Consumer M&A Market Rebound Delayed, Gradual Improvement Expected in 2026
Capstone Partners’ annual Consumer Industry M&A Report and 2026 Outlook examines public market valuations, macroeconomic trends, and deal activity driving sectors within the Consumer space. The majority of transactions completed by our Consumer Investment Banking Group are for privately-owned businesses accessing long-term investors for the first time. Our team knows strategic buyers drive the highest valuations and we are laser focused on getting to know each of their sweet spots in mergers and acquisitions (M&A). Using proprietary data, we will work closely with you to prep your company and put you in the ideal position for the best possible outcome.
Year of Market Uncertainty Dampens Consumer M&A, Signs of a Rebound Detected
Consumer industry deals fell 18.9% year-over-year (YOY) in 2025, a considerable drop given this contraction follows two years of declines in 2022 (-9.6% YOY) and 2023 (-29.6% YOY) and a year of only moderate growth in 2024 (+8.6% YOY). A large retreat in private equity (PE) dealmaking (-22.9% YOY) linked to market unpredictability and a lack of asset monetization served as one of the largest drivers of this decline. Moreover, a dramatic 33.8% YOY contraction in public strategic acquisitions also strained the Consumer M&A market. This weak appetite—particularly among public buyers—weighed on overall valuations, bringing the median EV/EBITDA multiple down to 9.2x in 2025, the lowest median multiple recorded since Capstone began tracking the data 10 years ago. Despite dampened consumer M&A in 2025, we have seen the initial signs of a rebounding market, due in large part to buyers getting comfortable with macroeconomic uncertainty. We see four major contributors to a positive outlook for consumer M&A in 2026.
We expect the initial M&A rebound to come from larger capitalization deals as these companies often understand market complications and are well-equipped to take advantage of a changing market as buyers and sellers. The number of companies acquired for an enterprise value of more than $250 million significantly expanded and reached a market high in 2025, representing 30.6% of all disclosed consumer M&A deals. Large deals have been the precursor to the opening of broader M&A activity. In years marked by declining consumer M&A volume but a high share of large deals—more than 20% of disclosed deals above $250 million in enterprise value—the Consumer M&A market saw deal volume increase 19.6% on average the following year based on trends from 2016 to 2025.
Several Discretionary sectors, which have typically been the first pocket of the market to see momentum return in a rebound, have been recovering, suggesting a broader industry rally in 2026. In 2025, Discretionary sectors with strong M&A growth included Tactical Products (+54.3% YOY), Outdoor Recreation & Enthusiasts (+47.7% YOY), Vitamins & Supplements (+30% YOY), and E-Commerce (+12.8% YOY). Discretionary sectors are more exposed to macroeconomic swings, more sensitive to deal volume volatility and margin compression, and more difficult to underwrite during uncertainty. Because of this, investors move towards defensive non-discretionary opportunities in a strained economy. By re-entering the Discretionary vertical, acquirers and investors have indicated that downside risk feels contained, demand has bottomed or stabilized, and operating outlooks have gained credibility again. This return of confidence in Discretionary sectors precedes a broader consumer M&A revival.
Consumer industry PE investment appetite experienced an increase in the past couple of months due to a greater willingness to buy and sell existing portfolio companies despite lingering market uncertainty. Notably, add-on activity climbed 29.4% month-over-month (MoM) in December 2025 while platforms jumped 75% MoM, a combined 48.3% rise in the final month of the year.
As of the end of 2025, 39% of U.S. PE companies have been held for more than four years, indicating a critical junction where PE firms will need to return funds to limited partners (LPs). If exits continue at the current pace (972 in 2025), it would take more than seven years for the backlog of portfolio companies aged four years or older to clear out, according to Capstone’s Q4 2025 Capital Markets Update. As a result, exits are expected to accelerate as rate cuts have materialized and LPs have demanded distributions. PE firms will likely eagerly return as both buyers and sellers in 2026.
We are looking forward to the end of H1 2026 as we expect to see a significant uptick in consumer M&A.
Consumer M&A Valuations Retreat in 2025
M&A valuations in the Consumer industry weakened to a median purchase multiple of 9.2x EV/EBITDA in 2025, almost half a turn lower than 2024 (9.6x). This marked the third consecutive year M&A pricing landed below the historical median of 10.5x between 2016 and 2025. The hurdles introduced by geopolitical uncertainty and shifting tariffs forced buyers to scrutinize targets thoroughly, created a more risk-averse posture, and made it difficult to justify premium multiples. However, acquirers continued to award elevated valuations to businesses with strong customer retention, clear competitive moats, pricing power, cash flow generation, and tariff-insulated supply chains. Moreover, asset-light operators and businesses indexed toward non-discretionary purchases were prioritized. Scaled businesses offering immediate accretive impacts to financials and smaller deals keeping debt servicing manageable both saw strong multiples. Assets unable to market as scale or digestible, high growth plays saw softer valuations.
Tight credit spreads and Federal Reserve (Fed) interest rate cuts supported acquisitions of scaled targets mandating significant capital commitments. In 2025, upper middle market (between $250 million and $500 million) and large-scale (greater than $500 million) transactions accounted for a record 30.6% of total disclosed deals, with large-scale deals comprising 24.1% of this activity.
The spread between median EBITDA multiples paid by strategic buyers (8.6x) and PE firms (10.4x) expanded in 2025. PE buyers, who experienced elevated LP pressure to meet capital deployment mandates, competed harder for a narrower set of safe growth assets in the Consumer space, driving multiples higher. Alternatively, strategics largely split their focus between inorganic growth and optimizing internal operations amid the shifting macroeconomic environment. These buyers self-selected into lower multiple deals due to competing capital uses—such as artificial intelligence (AI) integration and internal cost mitigation strategies—and sensitivity regarding synergy realization and integration success.
M&A Activity Trends by Sector
The full report, available for download below, includes M&A commentary and analysis on 14 key sectors within the Consumer industry:
