Consumer dealmaking separated into two distinct markets during the first half of 2026, with a narrow band of high-growth, high-margin brands drawing double-digit EBITDA multiples while the remaining sellers bridge price expectations through earnouts, rollover equity and seller notes, sources said.

The divide is no longer only a valuation story. It increasingly determines how a transaction is structured, who shows up to bid, and whether a process reaches signing at all.

“There is no single consumer multiple right now,” said Kevin Slaughter, partner and leader of the corporate practice group at Levenfeld Pearlstein. “The market is separating high-quality assets from everything else.”

North America consumer sector M&A volume totaled USD 53.6bn in 1H26, a decline of 11% compared to the same period last year, and deal count dropped 14% to 337 deals, according to Mergermarket data.

Headline volume has been carried by a handful of very large transactions, which can make the broader market look stronger than it feels in the middle market, Slaughter said. For example, Mergermarket data shows that Sysco’s pending acquisition of Jetro Restaurant Depot from Leonard Green & Partners accounted for USD 29.1bn of the retail subsector’s USD 33.6bn in disclosed deal volume.

Beneath those deals, buyers are still interested but more disciplined: diligence is deeper, financing is addressed earlier in processes, and sellers anchored to 2021 valuations are struggling to get to a signed deal.

“I do not expect a return to the 2021 market,” Slaughter said. “Good companies will get sold, but price, structure, and certainty of closing will all matter.”

Tosh Dhanalal, managing director and head of consumer investment banking at Portage Point Partners, described a K-shaped split, with premium, well-positioned assets drawing strong interest while underperforming or non-core assets face muted demand and heightened execution risk.

What buyers are paying for is scarcity. Strong but mature businesses have settled into mid-single-digit EBITDA multiples, according to David Shiffman, head of investment banking and co-head of the consumer retail group at Solomon Partners. Valuations in both public and private markets are bifurcating, he said, with the market rewarding challenger brands that combine high growth with strong margins and convert that into significant free cash flow. Only a handful of businesses exhibit those characteristics, and those are the ones commanding double digits.

That scarcity premium explains where competitive tension has concentrated. Better-for-you brands, experiential concepts, and both heritage and disruptor labels are drawing the most interest, said Jeff Derman, co-head of the consumer retail group at Solomon Partners. “People are searching hard-to-come-by, underwriteable growth vehicles with defensible niches,” he said.

Food and beverage have been the clearest beneficiary after a slow stretch through 2024 and early 2025, with consumer demand around protein driving genuine product innovation, noted Alisa Carmichael, a partner at consumer-focused private equity firm VMG Partners.

Mergermarket data shows food and beverage held steady compared to a year ago, with USD 12.4bn in deal volume across 119 transactions, compared to USD 12.2bn across 137 deals in 1H25.

Competitive tension in the category has pushed valuations up meaningfully in recent months, Carmichael added, while other categories have stayed more measured.

Beauty presents the counterexample. The category remains active and innovative, but M&A has slowed under competitive saturation and a constant flow of new entrants, Carmichael said. “It is not so much falling out of favor as it is facing a more discerning buyer environment,” she said. Traditional four-wall retail and apparel are being approached selectively even where the businesses still generate durable cash flow, Derman said.

Apparel, discretionary retail and anything heavily reliant on imported goods are having trouble drawing real conviction given tariff exposure and a noticeably more price-sensitive consumer, Dhanalal said. “Those categories aren’t dead, but the diligence is longer and the bar for a clean story is much higher,” he said.

For assets outside the premium band, structure is doing the work that price cannot. The gap between seller expectations and buyer willingness is increasingly resolved in the terms rather than the price, Slaughter said, which is not necessarily a negative outcome. “A thoughtful structure can preserve value and keep a deal moving,” he said.

“That gap is probably the single biggest reason deals are taking longer to close right now,” Dhanalal said.

Who’s left buying retail

The more consequential shift may be in who is buying. Traditional private equity is rarely a buyer in retail specifically, Derman said, other than contrarian specialists and deep-value firms. Large-cap sponsors rotated out of the category after a series of notable failed investments beginning in the late 2010s and have yet to show signs of rotating back.

The vacuum has been filled from two directions. Strategics now dominate retail M&A, pursuing scale, vendor and customer leverage, fixed-cost absorption, lower cost of capital and greater capacity to invest in systems and technology — advantages Derman described as recognized competitive differentiators and attractors of investible dollars.

“Brand management companies reign supreme over branded apparel, footwear, and accessories,” Shiffman said, pointing to LVMH’s sale of Marc Jacobs to WHP Global and G-III Apparel Group, Kontoor’s agreement to sell Lee to Authentic Brands Group, and VF Corporation’s 2025 sale of Dickies to Bluestar Alliance. That effectively establishes a standing clearing mechanism for brands that strategics no longer want to operate.

Private equity remains active elsewhere — the lower middle market, franchise and restaurant platforms, beauty, consumer services and fragmented sectors supporting consolidation, according to Slaughter, who also expects more sponsor-to-sponsor transactions as firms move to return capital.

In the middle market, sponsors are setting the pace outright. “Private equity is clearly back in the driver’s seat after sitting out the last couple of years,” Dhanalal said.

Dry powder across private equity and private credit needs deploying, and portfolio companies are overdue for exits, motivating sponsors on both sides of the table. Sponsors continue to drive much of the growth-stage activity, Carmichael said.

Financing is becoming less constraining. Private credit and traditional lenders are competing more aggressively, giving borrowers more options, Slaughter said.

Credit markets are strong for select retailers, Shiffman said. “You have to bifurcate the universe between the top 20 players and the rest of the universe,” he said.

Debt costs more relative to earnings than it used to, Dhanalal said, which limits the ability to pay on traditional LBOs — a dynamic he considers healthy, because it forces buyers to underwrite real cash flow.

Supply comes from sellers

The second-half pipeline is being generated less by buyer appetite than by seller necessity. Kontoor’s move to sell Lee in order to concentrate on two higher-growth assets illustrates the portfolio-optimization impulse now running through corporate sellers, and Yum! Brands’ sale of Pizza Hut shows that even well-known consumer brands are being reassessed when they no longer fit a parent’s strategy, Slaughter said.

Strategics are increasingly divesting and cleaning up portfolios in ways that could catalyze larger transactions, Carmichael said.

Aged sponsor holdings add to that supply. A significant number of private equity portfolio companies have aged past their expected exits, Slaughter said, and that pressure will eventually produce more sale processes.

A second exit path is also reopening. The cautious return of the IPO market for retailers — Reformation and Tailored Brands have both filed S-1s — gives scaled assets in sponsor portfolios an alternative to a sale, Derman said. On his read, the second half is shaping up to be as busy as the first, if not busier.

“I’d call it a gradual thaw rather than a snap-back,” Dhanalal said. “Momentum building steadily rather than a flood of deals all at once.”