Imagine this.
You’ve spent 20 years building your company. Revenues are steady, profits healthy, and you’ve started wondering: Is now the right time to sell? Or maybe bring in a partner to fuel the next stage of growth?
You call a friend who sold last year. She tells you her deal was priced at almost 8x earnings. Then you hear another story: a business like yours sold just a few months ago at closer to 6x.
Why such a big gap? That’s the story the data is telling us right now in the private M&A market. And if you’re an owner or an advisor to one, you need to know what it means.
Deal Activity: Buyers Are Back, But Pickier
The pace of deals picked up sharply this spring, up 33% from the winter. Buyers are showing interest again. But step back, and the picture looks more cautious: activity is still down 30% from last year.
Translation for owners: Buyers are shopping, but they’re choosy. To get noticed, your business needs to shine, have clear financials, strong margins, and a compelling story.
Valuations: The Gap Is Widening
The average price buyers are willing to pay has slipped. Strong, well-run businesses still command a premium. Weaker ones? They’re being marked down hard.
Translation for owners: Think of it like the housing market. The “move-in ready” homes are selling fast. The fixer-uppers sit, and when they do sell, it’s at a discount.
Debt & Deal Structures: Add-Ons Rule the Day
Banks are still lending, but buyers are cautious. Many are choosing to bolt smaller companies onto their existing platforms rather than launch new ventures from scratch.
Translation for owners: If your business can be the missing puzzle piece for a bigger player, you may be more attractive now than ever.
Different Buyers, Different Outcomes
Family offices (wealth-backed investment groups) are pricing deals lower than traditional private equity firms, especially for smaller companies under $50M.
Translation for owners: Who you sell to matters as much as when you sell. Know your buyer and tailor your story accordingly.
Industry Realities: Some Sectors Are Hot, Others Not
- Manufacturing, especially unbranded consumer goods, took the biggest valuation hit.
- Healthcare services and business services remain stronger, with investors paying a premium.
Translation for owners: Your industry will shape your negotiation leverage. If you’re in a pressured sector, prep for tough conversations. If you’re in a resilient one, lean into your strength.
So, What Should Owners Do Next?
The data tells us this: the easy-money days are gone. Today’s market rewards preparation, clarity, and resilience.
Here’s your playbook:
- Clean up your numbers. Reliable, transparent financials are non-negotiable.
- Tell the right story. Match your strengths to what today’s buyers value.
- Be open to partial exits. Add-on acquisitions and minority investments can unlock capital without giving up control.
- Stay grounded. Don’t anchor to the sky-high multiples of 2021–22. This market is different.
- Act strategically, not reactively. Waiting for “perfect” conditions may mean missing opportunities while better-prepared competitors close deals.
The Takeaway
The middle-market M&A story isn’t doom and gloom. It’s a market in transition. For owners, that means risk, but also opportunity. The best-prepared companies will still command attention and strong valuations.
At Quest, we help business owners understand this landscape, prepare for it, and win in it. Because in today’s market, value isn’t just about what you’ve built, it’s about how you position it when buyers come knocking.
