Pepperdine University’s 2025 Private Capital Markets Report offers fresh insight into today’s M&A environment, from valuation trends to financing challenges and buyer behaviors. Here are five key takeaways that highlight what’s driving deal activity in the lower middle market and how these factors are shaping sale processes in 2025.
- Valuation Gaps – Many sale processes don’t close, with the most common reason being valuation gaps. Roughly 31% of engagements ended without a transaction; the top reasons were a valuation gap (26%), unreasonable seller/buyer demands (14%), and no market for the business (12%). When pricing was the issue, ~84% of gaps were 11-30% wide.
- EBITDA Multiples – Recast (adjusted) EBITDA multiple is the most-used multiples method (76%), and guideline company transactions carry the largest valuation-method weight (33%). Reported deal EBITDA multiples over the last year span ~4.0× to >8.3×, while senior leverage typically ranges ~2.3×-4.8× and total leverage ~3.6×-6.0× (varying by size/industry).
- Buyer Mix & Premiums – Buyer mix, premiums, and platform activity: About 45% of closed sales involved strategic buyers; just over half (51%) saw no premium versus financial buyers, while 33% observed 1–20% premiums. Platform deals accounted for ~37% of closed transactions.
- Capital Access – Capital is tight for smaller companies and easier for larger ones. Bankers report a shortage of capital below $5M EBITDA and a surplus from $10M EBITDA and up; arranging senior debt is notably harder below $10M EBITDA and progressively easier at higher scales.
- Market Outlook – The most pressing issues for clients are labor availability and inflation today. Looking 12 months ahead, bankers expect higher leverage and deal multiples, more strategic-buyer activity, and improving general business conditions.
This year’s report underscores the importance of preparation and realistic expectations in a shifting market. By understanding these trends and working with experienced advisors, business owners can better navigate the complexities of selling their company and position themselves for a successful outcome.
Considering a sale or have questions about the market here in the PNW? Connect with our Co-Founders, Ed Kirk and John O’Dore, for a confidential conversation.
