A third of M&A engagements never close and the most common reason a deal dies is a price gap of just 11–20%.
That’s one finding from the 2026 Pepperdine Private Capital Markets Report, which surveyed 500+ participants across the private capital ecosystem. Seven takeaways stood out for anyone who owns a company they may sell one day:
- A modest valuation gap is enough to kill a deal. Roughly a third of banker engagements don’t close, and the single most cited cause is a buyer–seller valuation gap. When deals fell apart, the most common gap was only 11–20%. The case for getting to a realistic, defensible number early writes itself.
- Deals are getting done, but slower. Bankers reported time to sell up +46% net year-over-year, with most sales now running over nine months from engagement to close. The market is more active, but it’s a slower, grind-it-out process. Start earlier than you think you need to.
- Most owners head to the exit unprepared. 64% of sellers had no formal exit planning before going to market, and only 26% had met with any advisor beforehand, even though seller retirement drives about two-thirds of all sales. With roughly 51% of owners planning to transfer ownership five-plus years out, the boomer transition is real but arriving gradually. There’s still time to prepare, and readiness is what protects value.
- Scale commands a premium, and financing gets easier above $5M EBITDA. Median deal multiples climb from roughly 4–5x EBITDA for sub-$1M businesses to 7-8.5x once a company crosses $10M EBITDA. There’s a clear inflection around $5M, below it, quality companies outnumber available capital, and senior debt is hard to arrange. Above it, capital starts competing for deals. Growing earnings before a sale or positioning as an attractive add-on moves the needle.
- The buyers are there, and private equity has momentum. Among limited partners, PE allocations showed the biggest year-over-year jump of any asset class, and PE firms are concentrating right in the lower middle market. $10M–$25M EBITDA was the most common target (39%), favoring business services and manufacturing. Demand for PE rose even as expected returns fell, a clear sign of rising competition for quality assets. Sales to another PE group are now the single largest exit pathway (49% of exit dollars).
- Private equity remains one of the most active sources of capital right now. Among investors surveyed in Pepperdine’s report, private equity saw the strongest increase in YoY appetite over the past year while also carrying the highest return expectations of any category at 25.6%, ahead of venture capital and direct investments. Indicating that Private Equity has more capital to chase valuable and well-built companies
- AI continues to reshape privately held businesses. In Pepperdine’s report, respondents expect the biggest gains in operational productivity, financial performance, and product quality effects to strengthen over time. Along with slight downward pressure of long-term headcount
The throughline: this is an active market with motivated buyers, but a more competitive and patient one where preparation, scale, and a realistic view of value separate the deals that close from the ones that stall. The best time to start preparing was a few years ago. The second-best time is now.
Click here to read the full 2026 Pepperdine Private Capital Markets Report.
For a confidential conversation about the current state of the M&A markets, please reach out to John O’Dore or Ed Kirk.
