This time of year, I am frequently asked about the outlook for buying and selling businesses in the upcoming year. Business owners in particular are eager to understand the trends and levels of interest I am seeing on both the buy-side and sell-side of the market. 

There are many variables that impact the outlook - economic growth, interest rates, inflation - to name a few, but before addressing the variables, I can say that based on my engagements, there are increasingly positive conditions for acquisitions and sales particularly of businesses with 1M+ EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).

Following the trend that started in the last two quarters of 2024, nearly all of our $1M+ EBITDA opportunities are receiving 40+ serious inquiries and subsequent multiple offers. This kind of interest is translating into strong multiples, well-structured deals, and excellent outcomes for our sell-side clients. 

What is Driving the Increasing Interest from Buyers?
The emails and calls that I receive daily from Private Equity firms underscore their role in the increased competition for business acquisitions. Private equity firms are sitting on a build up of undeployed capital with an expiration date; thus they are under pressure to actively invest capital and provide a return on that investment. 

Adding to the picture, many PE firms have turned their focus from larger, middle market acquisitions to small businesses and lower middle market companies with enterprise values ranging from $1 million to $50 million. 

In addition to PE firms, business owners and corporate developers contact me seeking roll-up opportunities in order to expand and solidify their share of the market. Especially attractive are vertical industry roll-ups which provide the opportunity to consolidate smaller businesses within the same industry leveraging arbitrage. Healthcare, Industrial services, home services, and manufacturing are some of the areas where I am seeing heightened roll-up activity. 

Finally, the incoming administration’s anticipated policies for tax and regulatory relief for businesses are fueling optimism for business performance, deal financing and access to capital. The already declining interest rates will be a tailwind for financing, benefitting equity firms, strategic buyers and individual investors alike. 

What Could Hinder M&A Activity in 2025?
Forecasters expected a banner year for M&A in 2024, but it did not fully materialize largely because of limited exits. Despite many reaching traditional retirement age, business owners were not yet ready to implement their exit plans for a variety of reasons. Limited acquisition opportunities is the biggest obstacle to increased activity. 

Some of the business owners that I began working with on exit planning 2 to 3 years ago have expressed that they are now ready to exit. Many are selling because they are ready for their next chapter; the favorable seller’s market is an added motivator but definitely not their sole reason.

What do Predictions Mean to the Small Business or Lower Middle Market Business Owner who is wondering if they should expand through acquisition or the Business Owner considering selling?  

No matter what the economists or Wall Street pundits predict, in my experience, there are and will continue to be buyers looking for good, well-run companies. Business plans and personal goals rather than market predictions should drive the moves a business owner makes. During robust economic conditions or periods of uncertainty, I continue to work with buyers planning for growth and owners who are actively selling. Deals will continue to get done. 

In my bi-monthly Insights column, I’ll continue to share trends and actionable advice to help business owners and their advisors navigate the M&A landscape. Whether you’re preparing to sell, considering an acquisition, or advising a client, I’m here as a resource to help you make informed decisions.

Here’s to your continued success in 2025 and beyond.