Deals Without Exits: What the M&A Slowdown Says About Where the Money Sits

Global M&A fell 41% in the third quarter, after the biggest first half on record. The people closest to the deals expect volumes to keep rising for a decade anyway, because there is so much capital at the top of the system. That says less about the economy than it seems to. It says more about a market where fewer assets ever change hands at a price an outsider sets.

Photo: Dylan Agbagni, CC0 via Wikimedia Commons

By Fabian Fach, Founder, Black Flower Capital

Global mergers and acquisitions came to roughly $993 billion in the third quarter of 2026, according to LSEG. That is 41% less than in the second quarter and the first quarter below a trillion dollars since the spring of 2025. Dealogic, which counts slightly differently, has the drop at 35%. The number of megadeals, transactions above $10 billion, fell from 26 to 10.

The first half had been a record, about $2.8 trillion by LSEG's count. Paramount agreed to buy Warner Bros Discovery for around $111 billion including debt. A consortium led by BlackRock's Global Infrastructure Partners and EQT agreed to take the power company AES private at an enterprise value of about $33.4 billion. Even in August, as the pace slowed, Apollo agreed a £5.7 billion takeover of easyJet. And in October, Tesla and SpaceX both set up board committees to study a combination of two companies worth together somewhere around $3.5 trillion, more than most full years of global M&A. It is a study, not a deal.

So: is the boom over? On the FT's Unhedged podcast this week, the paper's two veteran deal reporters, James Fontanella-Khan and Arash Massoudi, gave an answer that is more interesting than yes or no. A slowdown, yes, partly the usual hesitation before a US election and partly higher borrowing costs and energy prices. But Fontanella-Khan expects deal volumes to keep rising over the next decade regardless, and the reason the two give is the part worth taking seriously.

A Number That Measures Capital, Not the Economy

The argument goes like this. There is now so much money at the top of the financial system, in sovereign funds, venture funds and private capital, that it has to go somewhere, and a large share of it goes into buying and financing companies. Deal volume, in the hosts' view, therefore tracks the amount of capital looking for a home far more than it tracks how well the underlying economy is doing. The hosts put it bluntly: the big numbers will keep coming, and that "doesn't translate" into a healthy economy. The two need to be read separately.

This is an opinion, and the hosts present it as one. But it changes how a familiar statistic should be read. For decades, rising M&A was taken as a sign of corporate confidence: managers buy when they expect growth. If the main driver is instead the size of the pools of capital that must be invested, a record first half says that those pools are large, not that boardrooms are optimistic. And a weak third quarter says that money paused, not necessarily that the economy turned.

For anyone who uses deal activity as an input, whether as a macro signal or as a read on risk appetite, that is a meaningful difference. The indicator still moves. It just measures something else.

Why the Biggest Companies Stay Private

The same pool of capital explains the second puzzle the hosts raised: equity markets are near their highs, the IPO window is open, and yet the IPO wave everyone expected has been thin. The explanation offered on the show is that a company with access to an apparently endless supply of private money has little reason to accept the disclosure, the quarterly scrutiny and the retail shareholders that come with a listing. The payments company Stripe came up as one that would ideally never list.

The conversation also produced the useful counterpoint. That logic holds for a business whose capital needs private investors can meet. It stops holding when the needs become very large. A company building frontier AI needs capital on a scale that, sooner or later, only the public markets can supply. That is why the largest AI companies are now coming to market after all, while a long list of mid-sized, profitable private companies feel no urgency.

The result is a stock market that sees fewer of the mature, established private companies and more of the very large, very capital-hungry ones. Public investors get access late, and to a particular kind of company.

Private Equity's Exit Problem and the "Forever" Fund

The third thread is the one with the most direct consequences for investors. The private equity model of the last two decades, buy a company with borrowed money, improve it, sell it a few years later at a higher multiple, depended on cheap financing. Since rates rose, many companies bought at peak valuations have not reached the prices their owners hoped for, and they cost more to finance while they wait. On the podcast, the industry came across as one of the clearest losers of the current macro mix: it needed lower rates and got tariffs, higher oil and no relief on borrowing costs.

Selling those companies would be a large source of M&A. Instead, many are being moved into continuation funds: the private equity firm sells the company from one of its own funds to a new vehicle it also manages, with new investors buying out those who want to leave. According to Evercore, continuation funds made up just under half of the roughly $121 billion of secondary transactions in the first half of 2026.

The newest variant goes further. Bloomberg reported in October that Goldman Sachs and Evercore have been sounding out private equity firms about "forever" continuation funds that would hold companies for 10 to 15 years, effectively removing the exit altogether. Other advisers are reported to be studying similar structures. Meanwhile the largest firms have rebranded as private capital managers and moved much of their activity into lending, a shift we have written about before. The hosts expect smaller private equity firms, without that second business, to struggle to stay relevant.

What a Sale Actually Does

It is worth being precise about what is lost when an exit is postponed indefinitely. A sale to a third party is the moment a private asset gets a price set by someone who is not its owner. A buyer with its own money at stake looks at the company and says what it is worth. Until that happens, the value in a fund's books is an estimate, made with care and audited, but made by the party that holds the asset.

A continuation fund is a transaction, with outside investors pricing the deal, and that matters. But the seller and the manager of the buyer are the same firm, the company does not change hands in any operational sense, and the fees continue. A structure designed to hold for 10 to 15 years pushes the next real test of that price well into the 2030s. The questions about how private marks behave under stress, which we discussed in the context of private credit, apply here over a longer horizon.

None of this means the valuations are wrong. Many of these companies are good businesses, and some will be sold at prices that justify every mark. It means the share of the economy that is valued without an outside buyer is growing, and that the growth is happening for financing reasons, not because the owners have decided these are the best long-term holdings they could have.

What This Means for a Portfolio

Three practical points follow.

First, deal statistics have become a weaker macro signal. A record quarter or a slump of 41% says a great deal about how much capital is looking for assets and how expensive borrowing is. It says less about the business cycle than it used to. Treat it as a measure of capital flows, not of corporate health.

Second, private holdings priced without a recent outside sale tend to look calm in a portfolio, because their values move slowly and rarely at the same moment as listed markets. That smoothness can make them appear less correlated with everything else than they really are. The longer the time to the next real price test, the more that apparent diversification depends on an estimate. We have written about how diversification can be overstated when exposures that look different turn out to move together. Indefinitely deferred exits are a slower version of the same problem.

Third, liquidity has a value that is easy to overlook when it is not needed. Assets that trade every day get repriced every day, which is uncomfortable but informative. An allocator who combines both kinds of holdings should know which part of the portfolio's apparent stability comes from the assets themselves and which part comes from the fact that nobody has had to sell them yet.

None of this is a forecast that the deal market or private equity is about to break. The hosts made the opposite case: this part of the financial system has proven remarkably resilient through a pandemic and several wars, and it may well keep growing. The point is narrower. When more and more of the money sits in structures designed not to sell, the number of prices set by an outsider falls, and the ones that remain carry more weight.