M&A

Article Autumn Hines

After a strong finish to 2024 and an optimistic start to 2025 in the deal market, U.S. merger and acquisition activity has cooled noticeably. Through the first nine months of 2025, total deal volume is down roughly 10% year-over-year, with nearly every sector feeling the slowdown.

But the story isn’t one of collapse — it’s one of uncertainty.

The Big Picture

Business owners, investors, and lenders alike have spent most of 2025 navigating a confusing mix of signals:

  • The economy is still growing — just at a slower pace
  • Interest rates are still high — but may start easing soon
  • Inflation decelerated, only to flare up again
  • Trade policies and tariffs remain fluid — but clarity is coming
  • Consumers kept spending even as they amassed record debt
  • Historically low unemployment coexisted with signs of a cooling job market

That “wait-and-see” mindset has led many would-be sellers to delay taking their companies to market and many buyers to pause until they can model what’s next with more confidence.

The result? A quieter market that’s building pressure beneath the surface.

The Numbers Behind the Slowdown

Our analysis of U.S. deal activity shows:

  • Overall M&A volume is down about 10% from 2024 and 9% from 2023. And 2024 and 2023 were subdued comparisons relative to pre-COVID periods. 
  • The Technology Services sector is the rare bright spot, up about 12% year-over-year, thanks to strong demand for cybersecurity, cloud, and AI-driven services.
  • Nearly all other sectors — especially distribution, health services, retail, and consumer products — have seen double-digit declines.

This isn’t about a weak economy. It’s about uncertainty — and the ripple effects it creates for buyers, sellers, and lenders.

What’s Driving the Hesitation

1. Global Trade and Policy Uncertainty

Trade policy remains one of the biggest wildcards affecting business confidence — and by extension, M&A activity.

  • The U.S. still imports more than 9% of its total goods from China, representing over $430 billion annually. While that share has declined from over 20% a few years ago, China remains a critical supplier across technology, consumer, and manufacturing categories.  A trade deal has yet to be reached with China, but all hopes and indications are that both sides will reach a broad resolution that will hopefully ‘stick’ in the coming weeks. 
  • Meanwhile, the U.S. and India are reportedly nearing a comprehensive trade agreement, with legal drafting underway. The U.S. imported about $91 billion in goods from India in 2024 — roughly 2.0% of total imports — and India’s share is steadily rising in higher-value manufacturing and technology products.

If these trade agreements reach resolution, the resulting stability in supply chains, tariffs, and input costs would give dealmakers something they haven’t had in a while: visibility. That clarity enables more reliable pro forma modeling — and more confident deal execution.

2. High Borrowing Costs

Even with expected Federal Reserve rate cuts on the horizon, financing a leveraged transaction remains far more expensive than it was just a few years ago. That means buyers are forced to use more equity to finance deals, making it harder to reach return thresholds — especially in the lower middle market.

3. Tighter Credit Conditions

Banks and private credit funds are still lending, but with tighter structures, higher spreads, and more caution. Deals are still getting financed, but the underwriting bar is higher, and timelines are longer.

4. Valuation Gaps

Sellers still remember the strong multiples of 2021–22. Buyers, however, are pricing for today’s higher cost of capital and lower growth forecasts. That mismatch continues to delay many processes, though creative structures — like earnouts or seller notes — are helping bridge the divide. 

What Could Break the Logjam

While the challenges currently restraining mergers and acquisitions are significant, they are expected to be temporary in nature. Several factors could bring the market back to life in 2026:

  1. Trade clarity — The conclusion of U.S. negotiations with China, India, and Mexico could stabilize costs and restore supply chain predictability.
  2. Interest rate direction — Expected Fed rate cuts would immediately improve deal financing math.
  3. Credit normalization — As lenders gain comfort, middle-market financing should become more fluid again.
  4. Private capital pressure — Family offices and private equity firms continue to hold significant “dry powder” that must be deployed.

When those pieces align, activity could rebound quickly — and valuations could move up with them.

Why Sellers Should Prepare Now

The best time to sell is right before the market wakes up.

If you wait until everyone else is ready, your deal risks getting lost in the noise.

By starting now — engaging an M&A advisor, preparing offering materials, establishing a data room, and refining your company’s growth narrative — you’ll be positioned to launch early in 2026, when buyers re-engage in force.

Buyers are hungry for dealflow. Capital is still available. What’s missing is clarity — and that’s beginning to change.

Our Take

2025’s slowdown isn’t about weakness — it’s about fog.  As trade deals finalize, rates normalize, and credit steadies, that fog will lift. When it does, which we expect in the near term, both buyers and sellers who have been waiting on the sidelines will rush back in.

For business owners, that means now is the right time to get ready. When the window opens — and it will — the prepared will be the first to capture it.

