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As US food and beverage companies navigate a shifting economic and consumer landscape, dealmakers are weighing cautious optimism against market volatility. Jeffrey Hechtman, a partner in the Chicago office of law firm Kilpatrick Townsend & Stockton, outlines four trends poised to shape mergers and acquisitions in 2026, from the rise of better-for-you brands and alternative beverages to the evolving middle-market landscape and valuation pressures.

The 2025 deal landscape could be summed up in three words: cautious, patient and hopeful. US food and beverage M&A was no different.

Stakeholders were cautious because of dynamic changes in the marketplace, be they regulatory pressures on processed foods or the back-and-forth on tariffs. They were patient in the face of widespread economic volatility – including the interest rate environment and tax uncertainties. And yet they remained hopeful: with interest rate uncertainty and inflation appearing to stabilise while private equity firms continue to sit on significant amounts of uninvested capital and consumer interest in such areas as better-for-you (BFY) products surges.

Still, as dealmakers look ahead to 2026, several critical questions linger: Which food and beverage categories are most ripe for M&A? How will the middle-market and start-up ecosystem fare? How will various macroeconomic factors impact deal activity and valuations?

Here are four key trends to watch.

1. Deeper diligence in middle-market transactions

As of 18 September 2025, more than 95% of this year’s M&A deals in the food sector were for less than $100 million in enterprise value or greater than $250 million. This means less activity in the middle-market as deals in that range have generally seen longer deal timelines and more robust due diligence.

Should M&A activity in the middle-market continue to lag, a 'flight to quality' could persist where highly sought after targets attain robust valuations while less desirable ones may find difficulty exiting. Economic softness in the middle-market could also result in deal structures with more contingent consideration and rigorous diligence periods.

On the latter front, new technologies will have an increasing role: with troves of available data at their fingertips, both buyers and sellers can perform extensive analytics during diligence that can impact the negotiation process, pricing mechanisms, and overall deal structure.

2. Expect an uptick in entrepreneurialism

While the difficult fundraising environment will continue to present challenges for early-stage food and beverage companies, downturns in the employment market often lead to upticks in entrepreneurship as those who lose their jobs look to start new companies or ventures.

The rise in ecommerce could support this trend, creating an environment where it is easier for early-stage companies to enter the market with less capital investment. This ease of entry has driven greater competition in certain segments, as well as an increase in purchase and sale transactions.

3. Hot categories: BFY, alternative beverages, branded companies

Amid mounting regulatory pressures and ongoing shifts in U.S. consumer preferences, 2025 BFY deal activity comprised more than a quarter of total sector deal volume through mid-September – the highest percentage since 2019. The trend encompasses the alternative beverages category, too, and we should expect ongoing activity related to alternatives to alcoholic beverages. Branded products, particularly those geared towards a health-conscious consumer (eg. protein-related products), are likely to drive dealmaking in 2026.

Zooming out, the BFY trend has interesting implications for big companies in the food industry. In the US in particular, many prominent players have long executed a buy versus build strategy: taking emerging products or brands and expanding them through their vast distribution networks while consolidating production and other costs.

However, the move towards fresh, healthy and non-processed foods creates challenges for those efforts given the focus on locally grown products and high transportation costs. As a result, we may see some choppiness in large food companies buying early-stage businesses in the year to come.

4. Valuations hang in the balance, particularly for growth companies

Valuations in the sector have been tricky to track amid the volatility in 2025. At the more expensive end of the deal spectrum, where activity is robust, valuations are still high. At the lower end of the market, valuation concerns have pressured sellers to adjust their expectations to get deals done.

Looking ahead, general economic pessimism and lower growth rates will fight against declining interest rates and vast amounts of private equity dry powder – the former will push prices down, while the latter will keep them up – in defining the 2026 deal market. As of now, we should expect that more established companies will command more fulsome valuations while the outlook for growth companies will remain less certain.

The above trends reflect equal parts concern and promise for US food and beverage M&A activity in 2026. As ever, macroeconomic factors will likely play a large role in dealmaking with interest rate movements greatly impacting the leverage available to fund M&A activity and volatility affecting the diligence and structure in dealmaking.