On February 3-5, 2025, Michael Stone and Zac Venos of Porter White’s investment banking team attended the Association for Corporate Growth (ACG) M&A South Capital Connection in Atlanta, GA, along with over six-hundred private equity firms, investment banks, capital providers, and ancillary service providers. Among the private equity firms in attendance, the general sentiment heading into 2025 was characterized as cautiously optimistic. We spoke with multiple firms that referenced a proverbial dam of acquisitions that is primed to break open as improving capital conditions and investor confidence underpin a positive outlook for M&A opportunities in 2025. Based on our conversations that took place, we identified the following key takeaways:
- Continued underlying demand from strategic (corporate) investors who often are more willing and able to pay up for synergies compared to private equity firms.
- Private equity firms indicated that “A-quality” businesses are still receiving high valuation multiples but finding them is becoming more infrequent.
- Private equity firms continue to leverage AI and other technology to source proprietary deals, often trying to circumvent a formal deal process typically run by investment banks to create competition and maximize purchase prices.
- Regulatory uncertainty is putting diligence processes at the forefront of closing deals.
- There is a buyer for every type and size of business, and private equity firms continue to show interest in smaller deals.
Middle-market M&A (defined here as less than $250M enterprise value) continues to evolve as private equity sponsors adapt to shifting economic conditions and market trends. Corporate acquirers remain highly active and have shown a greater willingness and ability to pay higher prices for potential synergies compared to private equity firms in the current market. We can attest to this as 75% of our closed transactions in 2024 were with strategic acquirers. We spoke with many private equity firms at the conference who acknowledged that finding “A-quality” businesses is becoming increasingly more difficult – indicating that quality businesses are commanding high valuations heading into 2025 as private equity continues to compete with corporate acquirers. Based on our conversations with various business owners, we have heard less about the underlying health of companies deteriorating and more about business owners focusing on stabilizing operations and navigating the evolving economic landscape rather than pursuing a sale. While this may have contributed to the perception that fewer “A-quality” businesses are available, we believe there is ample opportunity for buyers and sellers in the current market.
To stay ahead, private equity firms continue to leverage third party platforms to source proprietary deals, often trying to circumvent a formal deal process typically run by investment banks to create competition and boost purchase prices. Meanwhile, the regulatory landscape under the new U.S. administration has placed due diligence at the forefront of closing transactions. Due diligence timelines for private equity firms have materially increased through the end of 2024 and heading into 2025 as detailed analyses on key factors such as customer stability, inventory pricing, and workforce composition become more prevalent to mitigate regulatory risks.
2025 is poised to be a strong year for middle-market transactions. At Porter White, we help our clients achieve their goals by leveraging over 50 years of history and experience to identify opportunities and execute successful transactions. If you are interested in selling your business, acquiring a company, or learning more about what your business is worth, please email contact us or visit us online.
