There’s been a shift in the M&A middle market. If you’re a business owner thinking about selling soon, you might have noticed. Deals are still getting done, but the bar is higher. Buyers are cautious, valuations are more selective, and diligence is deeper.
But here’s the good news: there is still a healthy market for great businesses.
At Caber Hill, we’re speaking with buyers every day, from private equity firms to family offices to search funds. Across the board, they’re all communicating a clear strategic shift to prioritize quality over the quantity that drove the post-pandemic buying boom of 2021.
So, what exactly does “quality” look like in today’s market?
Let’s break it down.
1. Strong, Predictable Earnings
EBITDA has perhaps always been supreme, but now buyers are paying close attention not just to the number, but to the quality of those earnings. Are they consistent year over year? Are they growing? Are they backed by solid fundamentals or inflated by one-time events? A business with a strong EBITDA profile will always stand out, especially in uncertain markets.
2. Recurring or Repeatable Revenue
In a market where risk sensitivity is high, predictability is key. Buyers love to see a steady stream of recurring or contract-based revenue. If your business has long-term customer relationships or subscription-based models, that’s a major value driver. It gives buyers confidence in future performance and often justifies a higher multiple.
3. A Strong Team That Can Operate Without the Owner
One of the biggest red flags for buyers: a business that can’t function without the owner. If you’re an owner-operator who is still heavily involved in every decision or customer relationship, buyers may see that as a risk. On the flip side, companies with a deep, capable management team in place are seen as turnkey and scalable, which is a major selling point.
WATCH Managing Director Brian Steffens talk with Craig about how a great “lifestyle business” might not make a great target for a buyer
4. Limited Exposure to Major Risks
Buyers are digging deeper into concentration risk, examining categories such as customer, supplier, and even employee concentration. If too much of your revenue depends on one client or too much of your institutional knowledge is held by a single person, that could give buyers pause. The more diversified and de-risked your business is, the more attractive it becomes.
Bottom Line: A+ Companies Still Command A+ Valuations
Yes, we’re in a more cautious environment, but that doesn’t mean it’s a bad time to sell. In fact, high-quality businesses are more valuable than ever precisely because they’re rare. Buyers are still active, aggressive, and willing to pay a premium for the right company.
So, if you’ve built something strong, don’t assume you have to wait (which could cost you millions). In a crowded market, A+ companies rise to the top.
If you’re wondering where your business stands and what it would take to make it “buyer-ready,” we’d love to have a conversation.
Before the market turns again, schedule time with Craig Castelli or another member of our advising team.
