Middle Market M&A: The Turnaround is Coming!

Ladies and Gentlemen, BUYERS BEWARE! The middle market M&A landscape has been a rollercoaster ride, but the good news is that we're finally seeing signs of stabilization. Capstone Partners just dropped their 2024 Middle Market M&A Valuations Index, and it's a must-read for anyone looking to make a move in this space. Let's dive in!

First things first, the numbers are in, and they're not pretty. Average middle market M&A valuations declined to 9.4x EV/EBITDA in 2024, down from 9.6x in 2023 and 9.9x in 2022. But don't let that fool you—this is a market that's been through the wringer, and it's finally starting to show signs of life.



The Federal Reserve's rapid interest rate hikes last year sent shockwaves through the market, but equity markets largely shrugged it off. Dealmaking, however, remained constrained by high financing costs, uncertain cash flow projections, and a cautious private equity buyer pool. But here's the thing: despite all that, several industries showed resilience. Agriculture, Business Services, Consumer, Energy, Financial Technology & Services, Healthcare, and Industrial Technology sectors all saw year-over-year (YOY) improvements in average EBITDA purchase multiples. That's right, folks—these sectors are where the action is!

Now, let's talk about deal sizes. In 2024, the average enterprise value of targets increased from $112.5 million in 2023 to $166.8 million. That's a 48% increase, and it's a clear sign that buyers are shifting their focus from smaller, easily digestible acquisitions to larger, synergistic ones. And get this—the share of 2024 deals closing at 10.0x EBITDA or higher rebounded, rising 56.3% after a steep decline from 2022 to 2023. That's right, folks—high-quality assets are back in vogue!

But here's the kicker: the market is overdue for a rebound in activity. Capstone Partners has tracked several datasets that indicate the market is turning—including a reentrance of private equity platform acquisitions, which rose 4.7% YOY in 2024 and marked the first uptick since 2021. The improving macroeconomic environment paired with increasing pressure for private equity to deploy investor capital may be the catalysts needed to drive increased deal flow in 2025.

So, what does all this mean for you? It means that now is the time to get in on the action. The market is stabilizing, and the sectors that are showing resilience are where you want to be. But don't just take my word for it—do your own research and make sure you're positioning yourself for success. This is a market that's on the cusp of a turnaround, and you don't want to miss out on the opportunity to capitalize on it.

So, buckle up, folks—it's time to get in the game! The middle market M&A landscape is finally showing signs of life, and it's time to capitalize on the opportunity. Don't miss out on the turnaround—get in on the action now!