Dean Dorton M&A Advisory guides business owners and investors through all aspects of M&A transactions, including market preparation, negotiations, deal execution, timing, valuation, and transaction readiness.  If you’re considering a sale or recapitalization, our team can help you prepare and position your company for the next wave of opportunity.

Article Autumn Hines

Selling a business is one of the most significant decisions a business owner will make, often representing the culmination of years of hard work. Yet, the process of selling a business—particularly in the lower middle market—is rife with misconceptions. With approximately 75% of private businesses expected to change hands in the next decade, understanding the realities of M&A is more crucial than ever. Believing these myths can lead to poor decisions, missed opportunities, or even failure to close a deal. This article demystifies the top ten myths business owners believe about selling their business, helping you or your clients better prepare for a successful exit. 

1. “I can sell my business quickly and easily.” 

Many business owners underestimate the time and complexity of selling a business. They assume it’s as simple as responding to the frequent overtures they receive over email or listing their business and finding a buyer. In reality, the sale process can take 6–12 months or longer, depending on the industry, business size, and market conditions. Proper preparation, financial due diligence, and negotiations require both time and expertise. 

Reality: Selling a business is a marathon, not a sprint. Proper planning, robust marketing efforts, moving with a structured cadence, and having a clear strategy are essential for achieving the best value. Talking with advisers early in the process to understand what it takes to sell a business and balance non-value qualitative goals is key to developing a strong plan. 

2. “I know what my business is worth.” 

Business owners frequently misvalue their companies by relying on industry rules of thumb or comparing themselves to publicly traded companies. The best determinant of value is established during a fully marketed auction process conducted by a qualified M&A adviser. Moreover, these same advisors can also provide solid guidance or estimates of value before a process. And because sellers have an intimate understanding of their business, enlisting an adviser who can clearly articulate that message is critical.  

Reality: Your business is worth what the market is willing to pay based on concrete data and market conditions. Private company valuations depend on numerous factors, including earnings quality, growth potential, customer concentration, and market conditions. 

3. “I don’t need an advisor to sell my business.” 

Some owners believe they can handle the sale independently to save on advisory fees. However, navigating a sale without a professional often leads to undervaluation, legal pitfalls, and missed opportunities. Investment bankers bring expertise, negotiation skills, and access to a network of qualified buyers. A study by BVR’s DealStats (formerly Pratt’s Stats) shows that businesses sold with the help of an investment banker or M&A Advisor typically sell for a multiple of 1.5-2x higher EBITDA (27% – 36% higher than the 2023 average middle market multiple paid).    Is the 27-36% higher purchase price worth the 2-5% average fee paid to an advisor?  The math suggests it very much is.   

Reality: Professional advisors are invaluable in maximizing the sale price, avoiding costly mistakes, and managing the complexities of the transaction. 

4. “I should sell when I’m ready to retire.” 

Waiting until you’re ready to retire might seem logical, but it can limit your options. Selling a business when you’re no longer interested in being involved with it could result in a lower valuation.  Buyers who are willing to accept a quick or defined transition from an active owner know they are part of a select audience.  When buyers understand they are part of a select audience, it usually impacts their willingness to pay a significant premium.   

Reality: The best time to sell is when your business is performing well, and you have some time and effort you are willing to share with the new owner, not when you’re emotionally or physically ready to leave. 

5. “The buyer will handle the transition.” 

If retirement is a ‘must’ as part of selling a business, we find that some sellers initially believe their role ends once the business is sold. However, buyers often expect the seller to stay involved during a transition period to ensure a smooth handover. This could range from weeks to several months or longer, depending on the complexity of the business. 

Reality: Be ready to provide the buyer with training, client introductions, and operational support during the transition period. 

6. “Only struggling businesses are hard to sell.” 

Owners of profitable businesses often assume their sale will be straightforward. However, even successful businesses can face challenges when being marketed for sale.  Buyers can find unique rationales that inflame skepticism:  geopolitical risk, economic risk, industry cycle, technology or product obsolescence, dependence on the owner, and state of systems and admin functions are a few such areas we often see as points or items that can weigh on valuation during the negotiations we have on behalf of our clients.  

Reality: Every business, regardless of its financial performance, must address potential buyer concerns to ensure a successful sale. In the current market, buyers conduct extensive diligence, and it behooves sellers to be well prepared, with mitigants to common concerns in hand, going into the sale process. 

7. “My financial records are good enough.” 

Many business owners assume their financial records will suffice, only to find that buyers demand far greater detail during due diligence. To be sure, buyers expect clean, well-documented financials that align with tax filings and demonstrate consistent performance, but this is merely a start or basis for which they will form their opinion of value.  Most buyers who are willing to invest the hefty sums of capital to complete a deal will also investigate other cross-functional areas such as IT, HR, Environmental, legal, industry, insurance, and org chart adequacy 

Reality: Professional financial preparation, in addition to the numerous applicable cross-functional areas within your business, can build buyer confidence and streamline the sale process. 

