Mega deals and market shifts: 2025 investment banking recap and 2026 outlook

J.P. Morgan investment-banking heads said 2025 was defined by cautious optimism and adaptability, with global M&A hitting roughly $4.5 trillion (up ~38% YoY) driven by a decade-high wave of mega deals (> $10bn) and a clear market premium for scale. AI spending and related capex (data centers, infrastructure) are major secular tailwinds—still in the “early innings”—that buoyed equity markets and supported stronger-than-expected IPO performance; sponsor-related IPOs accounted for ~20% of listings YTD and outperformed (≈20% vs. 15% average), with JPM forecasting sponsor share of IPOs at 30–35% in 2026 and global IPO issuance up ~25%. Private markets show heavy activity in secondaries (volumes +60% YoY), growing direct lending (JPM provided nearly $10bn in 2025) and a leverage market dominated by refinancing (≈75%), with bankers noting capacity to underwrite very large LBO financings (single-B credits up to ~$25bn, double-B scenarios >$40bn). They flagged key risks—AI under-delivering, sticky inflation, geopolitical/regulatory frictions—and advised clients to remain nimble, preserve capital flexibility, pursue “focused scale,” and use current liquidity to execute strategic M&A and technology-driven investments.

Analysis

J.P. Morgan's investment-banking leaders report 2025 M&A volume of roughly $4.5 trillion, a 38% year‑over‑year increase driven by a decade‑high wave of mega deals (>$10 billion) and a material market premium for scale that has lifted PE and EBITDA multiples and favored larger, investment‑grade borrowers. Deal activity and financing were supported by ample liquidity and recycling of capital, with 75% of leveraged finance activity tied to refinancing and the bank noting the capacity to underwrite very large LBO financings (single‑B financings up to ~$25 billion; double‑B scenarios exceeding $40 billion).

AI adoption and related capex are primary secular tailwinds: the hosts cite 90% of organizations using AI regularly and more than one‑third allocating over 20% of digital budgets to AI, with rising investment in data centers and infrastructure. Equity markets were buoyed by AI demand and positive earnings, IPOs year‑to‑date returned ~15% on average while sponsor‑related IPOs returned ~20% and accounted for ~20% of listings; JP Morgan forecasts global IPO issuance +25% in 2026 and sponsor share of IPOs rising to 30–35%.

Private markets are active: secondaries volumes rose ~60% YoY and JPM reported nearly $10 billion of direct lending in 2025, creating alternative exit and financing channels. Key risks highlighted are AI failing to deliver expected efficiencies, stickier inflation prompting tighter policy, and geopolitical/regulatory frictions — all of which argue for nimble capital allocation and preservation of balance‑sheet flexibility.

Key Decisions for Investors

• Tilt exposure toward large‑cap companies and AI infrastructure beneficiaries that are likely to capture the premium for scale and benefit from sustained AI capex
• Consider participating selectively in sponsor‑related IPOs and secondary/private continuation opportunities given their recent outperformance and forecasted increase in 2026
• Allocate a measured portion to private credit or direct lending strategies where yields and demand are rising, while monitoring refinancing activity that dominates leveraged finance
• Use the current liquidity window to refinance or pursue strategic M&A if accretive, but maintain capital flexibility and hedges against sticky inflation or AI execution risk
• Monitor AI delivery metrics, central bank guidance and geopolitics as key triggers that should prompt rebalancing of equity and credit positions