How active is M&A, and who is driving it?

  • From the start of 2026 through the report date, announced strategic M&A in North America reached 1.3 trillion dollars, roughly matching the full-year total for 2025 and marking the highest figure for the same period since 2010. Europe reached 509 billion dollars and is on track for a full-year record. The recovery is driven primarily by corporate acquisitions aimed at consolidating businesses, technology and scale.
  • Private equity-led deals have been relatively constrained: North America recorded 613 billion dollars year to date, compared with 1 trillion dollars for all of 2025; Europe recorded 295 billion dollars, compared with 344 billion dollars for all of last year. Goldman Sachs believes the gap between private valuations and transaction valuations in public markets, along with financing costs, continues to restrain acquisitions and exits.

Where is financing demand for the European and North American deal boom coming from?

  • In North American strategic M&A, computers and electronics account for 23% of deal value, healthcare for 17%, and utilities and energy for 12%. Technology and utilities have gained share compared with 2025, which Goldman Sachs partly attributes to AI capital spending and related demand for data centers, power and infrastructure. In Europe, financials and telecommunications lead, accounting for 22% and 14% respectively, with reform agendas supporting industry consolidation.
  • Deals have also grown markedly larger: in North America, the share of deals worth at least 20 billion dollars each rose from 26% in 2025 to 37% in 2026; deals exceeding 10 billion dollars each accounted for 52% in total, the highest since 2019. In Europe, this proportion also exceeded half, reaching its highest level since the global financial crisis, with large deals increasing financing demand.

How much debt pressure can cash-and-stock payments relieve?

  • In 2026, the share of all-cash deals in Europe and North America declined, while mixed cash-and-stock payments increased slightly. Goldman Sachs sees this as mildly favorable to creditors: acquirers do not need to raise the entire consideration in cash, reducing cash financing needs.
  • Cash consideration is not the same as bond issuance volume: funds can come from balance-sheet liquidity, bank loans or bonds. An improved payment structure is only one part of the picture; the increase in large deals still brings greater financing demand, and the pressure on each market depends on the funding source.

Why is the dollar market already under pressure, and why could euro pressure increase?

  • Year-to-date M&A-related issuance of dollar investment-grade and high-yield bonds reached 177 billion and 55 billion dollars respectively, accounting for 10% and 20% of their respective total issuance, toward the upper end of recent historical ranges. Some of this financing relates to deals announced last year, illustrating the lag between M&A announcements and bond supply.
  • M&A-related issuance of euro investment-grade and high-yield bonds stood at 11 billion and 10 billion euros respectively, accounting for 2% and 12% of their respective total issuance. Current supply remains relatively modest given the level of European M&A activity; Goldman Sachs expects dollar supply to remain high and euro supply to rise further from a low base.

Why remain cautious in the near term when spreads are expected to tighten by year-end?

  • Goldman Sachs’s year-end spread targets are slightly below current levels, primarily based on seasonal support from slower bond issuance in late December. From the report date to early December, the bank still sees potential for greater volatility, with forecast risks clearly skewed toward wider spreads. M&A financing, alongside a multiyear wave of AI financing, makes supply a key variable.
  • The dollar market downside scenario previously referenced the peak in March 2026: 93 basis points for investment grade and 335 basis points for high yield. As spreads approach those levels, Goldman Sachs now expects a modest overshoot. For euros, it still references the 128 and 446 basis point levels in April 2025. A larger and sustained spread widening would require a sharp decline in economic activity, which is not the bank’s base case.