Fierce competition among direct lenders is reshaping deal structures, spreads and sponsor strategies. Meanwhile, evolving liquidity needs and new retail capital continue to transform the private markets.

Lincoln International’s Private Capital Markets Conference attracted more than 1,500 attendees, offering real-time insights into today’s market dynamics. Participants gleaned deep insights from Lincoln’s proprietary database, which encompasses more than 6,500 privately held portfolio companies and an incremental 2,500+ asset-backed finance investments. Our experts surveyed decision-makers in the audience to learn what trends they are watching heading into 2026.

Attendees identified three sectors as the most attractive for investment: business services, technology and industrials. Each experienced outsized growth in 2025 relative to the broader private market. In contrast, healthcare and consumer companies remain impacted by regulatory and economic uncertainty. Investors continue to favor high-growth, largely tariff-resistant sectors.

Heading into 2026, investors are seeking innovative solutions and dependable revenue streams amid evolving market dynamics. Assets in the identified sectors are well-positioned to generate investor interest and premium valuations.

We expect momentum in business services transactions to continue throughout 2026 as sponsors and strategic acquirers remain highly focused on recurring/reoccurring revenue models, service innovation and operational excellence.” Saurin Mehta | Managing Director & Global Head of Business Services, Lincoln International

We anticipate increased activity in the tech sector will be supported by AI investments, which are allowing our software clients to enhance their technology stacks and their competitive differentiation.” Will Bowmer | Managing Director & U.S. Co-Head of Technology, Lincoln International

Headwinds such as high interest rates, persistent inflation, tariffs and supply chain shifts have not deterred industrial leaders. Many have successfully navigated these challenges and are primed for significant growth, which is expected to translate into increased M&A activity in 2026.” Sean Bennis | Managing Director & Global Head of Industrials, Lincoln International

Deal flow sees modest improvement and continued momentum

Initial expectations for a strong return in mergers and acquisitions (M&A) activity did not fully materialize in 2025. Transactions have come to market at a slower-than-expected rate, and the rising tide has not yet lifted all boats. However, while deal volume year-to-date is down compared to previous years, enterprise valuation multiples for new buyouts have increased to 13.0x EBITDA, exceeding even the peak levels seen in 2021.

Additionally, a promising 72% of attendees reported an increase in new deal flow in Q3 2025 as compared to the prior quarter. Lincoln’s experts predict this upward trend will continue in 2026.

Despite a slower start to deal activity in 2025, we’re now seeing clear signs of renewed momentum. Many sponsors reported increased deal flow in Q3, and we expect this positive trend to carry through 2026 as market confidence grows.” Eric Malchow | President & Global Head of M&A, Lincoln International

Hold periods remain extended for private equity portfolios

The availability of capital and competition within the private credit and broadly syndicated loan markets have made it more attractive for sponsors to refinance or recapitalize performing portfolio companies, extending hold periods. Nearly half of attendees reported that between 25-50% of their portfolio companies had been held for more than four years, and nearly a third of attendees reported extended hold periods for 50-75% of their portfolio companies.

In Q3 2025, roughly two-thirds of private companies tracked by Lincoln grew revenue and adjusted EBITDA, consistent with the first half of the year. EBITDA growth remains steady, and the percentage of companies growing EBITDA have reached the record levels dating back to 2019. However, factors including limited free cash flow are still constraining the number of assets being brought to market.

While private markets are not currently a cause for concern given continued earnings growth, there are signs of strain that appear to be emerging gradually. These pressures serve as a reminder that even a handful of poor deals can significantly impact credit fund returns as uncertainty persists.”  Nick Baldwin | Managing Director, Lincoln International

Sell-side activity is imminent

In today’s market, the highest-quality companies are commanding unparalleled competition, resulting in average enterprise valuation multiples exceeding the levels observed at the prior peak of the market in 2021. While non-A+ assets are not yet experiencing the same benefits, sponsors remain motivated to pursue high-quality deals, which are targeted by a large pool of buyers looking to deploy their available capital and achieve higher purchase multiples.

While more than 4 in 10 attendees did not expect to launch a sell-side process in H2 2025, the outlook was more optimistic for H1 2026. More than 72% of attendees expected to launch a sell-side process in the first half of next year, with more than one-third predicting two or more launches.

We’re seeing a shift toward increased optimism among sponsors regarding sell-side activity. While expectations for launches in late 2025 remain tempered, many sponsors anticipate ramping up processes significantly in the first half of 2026.” Curt Tatham | Managing Director & U.S. Head of Financial Sponsors, Lincoln International

Valuation challenges lie ahead

When preparing sell-side processes over the next 12 months, attendees almost unanimously agreed that the most common challenge would be aligning with prospective buyers on valuation expectations.

Despite the widespread increase in earnings over 2025, many private companies have struggled to generate enough cash flow to deleverage themselves. Deals of all vintages tracked in Lincoln’s proprietary database have defied expectations, showing an increase in leverage of approximately 0.5x to 1.0x since inception. This trend could affect private company valuations and create misalignment between buyer and seller expectations. 

As we look ahead to 2026, reaching consensus on valuation expectations remains one of the most significant hurdles in today’s private markets. Buyers and sellers face a complex environment shaped by shifting earnings profiles and evolving leverage trends.” Patricia Luscombe | Managing Director & Global Co-Head of Valuations & Opinions, Lincoln International

Looking Ahead with Lincoln

Lincoln’s Valuations & Opinions Group collaborates with M&A and Capital Advisory colleagues to combine real-world experience with sophisticated expertise in all types of valuation methodologies. Our experts’ deep industry knowledge and commitment to excellence help clients navigate complex financial landscapes, make informed decisions and achieve successful outcomes in today’s dynamic market. Contact us to discuss how these trends may impact your strategy in 2026 and beyond.