Reinventing M&A: embracing complexity in deal structures for today's market

The M&A landscape is undergoing a fundamental transformation. As we move through 2026, deal structures are evolving in response to dramatic shifts in the capital markets, creating new opportunities for both corporate dealmakers and private equity firms willing to embrace complexity.

The capital markets shift that changed everything

For over a decade, companies enjoyed nearly unlimited access to cheap debt and liquid public equity markets. US Treasury rates remained remarkably low, credit spreads were tight, and capital flowed freely. That era has definitively ended.

Over the past four years, rising Treasury rates and widening credit spreads have fundamentally altered the financing landscape. The 144A private bond markets have grown more complicated, and traditional debt financing has become both more expensive and harder to access. Companies that once had infinite capital options now face meaningful constraints.

This shift has forced a reimagining of the corporate capital table. Where once there was simply debt at the top and equity at the bottom, today's structures increasingly feature something creative in the middle. This middle layer represents the frontier of deal innovation.

The rise of insurance capital and patient money

Simultaneously, a new capital source has emerged to meet this evolving demand. Large private equity houses have secured access to substantial insurance capital, creating what market participants call "long-term patient or tailored capital."

Life insurance companies need to deploy capital for 20 to 30 year holding periods. Private equity firms recognized this capital as ideally suited for specific deal structures. When supply met demand, the market responded dramatically.

In just the past three to four years, one category alone has seen over 60 deals representing well over $100 billion raised. This on-balance sheet, equity-classified capital has found applications across nearly every industry.

The capital isn't limited to initial raises. It's increasingly being deployed for acquisitions, divestitures, and pre-IPO funding. What began as an alternative financing mechanism has evolved into a versatile tool for common M&A scenarios.

The fundamental question: are we the right owner?

This new financing environment forces both corporates and private equity firms to ask harder questions about asset ownership.

For corporates, the question extends beyond "Are we a good owner?" to "Are we the right owner, right now?" Even high-quality assets that fit strategically may not warrant prioritization if management lacks the time or the balance sheet lacks the capacity to maximize their potential.

A business segment might require substantial R&D investment or dedicated management attention to reach its full potential. If those resources aren't available, alternative structures allow companies to access capital and expertise without complete divestiture.

For private equity, the calculus is equally challenging. Funds are holding portfolio companies longer than historical norms, either because exit valuations remain unattractive or market windows haven't opened. Yet limited partners are calling for liquidity after eight or nine years of capital commitment.

This tension between value and liquidity is driving creative solutions.

The spectrum of structural options

Today's dealmakers have multiple paths forward when traditional structures don't fit:

For private equity

• Continuation funds that move assets from main funds into specialized vehicles
• Partial sales that retain ongoing equity interests to capture future upside
• Elaborate seller financing structures that provide immediate liquidity while maintaining partnership
• Mezzanine capital arrangements that bridge the gap between full ownership and complete exit

For corporates

• On-balance sheet equity-classified capital raises against stable divisions
• Structured monetizations that maintain operational control
• Joint ventures with financial partners who bring both capital and expertise
• Tailored financing for specific divisions that face analyst skepticism

The common thread is flexibility. Rather than binary choices between holding and selling, these structures create a continuum of options.

Real-world applications across industries

The diversity of sectors employing these structures is striking:

• Chip manufacturers financing new production plants
• Entertainment companies monetizing evergreen music libraries
• Aerospace firms structuring around airplane engine portfolios
• Energy companies financing midstream oil pipelines
• Consumer companies funding coffee production facilities

The characteristic these assets share isn't industry-specific. They're stable, cash-generating businesses with established track records. They're mature operations that can support equity financing with predictable returns.

This stability makes them ideal candidates for long-dated capital that seeks steady income rather than explosive growth.

Private capital: the middle ground

Understanding the distinction between private credit and private capital is essential for dealmakers navigating this landscape.

Private credit focuses on loan origination and debt financing. Private capital occupies the mezzanine layer between traditional debt and equity. It's typically structured below debt but above common equity, or as a senior class of equity.

The defining characteristic is customization. Unlike bond markets that offer standardized seven-year maturities with known investor bases, private capital can be tailored precisely to specific corporate needs. This bespoke approach may cost an additional 50 basis points, but it's often still cheaper than standardized alternatives.

Companies can work with individual investors to structure capital that fits their exact requirements. This flexibility is particularly valuable when pursuing strategic initiatives that don't fit conventional financing templates.

The strategic pairing: mature assets fund growth initiatives

The most sophisticated applications pair asset monetization with strategic growth.

Consider a music company with an evergreen catalog of classic artists generating steady downloads. That mature asset can be efficiently monetized to fund contracts with emerging artists who represent future growth. The stable business finances the speculative opportunity.

The same logic applies across sectors:

• Energy companies monetize stable pipeline assets to fund alternative energy development
• Pharmaceutical firms finance mature drug portfolios to support R&D for next-generation treatments
• Technology companies leverage established products to fund AI infrastructure buildout

This is business strategy fundamentals applied with new financial tools. Take your most mature, stable business. Monetize it as efficiently as possible. Deploy that capital into the speculative growth areas where you have genuine competitive advantage.

The data center phenomenon and beyond

Recent headlines have focused heavily on data center financing, with estimates suggesting $686 billion in capital expenditures ahead to support AI infrastructure buildout. This digital infrastructure boom has captured attention and driven many initial conversations about alternative structures.

