Back in December, I wrote an article titled “Navigating the M&A Landscape – A Banker’s Perspective on 2025,” where I shared a cautiously optimistic outlook on the year ahead. While much of that optimism still holds, the reality of 2025 has taken on new dimensions, particularly with the unexpected resurgence of tariff-related uncertainty. 

Deal activity remains uneven across the lower-middle market. We see strong interest and competitive processes in sectors where the target’s supply chain is not meaningfully connected to international markets, especially China. The debt markets, meanwhile, have meaningfully opened up in recent months—but just in time for buyers and lenders to begin overanalyzing tariff implications and retrenching in affected categories. 

But here’s the nuance: in today’s climate, buyers are drawing sharp lines between businesses with exposure to international supply chains and those without. For companies that rely directly on imported inputs (particularly from Asia), tariff volatility has introduced real friction into processes. In some cases, that’s meant valuation discounts. In others, buyers are simply pausing until conditions stabilize. 

One notable response: an increased emphasis on non-cash and contingent considerations such as earn-outs. These tools are helping buyers and sellers bridge gaps in valuation expectations while preserving alignment amid lingering uncertainty. 

That said, for companies that are domestically sourced or only minimally exposed, valuations are holding up—and in some cases, improving. Why? Buyers still have capital. Strategics are looking for tuck-ins. And the scarcity of quality assets is giving sellers with clean narratives a rare advantage. 

A recent Dean Dorton M&A engagement offers a perfect example. We just completed a fully marketed process with impressive levels of demand, attention, and high-quality offers from several parties. It’s no coincidence that the company in question had virtually no exposure to international supply chains. 

What to Watch as 2025 Unfolds 

We still believe 2025 is a strong seller’s market—but not for everyone at the same time. If your business is in a tariff-neutral zone, the wind is at your back. If your inputs come from across the Pacific, it may be worth watching the next few months closely before launching a process. 

That said, we believe the moment the rules of the game are defined, market activity will snap back. The underlying fundamentals — ample dry powder, limited deal flow, and eager buyer pools — are all in place to support a swift rebound in valuations and demand once trade policy clarity returns. 

Our job at Dean Dorton M&A is to help clients navigate that nuance. Valuation isn’t static. It’s a function of timing, market sentiment, and buyer psychology. Right now, those levers are tilting favorably for the right companies. 

Let us know if we can help you think through where your business sits and how the current environment could affect value and process strategy.