Here’s a quick overview of the new challenges and issues that I’m predicting the M&A eco-system will face in the coming year:
Antitrust – Just when you thought the going was good…. Early in Trump’s tenure, his populist picks to run the DOJ and FTC appeared ready to horseshoe themselves into where Biden’s progressives left off. Their public pronouncements frequently echoed the themes of the Biden enforcers, and a smiling Lina Khan appeared jointly with Steve Bannon. The agencies even embraced the new HSR rules and 2023 merger guidelines, both of which were promulgated under the Biden regime. There was though some hope that the Trump agencies would have more procedural discipline than Lina Khan and Jonathan Kanter, who had regularly used “sand in the gears” tactics to delay and often litigate to block deals, even knowing they would most likely lose on the merits. The Khan/Kanter strategy, which often worked, was premised on the hope that one of the merger parties would try to back out or just not have the wherewithal to keep fighting during the 12+ months following the signing of the definitive agreement that it takes for the merger parties to prevail before a judge in their effort to defeat a US antitrust agency’s challenge to their merger. The anticipated procedural discipline materialized, and as 2025 wore on, the Administration’s emphasis on economic growth gained ascendancy. By the end of 2025 we had crossed into new territory where dealmakers declare that “We can cut just a deal with the agency,” and “We’ve got a White House strategy,” when it comes to US antitrust approval of M&A. Thus far, this idea that you can either cut a deal with the DOJ or FTC or get the Oval Office to green-light your deal has fed transformational M&A fever. In 2026, look out for this perception to change dramatically. The unpredictability of reliance on “The White House strategy,” the rise of blue state antitrust regulators and new state antitrust review processes, the pushback by frontline civil servants within the antitrust agencies against politicization, ill-advised hiring by merger parties of lobbyists who attract unhelpful attention to mergers that do not merit attention, and anticipation of mid-term elections that will give rise to at least one Democrat-controlled house of Congress where hearings will be held to investigate big mergers while they are pending, will all combine, by the end of 2026, to put a damper on the current misperception in boardrooms that “anything goes” when it comes to US antitrust review of M&A. Meanwhile, despite statements from Europe and the UK that they want to facilitate the growth of stronger and larger players through consolidation, the regulators on the Continent and in the UK may nonetheless create headwinds for cross-border M&A due to their reduced appetite for greenlighting mergers where the combined company will not necessarily be all that local in culture, headquarters, leadership, branding, or talent. The results will be an even further uptick during 2026 in the intensity of negotiations of regulatory risk allocations, pressure for ever higher regulatory reverse termination fees, and extended outside dates.
The data center boom – awareness that it cannot go on forever will actually be a big M&A driver. The number of companies touched in a positive way by the build-out of data centers, which has pretty much been solely responsible for 2025 GDP growth in the US, is often under-recognized. But the boardrooms where the company’s stock is up as a result of the company’s falling somewhere in the spectrum of businesses that benefit from this build-out are keenly aware both as to why their numbers are up and that this uptick is, by definition, short-lived in most cases. Even if you do not believe in a data center bubble, there are only so many data centers that need to be built. These boardrooms contemplating how much longer their companies can ride this build-out wave are fertile territory for M&A strategies. In 2026, we’ll see these companies use their stock as acquisition consideration or enter into merger-of-equal type transactions as they seek to use their highly valued equity currency to better place them for the inevitable return to earth of their businesses. This trend will be tough on dealmakers. Stock deals are always difficult to negotiate because, even though stockholders usually don’t care much about how the social issues are resolved, the directors and officers of the merger parties do, often to excess. In addition, expect 2026 to be a year of pressure on advisors to create innovative exchange ratio formulas as parties fret about how stock prices will react to stock consideration transactions.
Software companies will be targets and it may not be pretty. A couple of years ago, if a software company was on the road to the Rule of 40 or 50, they were safe from pressure to explore strategic alternatives. But near-term profitability will not be enough for many software companies in 2026. These software companies already live under the threat that AI will render their special sauce not so special. Meanwhile, the AI companies have been getting a pass on profitability. In 2026, there will be increased pressure on AI companies to show profitability and that will, in turn, put more pressure on these AI companies to eat into the territory of many software players. The result will be boardrooms of software companies that are keenly aware of this risk and more than happy to sell to private equity or a cash-rich strategic at less than stellar premia. Thus, 2026 will be a year where advisors to publicly listed software companies will need to work hard to create records to support, and to generate shareholder votes in favor of, sale prices at these less than blow-away prices.
