In recent months, headlines about the M&A market have painted a bleak picture, focusing on declining deal volumes and tougher financing conditions. However, most of these articles are centered on large and mega-cap transactions—the type that Wall Street investment banks advise on—while ignoring the more nuanced reality of the lower middle market. For owners of small and mid-sized businesses, the market dynamics are different, and in many ways, now remains an attractive time to sell.
Media Narratives vs. Lower Middle Market Realities
Most mainstream coverage of M&A activity is focused on Fortune 500 companies, multi-billion-dollar private equity deals, and high-profile IPOs (see this Financial Times article that cites a Managing Director at Blackstone, one of the largest PE firms in the world, and references a $68 billion Constellation Energy deal). While it’s true that rising interest rates and economic uncertainty have slowed some of these larger transactions, the lower middle market continues to see strong demand from buyers. Private equity groups, independent sponsors, family offices, and strategic acquirers are still actively seeking high-quality businesses to invest in. Unlike mega-cap deals that require complex financing structures, lower middle market transactions often involve more flexible capital sources and strategic motivations, making them more resilient to macroeconomic conditions.
Ignore the Headlines—Focus on Fundamentals
Rather than being swayed by doom-and-gloom headlines (like this Crain’s article with “slump” in the headline but then later notes PE deals only being off two deals/month compared to last year; or the “plunge” this article mentions for deal activity between January and March 10—a pretty arbitrary timeframe), business owners should assess the strength of their individual companies. If your business is an ‘A+’ in its category—meaning it has a solid track record of profitability, sustainable growth, and efficient operations—it will attract interest regardless of broader economic conditions. Quality businesses remain in high demand, and in many cases, there are more buyers than sellers in the lower middle market.
One of the key advantages of going to market now is the limited supply of high-performing businesses available for acquisition. Many business owners have been sitting on the sidelines, waiting for economic clarity. This hesitation has created a supply-demand imbalance, favoring sellers who are willing to move forward. Buyers, especially those with capital to deploy, are eager to find strong acquisition targets, and competition among them can lead to favorable valuations and deal terms.
Why This Market Works for Sellers
- Strong Buyer Interest: Private equity firms and strategic acquirers are actively looking for well-run businesses to acquire, and they have the capital to do so.
- Lower Market Supply: With fewer high-quality businesses coming to market, those that do stand out and command strong valuations.
- Operational Strength Matters More Than Macroeconomics: If your company has a proven business model, recurring revenue, and a strong management team, it remains attractive regardless of broader market trends.
A Strategic Approach to Selling
For business owners considering an exit, now is the time to engage with an investment banker to assess your business’s readiness and position in the market. A tailored approach—understanding buyer interest, preparing financials, and structuring the deal—can help maximize value and ensure a successful transition.
Rather than waiting for headlines to turn positive, focus on the unique strengths of your business and the demand within your segment of the M&A market. The right time to sell isn’t dictated by broad media sentiment but by the fundamentals of your business and the appetite of serious buyers in your industry.
