
- Manufacturing and industrial services
- Healthcare and healthcare services
- Business services, especially contract-based or compliance-driven
- Construction and infrastructure-adjacent businesses
- Technology-enabled services
One nuance worth acknowledging: even in a constructive 2026, pockets of volatility can slow deals in specific sectors. Recent reporting has highlighted how market volatility, especially in software, can complicate pricing and timing for transactions and IPO pipelines.
This is not a reason to panic. It is a reason to be prepared and realistic about valuation conversations.
Deal Terms: Price is Only One Line Item
In a selective market, structure is often what gets deals done. Expect continued use of:
- Earnouts where performance risk is debated
- Seller notes to bridge valuation gaps
- Rollover equity when owners want a second bite
- Partial liquidity structures for owners who want to de-risk without stepping away
A clean deal does not mean a simple deal. It means a transparent business that holds up under scrutiny.
Owners, Bookmark This Section: Preparing Without Committing
Preparation is not a decision to sell. It is a decision to protect leverage.
If you want optionality in 2026, focus on the basics that buyers reward:
- Financial clean-up and documented add-backs
- Reduced owner dependence and stronger leadership depth
- Customer concentration management and clearer revenue visibility
- Operational documentation that withstands diligence
- A realistic timeline that accounts for a longer process
Waiting until “next year” often feels easier than doing the prep work now. In practice, waiting usually just shifts the work into a more stressful window later.
What This All Means for Business Owners
For owners considering retirement, feeling burnout, or concerned about policy and tax uncertainty before 2028, 2026 may be the right time to explore options. For everyone else, it is still the right time to prepare.
The first step is information, not commitment.
The lower middle market remains active. Buyers are present. Capital is available. Many market outlooks still point toward improving deal conditions through 2026, even with nuance and selectivity.
Bottom line: Selling is not the only win. Being ready is.