However, the tools aren't specific to data centers. Any large strategic project becomes a candidate when traditional debt and equity markets can't provide capital as cheaply as needed.

The framework applies to:

• Large capital expenditure programs
• Expansion of existing businesses
• Acquisition of new businesses
• Consolidation plays within fragmented industries
• Marketing investments with measurable returns

If you're searching your "couch cushions" for capital to fund that critical N+1 project, and public markets can't deliver the pricing you need, private capital offers an alternative.

Three sectors leading adoption

While applications span industries, three sectors show particularly heavy activity:

Energy and infrastructure: Large capital expenditure requirements combined with mature, stable cash flows make this sector ideal.

Pharmaceutical R&D: The combination of stable revenue from mature drug portfolios and capital-intensive development of new treatments creates natural opportunities for structured financing.

Digital infrastructure: Data centers, fiber networks, and AI-supporting infrastructure represent the most visible current application, driven by unprecedented capital requirements.

Beyond these leaders, a fourth category is emerging: large corporates with mixed business portfolios seeking to monetize mature divisions to fund aggressive growth strategies.

The carve-out question

Divestiture activity is prompting a new analytical framework. When evaluating large-scale carve-outs, dealmakers are asking: "What assets within the carved-out business can be financed differently?"

This question is appearing in unexpected places. Consumer packaged goods companies are examining their brand portfolios through this lens. Powerful brands that generate predictable cash flows may warrant separate consideration.

The presence of strong brands suggests potential for creative structuring. Brand value translates to cash flow predictability, which translates to financing options.

Governance rights and active partnership

These structures aren't purely financial exercises. The capital comes with participation, and that participation can add substantial value.

Private equity firms and other capital providers bring more than money. They bring board-level expertise, strategic insights, and operational experience. For corporates holding divisions that need "sprucing up," this active involvement can accelerate transformation.

The governance framework matters enormously. Clear articulation of roles, decision rights, and strategic objectives ensures alignment. When structured properly, these arrangements function as true partnerships rather than passive financing.

Call options, put options, and predetermined exit mechanisms allow parties to reunite assets with original owners or pursue market sales when timing is optimal. The flexibility extends through the entire lifecycle.

Joint ventures and strategic alliances on the rise

According to the H1 2026 Intralinks Dealmakers Sentiment Report, 35% of respondents anticipate involvement in joint ventures or strategic alliances. This represents a significant shift from historical norms.

Traditional joint ventures brought together complementary businesses to realize synergies. Today's joint ventures increasingly center on capital itself as the complementary resource.

A corporate contributes a stable business with transformation potential. A financial partner contributes capital plus active involvement in strategic direction. Together they reposition the business for its next phase.

After four or five years of joint value creation, the parties can reassess. The original owner might buy back the business. They might sell together to whoever represents the highest and best use. The structure preserves optionality.

The case for change and transformation

Artificial intelligence is infiltrating every sector, fundamentally changing how companies operate, how customers buy, and what products and services are possible. This transformation creates both opportunity and risk.

Legacy sectors must evolve. In some cases, that evolution is straightforward and can be financed through existing cash flows. In other cases, transformation is fundamental and requires complete business model reinvention.

This type of transformation is expensive and risky. Alternative structures provide a way to align incentives, de-risk the proposition, and bring in partners with business-building mindsets.

The long-term outlook

Debate continues about whether this represents a temporary market dislocation or a permanent evolution. Will traditional debt and equity markets regain liquidity and render these structures obsolete?

The major investment banks are placing their bets. They're investing in capabilities and relationships based on the belief that tailored capital represents a long-term market segment. There will be debt, there will be equity, and there will be something in between.

The fundamental drivers support this view. Insurance companies will continue to need long-duration assets. Private equity will continue to need liquidity solutions that don't require fire sales. Corporates will continue to face strategic initiatives that don't fit conventional financing templates.

The market has moved beyond experimentation. With over $100 billion deployed and deal structures proven across multiple sectors, the playbook is established. As more transactions become public and more dealmakers gain familiarity, adoption should accelerate.

Practical guidance for dealmakers

For dealmakers considering these structures, two principles stand out:

Don't fear complexity. In a transformed capital environment, doing things the way you've always done them may carry more risk than exploring new structures.

Governance rights matter. Think beyond the financing exercise to the partnership you're creating. The most successful structures align strategic objectives with clear governance frameworks.

The opportunity ahead

The convergence of constrained traditional financing, available patient capital, and strategic transformation needs creates a unique moment for dealmakers willing to embrace structural creativity.

Companies sitting on stable, mature assets while facing capital constraints for growth initiatives have options beyond binary hold-or-sell decisions. Private equity firms holding valuable portfolio companies while facing LP liquidity demands can find middle paths.

Success requires moving beyond conventional thinking to ask different questions. Not just "Should we sell this business?" but "How can we optimize our capital structure to fund our strategic priorities?" Not just "How do we exit this investment?" but "How do we provide liquidity while retaining upside?"

The M&A market is reinventing itself for today's capital environment. Dealmakers who understand these evolving structures and apply them strategically will find opportunities their competitors miss.

The complexity isn't a barrier. It's the point. In a world where one-size-fits-all solutions no longer work, the ability to tailor structures to specific needs becomes a competitive advantage.