Strong appetite for strategic transactions

Sponsor activity is surging, driven by several tailwinds including an improving macroeconomic backdrop. Moderating inflation and lower interest rates are making debt financing cheaper, enhancing the attractiveness of leveraged buyouts. Greater clarity around the macro outlook is also giving financial sponsors renewed confidence to pursue strategic transactions.   

As a result, there is significant pent-up demand for deals — and an abundance of capital ready to be deployed. Financial sponsors are sitting on ample amounts of dry powder, with global private equity funds collectively holding over $2 trillion in unallocated capital.

Meanwhile, strong corporate earnings and balance sheets are signaling profitability and stability. This is positioning companies as attractive acquisition targets, further boosting sponsor activity. 

AI is driving the surge in dealmaking

With the AI supercycle picking up pace, financial sponsors are seeking to deploy capital across the entire AI value chain — including hardware, software and infrastructure — and are actively pursuing investment opportunities in this field. J.P. Morgan recently advised engineering firm Boyd Corporation — which has been a portfolio company of Goldman Sachs Alternatives since 2018 — on the $9.5 billion sale of its thermal business to intelligent power management company Eaton, highlighting the firm’s leadership in the data center infrastructure sector.  

The buyout is aimed at augmenting Eaton’s data center cooling solutions to meet the growing demand for AI. “The combination of Boyd’s chip-to-ambient cooling architectures and Eaton’s chip-to-grid power solutions will accelerate the deployment of future AI data centers and enable customers to manage power demands more effectively,” noted Avery Whidden, global head of the Financial Sponsors and Strategic Investors group at J.P. Morgan.

Besides driving investment activity, AI is accelerating the deal lifecycle itself by enabling sponsors to automate data-intensive tasks. For instance, AI can scan vast amounts of public and private data to identify potential targets, as well as review and analyze legal documents and contracts at scale, streamlining due diligence processes. 

The rise of take-privates

Take-privates — where a publicly traded company is acquired and de-listed from the stock exchange to allow restructuring without public market pressures — are growing in popularity. One reason for this trend is that some underperforming public companies are trading at discounted valuations, making them attractive targets for buyouts.

Indeed, 2025 proved to be a bumper year for take-privates, with NAMR and EMEA seeing record-breaking volumes. In the U.S. alone, there were 26 take-private deals in the first half of the year, including the landmark acquisition of global footwear brand Skechers by 3G Capital. J.P. Morgan acted as the lead arranger for the $6.5 billion debt sale, which marks the footwear industry’s biggest buyout to date.

More recently in September, J.P. Morgan advised a consortium of private equity investors — including Saudi Arabia’s Public Investment Fund (PIF), Silver Lake and Affinity Partners —on the $55 billion buyout of American video game company Electronic Arts. The transaction marked the largest all-cash sponsor take-private in history. As part of the deal, J.P. Morgan was the sole provider of $20 billion in committed debt financing, representing the largest ever non-investment grade debt financing underwritten by a single firm.

This trend is further exemplified by the recent take-private of Sealed Air, the U.S. packaging company best known for inventing bubble wrap. J.P. Morgan acted as financial advisor to private equity firm CD&R in the $10.3 billion acquisition, and also provided committed financing. “The Sealed Air transaction reflects the growing popularity of take-private deals, as investors increasingly seek opportunities to unlock value and drive transformation in established companies,” Whidden noted. “We’re seeing strong interest from financial sponsors who recognize the potential for strategic growth and innovation through transactions like this, which bring together industry leaders and long-term capital.”

The outlook for financial sponsors in 2026

All in all, opportunities abound in 2026, with financial sponsors — particularly those that act innovatively and strategically — well positioned to drive a substantial share of deal volume and value across the broader M&A landscape. Nevertheless, it is important to remain mindful of the risks that may arise.

“The investment banking pipeline is robust, with sponsors showing strong appetite for new opportunities, especially in IPOs and strategic acquisitions. Overall, we anticipate continued momentum in sponsor activity in 2026,” Whidden said. “However, we are closely monitoring emerging risks in the credit markets. Concerns around credit quality and potential loan losses may lead to increased caution among buyers, shaping the landscape for future deals.”