DExit will die down and live on. Just before Christmas, the Delaware Supreme Court’s Tornetta v Musk decision made it possible for the already-richest man in the world to receive the richest compensation package ever (albeit due to an interpretation of a remedies doctrine that had nothing to do with the fairness of the board process that approved his pay package). Despite the pro-Musk headline of this ruling by Delaware’s highest court, we’ll still see tech bros in 2026 embracing the idea that formation of your company outside Delaware is cool. Accordingly, there will continue in 2026 to be an uptick in controlling stockholder-founders choosing Nevada and Texas as the state for incorporation of their babies when IPOing (although most of them will continue to live large in 2026 without a public listing). But the momentum of DExit will otherwise die down in 2026. Institutional investors are not pleased with the latest round of shareholder-unfriendly amendments to the corporate statutes of Nevada and Texas. A move by those states to further distinguish themselves from Delaware by permitting mandatory arbitration bylaws, prompted by the SEC’s announcement that the Commission will no longer stand in the way of such bylaws, will only further heighten investor repulsion. Any non-controlled, publicly listed company that does not have an extremely large and loyal retail shareholder base in the mode of Tesla or other very special circumstances would be foolish to try to obtain shareholder approval in 2026 of a move from Delaware to Nevada or Texas. Moreover, investment bankers will continue to push their IPO clients to do what worked last time, which was to have a Delaware corporation as the listco. In 2026, we may even start to get our first taste of corporate jurisprudence out of Nevada and Texas business courts, and inevitably one or two of the decisions will create some ambiguity that undermines the myths that these states are purely “code based” and that their case law is 100% predictable and pro-corporation. In addition, 2026 may be the year when some of the anti-civil rights, anti-ESG, anti-abortion, and anti-immigrant obsessions of the Texas state government are legislatively required to become attributes of Texas corporations. Meanwhile, Delaware will continue to be keenly aware of the competition. Expect the Delaware courts to be less provocative in 2026. Indeed, it was notable that in 2025, the Chancery Court relied on the old Monroe County precedent to dismiss an entire fairness case on the pleadings, arguably indicating that even if a conflict M&A transaction does not qualify for the Section 144 safe harbor enacted by Delaware in March 2025, the Delaware courts do not necessarily see a non-ratable benefit to a related party in a transaction as meaning the plaintiffs automatically get to defeat motions to dismiss. Moreover, expect the Delaware legislature to be proactive in 2026 by quickly smoothing the fall-out from any Chancery Court decisions that lead corporate law firms to send alarmist memos to clients about new risks of director liability.
Standardization of definitive M&A agreements. A combination of AI tools, the replacement of the billable hour with fixed fees, the pressure from clients and markets to move faster and at greater speed, the increasing concentration of high value M&A among a small group of lawyers at a handful of law firms, and the enhanced predictability over the last several years of case law relating to virtually all the issues that arise under M&A agreements will (and on this one I am very much all-in) result in M&A agreements becoming more concise and more standardized. If the ISDA lawyers can do it for complex derivatives transactions, so can we M&A lawyers! This will apply not only for US domestic transactions, but even for true cross-border transactions where terms have already become much more standardized over the last 24 months despite having parties from different countries and legal systems.
Private equity will emerge from the M&A doldrums with new sources in the lead, while the old guard may face new headwinds. Private equity M&A has been in the doldrums – displaced as a source of liquidity by continuation funds, NAV loans, and secondary sales of LP interests, while the big players have shifted their focus away from M&A to direct lending and never-ending re-engineering of portfolio company balance sheets. In 2026, look for Middle Eastern funds to take up the mantle of old-fashioned private equity M&A: taking trophy public companies private and buying portfolio companies that have been sitting with one private equity shop’s funds (and continuation funds) for longer than anybody ever expected when the shop first acquired the portfolio company. Rates of return for the private equity sellers won’t necessarily be anything to write home about, but the pressure on them to sell will increase as the attractiveness to LPs of investing in continuation funds will decline in 2026 as more of the portfolio companies handed off to continuation funds over the last few years reveal themselves to have been duds in the coming year. In addition, the hunger of Middle Eastern funds to take public companies private will accelerate the decline in the number of listed companies, which in turn will put more pressure on “retail-ization” of the private capital world. Finally, look for some losses and scandals in the private capital world in 2026 to trigger calls for more regulation and transparency there.
The diversification vs. pure-play pendulum will continue to keep the M&A and activism defense business busy. Remember when activists forced Fortune Brands to split into three separate companies 15 years ago. The thought in the following year was that there are not that many other Fortune Brands out there. Ha! Never underestimate the ability of hedge fund researchers to find a gem lurking within listed companies and to advocate for separating out that gem to generate pure-play value at a better multiple than the listed companies' blended multiples. Similarly, never underestimate the desire of executives to protect themselves from downturns by buying up countercyclical businesses to create more stable, blended results going forward. The cycle will continue in 2026 and keep us busy.
