This article is adapted from FounderNest’s 2026 Scouting & Deal Sourcing Report, a deep dive into how corporate M&A, venture, and strategy teams are rethinking how they find and win the right opportunities.
👉 Download the full report here
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For years, sourcing was treated as the quiet prelude to “real” deal work. A necessary step, but rarely the strategic focus.
That assumption no longer holds.
As we move through 2025 and into 2026, sourcing has become the defining competitive advantage in M&A and corporate development. Not valuation. Not financing creativity. Not even execution speed.
Sourcing.
The data is unambiguous. Traditional, banker-led playbooks are breaking down. Competition is intensifying around a smaller set of high-quality assets. Capital is scarcer and more contested internally. And the companies that consistently win deals are those that see opportunities earlier, build conviction sooner, and move before processes become crowded.
This is the sourcing reality check.
Why traditional deal sourcing playbooks are failing
For decades, corporate M&A teams relied on a familiar model:
- Investment banks surfaced opportunities
- Advisors ran competitive processes
- Inbound deals shaped the pipeline
- The best assets were auctioned to the highest bidder
This approach worked in a world where information was scarce, deal velocity was slow, and markets were fragmented.
That world no longer exists.
In 2025, global strategic M&A activity grew 11%year over year through May, yet expectations for 2026 tell a more nuanced story. Sixty-seven% of dealmakers now expect only “somewhat” increased activity, down sharply from prior-year expectations of significant growth.
According to Deloitte’s 2026 M&A Trends Survey, while 90% of private equity respondents and 80% of corporate respondents still expect deal increases, the share anticipating meaningful volume growth fell 16 points compared to 2024.
This is not pessimism. It is selectivity.
Dealmakers are becoming more deliberate, more thesis-driven, and more focused on timing. The pressure is no longer to do more deals. It is to do the right deals, earlier, and with greater conviction.
The market forces reshaping deal sourcing in 2026
The rise of the megadeal
One of the most striking shifts in 2025 has been the return of the megadeal.
Companies long classified as “infrequent acquirers” are suddenly making bold, transformational moves. After years of sitting on the sidelines, when they act, they are acting decisively.
US deal volume for transactions above $100 million rose 9% year-to-date in 2025, while total deal value surged 36% compared to 2024. Deals above $1 billion now represent 27% of activity, up from a pre-2020 average of 22%.
The implication for sourcing teams is critical. These buyers are not slowly building pipelines through banker decks. They are acting on long-held strategic theses and moving quickly when conviction crystallises.
If you are discovering targets at the same time as everyone else, you are already too late.
AI is no longer just a sourcing tool
AI’s role in dealmaking has quietly expanded beyond screening and shortlisting.
In 2025, AI adoption in M&A more than doubled, reaching 45% of practitioners. What changed is not just usage, but scope. AI is now embedded across sourcing, diligence, integration planning, and strategic modelling.
More telling still, nearly half of strategic technology deals above $500 million in 2025 involved AI-native companies or explicitly cited AI-driven value creation.
This has created a second-order effect. The market for technology scouting software itself is booming, projected to grow from $150 million in 2023 to $646 million by 2032.
The takeaway is simple. Sourcing is becoming a real-time intelligence function, not a periodic research exercise.
Capital allocation is getting harder, not easier
Despite stronger deal activity, M&A teams are facing a harsher internal reality.
Capital allocated to M&A fell to a 10-year low in 2025, accounting for just 7% of total cash expenditures among nearly 700 S&P World Index companies. Historically, that figure ranged between 9 and 17%.
Where is the money going instead?
- AI infrastructure
- Robotics and automation
- Digital transformation
- Renewable energy assets
- Internal R&D
This creates a structural challenge for sourcing teams. Not only must they find compelling targets, they must find opportunities that justify investment over these competing priorities.
In practice, that means sourcing earlier, building stronger strategic narratives, and reducing perceived execution risk long before capital committees get involved.
Geographic fragmentation is creeping back in
While trade restrictions had less impact on 2025 deal plans than expected, early signals point toward increasing regional consolidation.
US buyers are showing a stronger preference for domestic deals. At the same time, non-US acquirers are demonstrating softer appetite for US-based assets.
This fragmentation makes global banker-led processes less efficient and increases the value of local intelligence, regional signal tracking, and direct relationship building.
Where sourcing pressure is highest
Technology and AI
Technology M&A surged 76% year-to-date in 2025, reaching $478 billion. AI sits at the centre of this activity.
Competition for talent, infrastructure, and proprietary data has created a gold-rush environment where speed often outweighs traditional valuation discipline. In this market, sourcing is not about finding companies. It is about finding them first.
Healthcare and Biopharma
Global healthcare deal volume fell roughly 22% in 2025, with total value down 25% year over year.
But the headline masks a shift in behaviour. Healthcare services saw 25% fewer deals, yet total deal value rose over 50%, signalling a pivot toward fewer, larger, more strategic acquisitions. Pharma, meanwhile, continues to rationalise portfolios rather than expand aggressively.
Consumer and Retail
Consumer and retail M&A tells a similar story. Deal value surged 175% year on year to $19.9 billion in Q2 2025, even as overall activity remained flat.
Fewer deals. Bigger bets. Higher expectations on strategic fit.
Energy Transition and Renewables
Despite financing headwinds, investor appetite for wind, solar, and battery storage remains strong, driven by long-term decarbonisation commitments.
Early indicators suggest energy transition assets will be among the most competitive deal categories heading into 2026, placing additional pressure on sourcing teams to engage early and build differentiated access.
Infrastructure and Transportation
The year’s largest transaction, Union Pacific’s $85 billion acquisition of Norfolk Southern, underscored the strategic importance of infrastructure consolidation.
Physical assets are back at the centre of long-term strategy, and sourcing in this space increasingly rewards patience, persistence, and early relationship building rather than reactive bidding.
The discovery timeline gap that determines deal outcomes
The most important shift highlighted in the 2026 Scouting & Deal Sourcing Report is not sector-specific. It is structural.
The Traditional Banker-Led Timeline
- Months 1–2: Brief advisors and define criteria
- Months 3–5: Receive target lists and screen
- Months 6–8: First meetings and preliminary diligence
- Months 9–12: Competitive process and negotiations
This model assumes that discovery begins when the mandate begins.
The Signal-Led Discovery Model
- Week 1: Define strategic thesis and deploy continuous monitoring
- Weeks 2–4: Real-time target identification and signal validation
- Weeks 5–8: Proactive outreach before formal processes
- Ongoing: Relationship building, tracking, and pre-emptive positioning
By the time a traditional process surfaces a target, signal-led teams have often already built context, conviction, and trust.
In megadeal environments, where companies transact infrequently but decisively, this six to nine-month head start is often the difference between winning proprietary access and competing in an auction.
Sourcing is no longer a function. It’s a strategy.
The lesson from 2025 is clear.
The competitive advantage in M&A has shifted upstream. Teams that treat sourcing as a living intelligence system rather than a periodic exercise are consistently better positioned to act when the moment comes.
This is not about doing more deals. It is about seeing earlier, understanding deeper, and moving with confidence when others are still reacting.
For a deeper look at the data, frameworks, and real-world implications behind these trends, you can explore the full findings in the 2026 Scouting & Deal Sourcing Report.
