- U.S. M&A is expected to accelerate in 2026 as financing eases and valuations improve, with private equity and AI/tech themes driving activity.
- Chattanooga bankers see a growing pipeline tied to over $1B of recent capital investment and strong industrial/logistics demand with sub-3% vacancy.
- Local multifamily and residential segments remain softer after recent supply, keeping buyers selective and underwriting disciplined.
- Key constraints are interest-rate uncertainty, valuation gaps, policy and tariff risk, and pockets of real-estate oversupply that require careful deal structuring.
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U.S. Macro-Deal Environment & Drivers
Forecasts by EY-Parthenon, PwC, and others show total U.S. M&A volume (deals over $100 million) expected to grow 3 % in 2026, after a sharper rise in 2025., Corporate M&A is expected to rise by ~3 %, while PE-led deal volume is forecasted to grow 5 %, supported by easing borrowing conditions, narrowing valuation gaps, and higher confidence among sponsors and executives.,
Segments expected to drive outperforming deal activity include technology, media and telecommunications (TMT), financial services, real estate, and lodging/leisure. AI‐enabled capabilities are especially prized, contributing to higher valuation multiples., Megadeals (>$5B) are increasingly common, with over 20 % of large transactions in 2025 linked to AI themes.
Chattanooga-Specific Conditions & Opportunities
Regionally, Chattanooga has secured over $1 billion in capital investment led by Novonix’s synthetic graphite EV facility, plus expansions by local manufacturers and aviation service firms—projected to create ~742 jobs and raise average wages near $64,000. The industrial real estate market remains strong: vacancy below 3 %, steady rent growth, and continued demand for Class A specs along major logistics corridors.
The multifamily market is adjusting: units delivered in 2024 pushed vacancy to ~12 %, which eased only modestly in 2025. Supply pipeline has sharply declined (~70 % drop), acting as a stabilizer. Negative rent growth and elevated concessions indicate that select segments (especially lower‐quality/older assets) remain under pressure.
Strategic Implications for Investment Bankers in Chattanooga
1. Sector focus: Industrial/logistics, EV battery supply (e.g., Novonix), aviation, and manufacturing supplier networks are structurally strong in the region. Targeting strategic PE or corporate acquirers looking for TMT or real asset infrastructure exposure could unlock deal flow.
2. Deal structuring: With interest rates still elevated and themes like AI boosting premiums, transactions may need creative financing, earnouts, and protections against valuation downside. Favor stable, revenue-generating assets over speculative build projects.
3. M&A pipeline development: Local bankers should monitor Tennessee’s VC/innovation ecosystem (health tech, AI, SaaS), but recognize exits via IPO are muted—M&A and secondary sales remain main liquidity routes.,
4. Risk management: Key risks include macro shocks (trade policy, rates), oversupply in housing or multifamily, valuation misalignment, and rising input or labor costs. Diligence should focus on realistic pro forma performance and sensitivity to cost changes.
Open Questions & Uncertainties
- How fast will interest rates fall (if they do), and how will that impact valuation multiples and deal financing locally?
- To what extent will AI-driven deal premiums persist, especially for non-tech sectors in Chattanooga?
- Will global/regional trade or regulation (e.g. tariffs, supply chain constraints) constrain industrial/manufacturing expansion?
- How will residential real estate cooling affect investment capital flows, and to what degree will multifamily and single-family resi sectors lag or recover?
Supporting Notes
- U.S. deal volume over $100M is expected to grow ~3 % in 2026, with private equity‐led deals rising ~5 %; corporate M&A similarly projected to increase ~3 % after a ~10 % rise in 2025.
- Deal value year‐to‐date (2025) is up ~36 % over 2024, driven by large deals; share of transactions >$1B has risen from ~22 % pre-COVID average to ~27 % in recent quarters.,
- In a Citizens survey of ~400 middle-market companies and PE firms, 58 % expect M&A volume to increase in 2026; 86 % of PE respondents felt confident in decision-making in Q4 of 2025—up from 48 % in Q1.
- Chattanooga secured >$1 billion in capital investment in recent local projects (led by Novonix) with ~742 projected new jobs, and average wages around $63,973.
- Industrial real estate vacancy is ~2.7 %, and average asking rents in Q3 2025 were ~$7.76/SF, up ~3.7 % year-over-year.
- Chattanooga multifamily market saw vacancy of ~12 % in 2024, rent growth negative ~-2.2 % in 2025, and construction starts down ~70 % year-over-year, pointing to ongoing rebalancing.