8. “The highest offer is the best offer.” 

The purchase price is just one component of a deal. Transaction structure, timing, earnouts, working capital adjustments, legal representations and warranties, and post-closing obligations can significantly impact the actual proceeds and risk to the seller. A higher offer may come with unfavorable terms, such as a large portion of the price tied to performance-based earn-outs or deferred payments or a definitive purchase agreement that shifts the burden of post-close risk to a seller. Additionally, the buyer’s ability to close the deal and their strategic fit with your business should also be considered. 

Reality: Evaluate offers holistically, considering payment terms, contingencies, and the buyer’s credibility. Sometimes, a slightly lower offer with better terms and a reliable buyer can be the smarter choice. Experienced advisers will contribute valuable insights to evaluate offers. 

9. “Once we sign a letter of intent, the deal is done.” 

Signing a Letter of Intent (LOI) is an important milestone, but it doesn’t guarantee the deal. Approximately 30% of deals fall apart between the LOI and closing. The most common causes are due diligence findings, renegotiation attempts, and financing issues.  

Reality: The LOI is just the beginning of the process. Expect continued effort and negotiations until the deal is finalized, and be prepared to address challenges that arise along the way.  

10. “I’ll be set for life after the sale.” 

Many owners assume selling their business will generate enough wealth to secure their future. However, taxes, deal structure (e.g., deferred payments or earn-outs), and ongoing expenses often reduce the net proceeds. 

Reality: Consult financial planners and tax professionals to ensure you understand the post-sale financial implications and plan accordingly. Sellers can use a number of tax deferral strategies, but they generally must be implemented well before beginning the sale process. 

Selling a business is a complex and nuanced process, particularly for middle-market businesses. By dispelling these myths and understanding the realities of the sales process, business owners can better position themselves for success. Engaging qualified M&A advisors early in the process, preparing thoroughly, and setting realistic expectations are key steps to achieving a rewarding exit. 

Article Autumn Hines

The Dean Dorton Manufacturing and Distribution M&A Market Overview offers an in-depth examination of the latest industry trends and dynamics. Following a subdued 2023, the M&A market gained momentum in Q1 2024, driven by robust earnings, anticipated interest rate cuts, and a resilient equity market. M&A volume surged by 59% to $431.9 billion, with cash-rich buyers actively pursuing acquisitions. The manufacturing sector saw its first expansion in 16 months due to favorable demand, strengthened output, and improved supply chain conditions.

Increasing demand, fueled by reduced customer softness and expanding new orders, indicates favorable investment conditions. Despite ongoing raw material supply chain challenges, early signs of recovery among suppliers suggest potential improvements. Production execution surged in early 2024, maintaining stability through March and signaling expansion. Looking ahead, anticipated interest rate cuts by late 2024 could boost investor confidence and spark renewed interest in strategic transactions, potentially revitalizing the M&A landscape as we move into Q1 2025. This shift in monetary policy is likely to create a more favorable environment for M&A activities across key sectors.

Download your own copy of the report today.

For questions about this article, please contact Keith Carlson.

Article Dean Dorton

Merger and acquisition (M&A) transaction volume in the healthcare industry is off to a fast start in 2015, continuing the robust trend from 2014.  Many analysts and executives believe M&A activity will continue its strong momentum and may accelerate at an even faster pace for the remainder of 2015.

Participants in the marketplace, both buyers and sellers, are assessing whether future transactions meet their organization’s goals and operational strategies.  Furthermore, management teams are assessing the value of the subject entity to ensure the transaction price reflects the current market and maximizes their long-term return on capital.  Understanding the marketplace of the subject entity can be a daunting task and determining whether the assessed value will enable the organization to meet its objectives can be challenging.  To further complicate the analysis, Stark Law requirements and other regulatory concerns must be addressed.

The approaches to valuation are often implicitly known and performed, but often not formally outlined. The three primary approaches to valuing a healthcare entity (or any closely-held business) are the asset, market, and income approaches.  The asset approach looks to the subject entity’s tangible equity on the balance sheet, but often ignores the intangible assets (e.g. customer relationships, assembled workforce, and goodwill).  The market approach uses known transactions in the marketplace for entities that are comparable to the subject entity to arrive at valuation multiples (often reflected as multiples of revenue or earnings) which are applied to the subject entity’s financial metrics.  The income approach derives value by converting the subject entity’s forecasted future cash flows to present value using a discount rate adjusted for the risks of the forecast, industry, and inherent characteristics of the subject entity.

Dean Dorton’s valuation expertise and experience, combined with its healthcare industry knowledge, has contributed to the success of many M&A transactions.  From guidance in strategy to valuation, Dean Dorton can assist with the challenges involved with M&A transactions.

For more information, contact Adam Shewmaker at 502.566.1054 or ashewmaker@deandorton.com or David Angelucci at 859.425.7695 or dangelucci@deandorton.com.

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