3rd September 2026

In half of all European M&A transaction processes, advisors report that sellers' valuation expectations are too high, a gap that averages 25% and breaks the deal in 29% of those cases. Buyer appetite is shifting too: software development, once Europe's most sought-after sector, is cooling amid the rise of AI, with IT Services now drawing more interest instead.

According to the 8th edition of the Dealsuite European M&A Monitor, covering UK&I, DACH, the Netherlands, France, CEE, Southern Europe and the Nordics, based on input from 815 M&A advisory firms. 

A Persistent Gap, Now Quantified

Dealsuite has flagged unrealistic seller expectations as a leading cause of deal collapses across Europe for years. This edition is the first to measure the scale directly: how often it happens, how wide the gap runs, and how often it kills the deal.

The gap is not evenly spread across the continent. The Nordics reported both the highest share of overvalued sellers (58%) and one of the highest deal-collapse rates (32%), while the Netherlands recorded the fewest process breakdowns of any region, at 19%. Southern Europe saw the highest share of processes derailed by valuation disagreements, at 38%. 

Floyd Plettenberg, CEO of Dealsuite, says the numbers finally put a figure on something advisors have felt for years: "A deal doesn't usually fall apart because a buyer walks away for no reason. It falls apart because the seller is anchored to a number the market won't pay. Now we have measured that gap across Europe, and how often it actually breaks a deal. This is the kind of transparency that avoids dealbreakers and helps close more deals."

As Julia Gathen, Baker Tilly OBT AG (Switzerland), explains: "Earn-outs remain one of the most effective instruments for bridging valuation gaps between buyers and sellers, especially when both sides have differing views on the company's future development. Seller loans can also help close a valuation gap, particularly when there is strong confidence in the company and a constructive, trust-based relationship exists between the parties."

Software Development Cools as AI Reshapes Buyer Appetite

Alongside the valuation gap, the clearest shift in the data is in buyer appetite for software companies. Software Development has long been one of Europe's most sought-after sectors, but interest is now cooling: the average number of interested buyers per listed company fell from 11.8 a year ago to 10.7 in H1-2026, the steepest decline of any sector. IT Services has overtaken it as Europe's most in-demand sector, rising to 11.2 interested parties per company.

Four of the seven regions now expect fewer software development transactions in H2-2026, with several advisors linking this directly to AI.

Jack Minns, Larking Gowen (UK): "We expect the software development sector to become less attractive to buyers because of the threat of AI. As long as it's unclear which business models will survive automation, many parties will hold off."

Wilfred van der Lee, Grant Thornton (Netherlands): "Due to the impact of AI, valuations in the software development sector have declined. As a result, we also expect fewer exits in the coming period."

Deal Activity Ticks Higher, Pipeline Builds for H2-2026

Across Europe, 35% of M&A advisors reported an increase in the number of transactions in H1-2026 compared to H2-2025, against 20% who reported a decline. Southern Europe recorded the strongest rise of any region, with 47% of advisors reporting more transactions.

One in four deals (25%) now has a value above €10 million. Half of all advisors (50%) also reported an increase in new assignments in H1-2026, against 17% who reported a decline, pointing to a healthy pipeline heading into the second half of the year.

Business Services is expected to drive growth in six of the seven regions in H2-2026, and Industrial & Manufacturing in five. Retail trade is the only sector every single region expects to see fewer deals in.

As Julien Lagenette, Grant Thornton (Spain), explains:"We still see room for continued increase in Business Services M&A deals in the coming months, driven by high demand for recurring, specialized and AI & tech-enabled services as well as Private equity-led build-ups in a highly fragmented and lower middle market segment." 

Regional Valuations Converge Around 5.3

The average European EBITDA multiple holds steady at 5.3. Regional differences continue to narrow: DACH, UK&I, the Nordics and Southern Europe all stand at 5.4, France and CEE sit at 5.3, and the Netherlands at 5.0, a spread of just 0.4 across all seven regions.

Company size remains a decisive factor in valuation. Businesses with an EBITDA of €10 million trade at close to double the multiple of those with an EBITDA of €200,000, reflecting the so-called Small Firm Premium applied to compensate for the higher risk profile of smaller businesses.

As Dino Bendekovic, Marktlink Adriatic (Croatia), explains:"Smaller companies typically trade at lower EBITDA multiples because they carry higher perceived risk. They are often more dependent on the owner, have a less diversified customer base, weaker management depth, and lower resilience to economic shocks... As businesses grow, they tend to demonstrate stronger governance, more predictable cash flows, and greater opportunities for value creation, which justifies higher valuation multiples." 

Sentiment Strengthens Further Into H2-2026

Three in four advisors (75%) rated the European M&A mid-market positively over the past six months, against 25% who took a negative view. Looking ahead, optimism rose in every region except France, where uncertainty ahead of the 2027 elections tempered expectations. Overall, 82% of advisors describe themselves as optimistic about H2-2026.

Piotr Kucharczyk, JP Weber (Poland): "H2-2026 M&A activity is likely to stay uneven, concentrated around scarce capabilities and strategic resilience. AI is shifting buyer interest towards the physical economy, particularly power generation, data centres, and industrial automation, alongside continued interest in defence technology and healthcare."

Chris Seifert, Just Finance GmbH (Germany) adds: "The ongoing trend toward age-related business sales will continue to support the M&A market in the second half of 2026 as well. At the same time, the financing side of transactions in the small- and mid-cap segment is becoming more complex: the path to a tailored financing solution requires access to the right capital providers, individual structuring expertise, and a process that aligns with the M&A process in both timing and content." 

Taken together, the data point to a European mid-market that keeps building momentum: a valuation gap now measured for the first time, buyer appetite shifting away from software as AI reshapes the sector, and confidence heading into H2-2026.

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