Top Five Trends in (Smaller) M&A

Or, stated another way….

Private Equity is Hungry in 2025:  What SMB Founders Need to Know

How often have you seen a newsletter about the “TOP TRENDS IN M&A” and started reading with excitement, only to find that the author’s content is about large M&A deals and offers little value to founders and owners of smaller companies? Let me give you an update from the perspective of a boutique investment bank that will be meaningful to you as a small or middle-market company.    

The Mergers & Acquisition landscape in 2025 feels markedly different from the breakneck environment of just a few years ago. Today’s slower pace has unlocked new opportunities for closely held businesses and founder-led companies to engage serious, professional buyers, particularly financial sponsors. At TOBIN, we are observing several important shifts that directly affect our clients’ ability to prepare for and succeed in a sales transaction.

1. A Slower Market Is Creating Better Access to Financial Buyers

The frenetic pace of 2021 and 2022 left smaller deals largely ignored. In 2025, however, private equity groups (PEGs) have bandwidth—and a genuine appetite—for founder-led businesses. Sellers can expect a higher level of engagement, responsiveness, and even collegiality from financial buyers compared to just a few years ago.

2. Strategic Buyers Remain Selective and Discerning

While PEGs are leaning in, the strategic buyers remain aloof. Their acquisition priorities are tightly focused on transformational opportunities rather than opportunistic add-ons. They are also distracted by the uncertainty imposed by recent tariff mandates. For many sellers, this means financial buyers are a more realistic and rewarding path to a transaction.

3. Financial Buyers Are More Personable — and Competitive

PEGs are operating in a more crowded and slower market, and many are showing unprecedented friendliness and flexibility. Sellers (and their bankers) today are experiencing faster follow-up, deeper relationship-building efforts, and more willingness to structure transactions creatively to win deals.

4. Quality of Financials Has Become a Gatekeeper

Even in this environment, financial discipline is non-negotiable. Buyers expect high-quality financial reports, clear working capital definitions, and a thoughtful financial narrative — even in sub-$50 million deals. Poor preparation will quietly eliminate sellers from contention.

5. Earnouts and Seller Rollovers Are Critical to Bridging Value Gaps

Valuation gaps persist, especially in this turbulent capital markets environment resulting from the new presidential administration.  Thus, creative structuring has become routine. Earnouts, seller equity rollovers, and contingent payments are standard tools in today’s lower middle market. Sellers should be prepared to engage in real conversations about risk-sharing mechanisms early in the process. 

The good news for lower middle market companies is that their stability, scalability, and strong fundamentals make them a primary target of M&A activity during this time of uncertainty and shifting market dynamics. Sellers with strong digital capabilities or unique technology solutions are mustering a lot of attention, although buyers can be selective if the target doesn’t exactly fit their current priorities or platform. At the same time, basic industrial companies remain popular, especially among less tenured private equity groups.

Are you a small or middle-market company looking for guidance on optimizing the sale of your business? TOBIN is an international boutique investment bank with offices in New York, North Carolina and Montana that navigates this evolving market with precision. We ensure that our clients are positioned for maximum engagement and success. If you are considering a transaction in 2025 or beyond, we welcome the opportunity to discuss how today’s environment may serve your objectives.