Strategic buyers have the upper hand for M&A in most financial services sectors for 2H26, owing to strong earnings in recent periods and AI-related headwinds crimping private equity’s investment models, advisors say.

Industry deal value during the first half of 2026 was off considerably compared to last year and the lowest since 2H23, according to Mergermarket data. North America financial services deal value reached USD 72.7bn in 1H26, down 32% from USD 107bn in 1H25.

Deal count rose 7% year-over-year to 712 transactions, marking the highest half-year total since 2H21.

Advisors in the sector expect strong activity in most subsectors as the bank market rebounds and M&A catalysts strengthen with potential headwinds from AI disruption among private equity investors.

Leading the way in transaction value were Banco Santander’s pending USD 12.24bn acquisition of Webster Financial announced in February, and life insurer Equitable Holdings’ USD 10.7bn agreement to sell to Corebridge Financial announced in March.

Strategic acquirers accounted for USD 53.2bn, or 73%, of total deal value in 1H26, compared with 53% in 1H25. Sponsor buyout value fell by half to USD 12.6bn during the same period.

Macroeconomic conditions are favoring strategic buyers, who have begun outperforming financial sponsors in competitive sale processes, said Khelan Dattani, senior advisor for financial technology and financial services at Capstone Partners.

Private equity firms face challenges deploying capital due to higher target asset valuations while AI-related disruption has pressured portfolio company valuations and slowed exits. The result has been fundraising challenges and more selective investment decisions, Dattani said.

“Most people in the financial and private equity space are struggling with either too many portfolio companies or struggling with just putting capital to work and making decisions because of the AI headwind,” Dattani said.

Strategic buyers can leverage operational synergies, benefit from strong equity valuations and operate with longer investment horizons, Dattani said.

Private equity firms remain dominant players in certain segments such as insurance services and asset and wealth management given their historical success, he said.

Asset management

Investment management deal value, which includes asset and wealth management transactions, declined 62% year-over-year to USD 10.2bn in 1H26 from USD 26.bn in 1H25 and USD 25.7bn the year before that.

Deal count reached a record 263 transactions, up from 241 in 1H25 and 237 in 2H25.

Despite credit managers facing headwinds from redemption requests during the half, credit strategies continue to attract strong buyer demand, according to an investment banker active in the asset and wealth management sector.

Likewise for investment managers of secondary market funds, real estate, and infrastructure, the banker said.

Insurance companies continue to pursue asset management acquisitions while asset managers seek insurance-related opportunities, creating sustained transaction momentum between the sectors, the banker said.

“That pairing has a lot of momentum still,” the banker said.

Matt Bacon, senior partner at financial services advisory Alpha FMC, said fragmentation in the registered investment advisor (RIA) space will continue to attract PE backing and drive deal count.

“There are a lot of small, mom-and-pop shops [on the lower end], and that’s what will keep more of the deal flow,” Bacon said.

Larger-scale institutional asset management is likely to see more “mega-deals” because of margin pressures on equities-based firms facing competition from lower-cost investment products, he added.

The quest for scale, diversification and distribution capabilities will likely entice more cross-border deals inbound and outbound from the US perspective, Bacon said.

Insurance

The Equitable-Corebridge transaction ranks as the eighth-largest insurance deal of the past decade and the largest life and annuities transaction during that period, according to Mergermarket data.

Insurance brokerage deal count increased to 171 transactions in 1H26 from 154 in 1H25. Deal value declined to USD 4.74bn from USD 17.4bn in the prior-year period.

Distribution M&A has been strong for the investment bank Merger & Acquisition Services, said managing director Chris Hughes.

“We’re going to close several deals in the second half of the year,” Hughes said.

Valuations have recently plateaued, partly because publicly traded brokers are trading at lower multiples, Hughes said.

“We’re hitting caps at around 15x [EBITDA], whereas last year or two years ago, I would have expected to get into the mid to even high teens,” Hughes said.

Despite the valuation moderation, M&A conditions remain favorable to brokerage sellers and valuations remain attractive relative to historical standards, Hughes said.

Market participants will be watching Hub International after the Hellman & Friedman-backed brokerage filed for an IPO on 26 June.

Potential recapitalization candidates in the brokerage sector include Inszone, ALKEME and High Street, according to Mergermarket data tracking sponsor activity.

Market attitudes diverge on AI’s growing presence in the insurance space, Hughes said. Investors increasingly view AI adoption as a headwind for insurance distribution businesses but a potential accelerator for underwriting firms, he said.

Mark Friedman, a PwC partner and M&A deal advisor, said P&C carriers have built a formidable acquisition profile having generated substantial underwriting profits during the past several years.

“Companies are sitting on massive excess capital positions,” Friedman said.

Sponsor activity 

Despite strategics’ dominance of overall deal volume, private capital investment accounted for some of the largest deals in financial services during the first half.

Athora Holdings announced a USD 4.05bn equity investment round on 6 March with commitments from Abu Dhabi Investment Council, Apollo Global, Athene, and Mubadala Investment Co.

Competition among private capital investors pursuing life and annuity assets has intensified with the lure of stable liability profiles and scalable asset management opportunities, Friedman said.

“If there’s a clean book of business that comes up, or even maybe not so clean, there’s 50-plus bidders that are chasing those assets,” Friedman said.

Insurance brokerages remain one of private capital’s most reliable tracks of recent success. IMA Financial’s USD 4bn recapitalization by Oak Hill Capital, New Mountain Capital, and HarbourVest Partners by itself represented the largest half-year in announced value in the industry in two years.