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137
M&A 2025: I Was Wrong – Time for a Do-Over
- Deal activity in 2025 has not met the earlier consensus forecast of a land rush of quality deals.
- Factors contributing to the sluggish deal activity include stubborn inflation, reduced interest rate cut prospects, and supply chain disruptions.
- Market conditions in early 2025 continue to reflect those of 2024, with challenges affecting manufacturing and distribution businesses.
- Commercial and residential service firms are dominating the market as manufacturing firms hold back from selling.
- Valuations have stabilized overall, with differences between industry sectors like business services and manufacturing.
- There are fewer high-performing manufacturers in the market, leading to scarcity and driving valuations.
- Buyers are seeking quality businesses, leading to premiums for top performers in certain sectors.
- Due to uncertainty, financial buyers are facing pressure to put money to work and may utilize earnouts and seller financing.
- Discontent with the current exit environment is fueling the rise of private equity continuation vehicles (CVs).
- CVs may not suit all needs, and changes in the market may impact financial buyers and individual/family business owners differently.
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