Key Takeaways
- • Post-election market optimism reversed by tariff uncertainty: Following the US election, equities rallied and sparked M&A momentum, but mounting uncertainty around tariff policy implications has since dampened investor confidence in deal activity.
- • PE dry powder at record levels: Private equity firms maintain historically elevated cash reserves and continue actively pursuing high-quality, resilient assets despite current market volatility.
- • Late 2025 recovery contingent on tariff resolution: DC Advisory's US CEO Bill Kohr anticipates meaningful recovery in both M&A and IPO activity in late 2025, conditional on partial or full tariff policy resolution and macroeconomic stabilization.
- • Early preparation critical for sellers: Historical precedent shows sellers who prepare asset sales in advance of market windows capture disproportionate value; those awaiting "perfect conditions" frequently miss market cycles entirely.
- • Valuation gap narrowing signals gradual stabilization: Market recovery has progressed gradually but steadily through Q1 2026, with narrowing valuation spreads indicating improving sentiment among mid-market participants.
Summary
DC Advisory's latest US Private Equity Mid-Market Monitor reveals a market navigating conflicting crosscurrents of opportunity and uncertainty as of Q1 2026. The initial optimism that followed the US election and sparked a notable stock market rally has been substantially tempered by escalating concerns surrounding tariff policy implications, creating an environment of pronounced macroeconomic uncertainty that continues to restrain deal activity.
Despite current headwinds, private equity sponsors remain well-positioned to capitalize on market dislocations. PE firms are sitting on record levels of dry powder—accumulated capital awaiting deployment—while continuing to actively pursue resilient, high-quality assets across various mid-market sectors. This persistent capital availability suggests that deal flow will resume once macroeconomic clarity improves.
Bill Kohr, DC Advisory's US CEO, articulated a conditional recovery thesis: a meaningful resurgence in both M&A and IPO activity could materialize in late 2025 if tariff-related policy uncertainty is resolved, either partially or comprehensively, and broader macroeconomic conditions stabilize. Kohr emphasized that volatile market environments, while uncomfortable in the near term, historically create substantial opportunities for well-prepared market participants.
The report underscores a critical timing consideration for potential sellers: asset preparation should precede rather than follow market window openings. Historical analysis consistently demonstrates that sellers leaning into preparation early position themselves to capitalize when market cycles turn, whereas those awaiting ideal conditions frequently fail to execute within favorable windows. Market recovery has been gradual but steady through Q1 2026, with valuation gaps narrowing quarter-over-quarter, signaling incremental improvement in mid-market sentiment and transaction momentum.
Despite current headwinds, private equity sponsors remain well-positioned to capitalize on market dislocations. PE firms are sitting on record levels of dry powder—accumulated capital awaiting deployment—while continuing to actively pursue resilient, high-quality assets across various mid-market sectors. This persistent capital availability suggests that deal flow will resume once macroeconomic clarity improves.
Bill Kohr, DC Advisory's US CEO, articulated a conditional recovery thesis: a meaningful resurgence in both M&A and IPO activity could materialize in late 2025 if tariff-related policy uncertainty is resolved, either partially or comprehensively, and broader macroeconomic conditions stabilize. Kohr emphasized that volatile market environments, while uncomfortable in the near term, historically create substantial opportunities for well-prepared market participants.
The report underscores a critical timing consideration for potential sellers: asset preparation should precede rather than follow market window openings. Historical analysis consistently demonstrates that sellers leaning into preparation early position themselves to capitalize when market cycles turn, whereas those awaiting ideal conditions frequently fail to execute within favorable windows. Market recovery has been gradual but steady through Q1 2026, with valuation gaps narrowing quarter-over-quarter, signaling incremental improvement in mid-market sentiment and transaction momentum.
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