2026 Predictions: Why SMB M&A Is Likely to Stay Strong

Every year people ask the same question: Is this the year deal activity slows down?

As we head into 2026, I don’t see it that way - especially in the small and lower-middle market.

Here’s what I’m seeing on the ground.

Corporate Layoffs Are Creating More Buyers, Not Fewer

Corporate layoffs don’t hurt SMB M&A - they fuel it.

I’m seeing more experienced professionals step out of corporate roles and decide they don’t want to go back. Buying a profitable business gives them control, cash flow, and stability that a W-2 job no longer guarantees.

That buyer pool keeps growing, while the number of quality businesses for sale doesn’t. When demand rises faster than supply, pricing follows.

Lower Rates Help - But the Market Doesn’t Need Them to Survive

Lower interest rates would absolutely help deal flow. Better loan terms improve buyer math and expand the pool of qualified buyers.

But the important point is this: the market isn’t waiting for perfect conditions.

Even modest rate relief improves SBA structures and deal confidence. If rates move lower in 2026, it’s an accelerant - not a lifeline.

AI Isn’t a Buzzword Anymore - It’s a Valuation Driver

AI is already showing up in deals, and buyers can tell the difference between real adoption and marketing fluff.

Businesses using AI to reduce labor dependency, improve margins, or scale without adding headcount are getting rewarded with higher multiples.

By 2026, that gap will widen. Efficient, tech-enabled businesses will continue to trade at a premium.

Recession-Resistant Businesses Are Still in Demand

Not all cash flow is viewed equally.

Buyers continue to pay up for businesses with:

  • Recurring revenue

  • Essential services

  • Predictable demand

In uncertain economic environments, consistency matters. Businesses that hold up in a downturn move faster and sell cleaner - often with fewer valuation debates.

Cash Flow Multiples Are Likely to Stay Elevated

Put it all together:

  • More buyers entering the market

  • Stable to improving financing conditions

  • Capital chasing reliable cash flow

  • Clear premiums for quality businesses

That’s why I expect cash flow multiples in the SMB space to remain strong in 2026.

Not every business will command a premium, fundamentals still matter - but well-run companies with clean financials and defensible earnings are selling into a very favorable market.

Bottom Line

2026 won’t be about guessing the top of the market.

It’ll be about preparation.

Sellers who understand their numbers, position their story correctly, and plan ahead will have leverage. Buyers will still find opportunities - but discipline will matter more than ever.

The SMB M&A market isn’t slowing down. It’s maturing.

Eric I. Mendelsohn- Business Broker