10. IPOs and M&A activity: Multiple sectors set to benefit

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10. IPOs and M&A activity: Multiple sectors set to benefit

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10. IPOs and M&A activity: Multiple sectors set to benefit

What we said
We anticipated a normalisation in initial public offerings (IPOs) and mergers and acquisitions (M&A) in 2026, driven by sector‑specific opportunities, pent‑up demand and strategic repositioning.

How it has played out

IPOs: fewer deals, larger proceeds
The IPO market has evolved broadly as expected, but with a clear quality bias. In Q1 2026, the number of IPOs fell versus a year earlier, yet total proceeds were significantly higher (Figure 12). This reflects a more selective environment, where heightened geopolitical uncertainty favours fewer listings by companies with stronger fundamentals.

The standout transaction is the SpaceX IPO. While the company has a powerful growth narrative, its listing structure introduces important risks for investors.

Under the previous rules, a stock needed several months of trading history and at least 10% free float before becoming eligible for Nasdaq index inclusion. Nasdaq has now amended its rules: a stock can be fast‑tracked into the Nasdaq‑100 after just 15 trading days if its market capitalisation places it among the top 40 holdings.21

Given SpaceX’s low free float, this creates a dynamic where:

  • Supply is constrained (few shares available),
  • Demand is amplified by media hype and index‑tracking flows, and
  • Once the lock‑up period ends, insiders and early investors can sell into a market where ETFs are effectively forced buyers due to index inclusion.

The result is that private investors and insiders can monetise at peak hype, while passive investors bear the downside risk if valuations correct.

M&A: highest-value start since 2021
M&A has followed a similar pattern: fewer deals, but higher aggregate value. As expected, geopolitical tensions and still‑elevated financing costs have constrained highly leveraged transactions and encouraged dealmakers to prioritise quality over volume.

In Q1 2026, the number of deals declined year‑on‑year, but deal value rose 9.7%, marking the strongest start to a year since 2021.22

Outlook for H2 2026
We expect IPO and M&A activity to remain robust in H2 2026, but with a continued emphasis on quality over volume. The pattern seen in H1 – fewer deals but higher aggregate proceeds and deal values – is likely to persist as geopolitical uncertainty and elevated financing costs keep the bar high for new listings and large, highly levered transactions.

On the IPO side, the pipeline is dominated by large technology and AI‑related names, including Anthropic, Databricks and OpenAI, extending the theme beyond SpaceX and reinforcing the link between AI, capital markets and index dynamics. The combination of low free float, fast‑track index inclusion and intense media attention creates a fertile environment for hype‑driven price action, particularly in the early trading days.

IIn M&A, CEO intentions point to a constructive backdrop: 62% of CEOs globally expect to increase deal activity over the next 12 months.23 If geopolitical tensions ease and the energy shock moderates, we see scope for a gradual normalisation of financing conditions, supporting a broader range of strategic transactions across sectors.

Overall, we see H2 2026 as an attractive but selective environment for investors around IPOs and M&A: opportunities are concentrated in high‑quality, strategically important assets, while index mechanics and low‑float structures increase the risks for passive investors in headline deals.

Action for investors:

  • Do not be purely passive around high‑profile IPOs: Low‑float, mega‑cap listings (e.g. SpaceX) can be added rapidly to major indices, forcing ETF buying at peak‑hype valuations and leaving passive investors exposed when lock‑ups expire.
  • Favour active strategies to navigate IPOs and M&A: Use active stock selection to distinguish between structurally attractive new listings and those primarily driven by narrative and index mechanics.
  • Look for second‑order beneficiaries: Investment banks and advisory firms have outperformed traditional banks year‑to‑date, reflecting higher fee income from IPO and M&A activity. These can offer a more diversified way to benefit from the deal cycle.

10. IPOs and M&A activity: Multiple sectors set to benefit

The outlook for initial public offerings (IPOs) and mergers and acquisitions (M&A) in 2026 is for a normalisation after a drying-up of activity in recent years. A combination of sectoral opportunities, pent-up demand and strategic opportunities points to a more active year.

IPO market: Recovery with discipline
The US IPO market was subdued through much of 2022–24 amid inflation, rising rates and market volatility. It began to recover in 2025 (Figure 14) and we expect that momentum to carry into 2026. Companies in high-growth sectors – AI, biotech, clean energy and green infrastructure – are likely to drive issuance, as investor demand for innovation and thematic exposure remains strong. Private equity (PE) sponsors are also likely to see 2026 as an attractive exit window with interest rates expected to trough. Indeed,PE-backed IPO listings more than doubled in the first three quarters of 2025 compared to the same period in 2024.18

However, stricter regulatory requirements around disclosures, governance and ESG standards raise the bar for public listings. Companies are also tending to stay private for longer, preferring to reach greater scale before entering public markets. Valuation conditions matter: if equity multiples compress due to economic slowdown or policy tightening, issuance could pause. Overall, 2026 is best characterised as a year of IPO recovery – more active than 2025, but far from the exuberance of 2020–21.

Global growth in IPOs is set to remain a key phenomenon. In the first half of 2025, there were almost as many IPOs in India and China as in the US. This is despite the number of IPOs in these countries declining compared to the same period a year earlier. However, while IPO volumes declined in Asia, proceeds rose, bolstered by listings of chips and semiconductor manufacturing companies. This was evidenced by the fact the amount raised in China was higher than in the US.

“ In the first half of 2025, there were almost as many IPOs in India and China as in the US. ”

Return of the SPAC
Special Purpose Acquisition Companies (SPACs) are listed companies with high levels of liquidity or credit lines which can be quickly deployed to acquire other companies. They soared in popularity earlier in the decade before collapsing under poor performance and regulatory backlash but are showing signs of a comeback. In the first half of 2025, SPACs represented over 40% of IPO issuance in the US (Figure 15). This was supported by a favourable regulatory backdrop after the Securities and Exchange Commission implemented enhanced disclosure and investor protection rules in 2024.

Still, headwinds remain. Investor scepticism lingers after underwhelming post-merger performance in the last cycle. Quality deal flow is another challenge: sponsors must secure credible targets with sound financials, which will limit volume compared to the earlier boom. Thus, SPACs are unlikely to regain their past scale, but they will persist as one option within a diversified menu of listing routes.

M&A: Strategic but constrained
M&A activity slowed in 2024–25, reflecting higher interest rates, market uncertainty and regulatory pushback. In 2026, conditions appear somewhat more supportive. Corporates face strategic imperatives to transform business models, secure supply chains, and invest in digital and green transitions.
These pressures create demand for consolidation and bolt-on acquisitions. Private equity, holding substantial dry powder, is also poised to re-enter the market.

Cross-border M&A could regain momentum as companies reposition for supply-chain resilience and market access. However, geopolitical tensions, sanctions regimes and investment-screening frameworks will complicate global dealmaking. Regulatory scrutiny, particularly in technology, healthcare, and infrastructure, remains a significant headwind. Financing costs, while lower than the peak, will still constrain highly leveraged transactions. As a result, dealmakers in 2026 will likely prioritise quality over volume, focusing on strategic alignment rather than opportunistic expansion.

Action for investors:

  • Look for opportunities in key sectors including biotech, IT and robotics.
  • We favour investment banks who are set to benefit from the dealmaking activity.

18 EY Global IPO Trends Q3 2025

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