As we navigate the opening months of the year, the 2026 M&A landscape is characterized by a sense of cautious optimism. While macroeconomic headwinds and heightened uncertainty kept many dealmakers on the sidelines last year, recent data suggests a market searching for equilibrium. For owners of founder-led businesses with revenues between $20 million and $200 million, understanding these shifts is critical to a successful exit.
Real-World Perspectives from the Field
In our recent conversations with colleagues at M&A South and the International Cornerstone Alliance, a consistent theme emerged. Buyers and sellers are no longer waiting for the perfect moment. At Walden M&A, we have seen uncertainty normalized as businesses adapt without overreaction, learning to ignore unnecessary noise to focus on the fundamental strength of operations.
Our experience on the ground is now supported by the data. According to the latest GF Data Q4 2025 report, quarterly results frequently exhibited an inverse relationship between transaction counts and valuations. This means while more deals are closing, price multiples are experiencing localized pressure depending on the sector.
The Great Divergence: Business Services vs. Manufacturing
The most striking trend we see in the current market is the valuation gap between sectors. According to data provided by GF Data, business services essentially side-stepped much of the uncertainty affecting other industries last year. In 2025, business services valuations averaged 7.4x EBITDA, tying the highest level on record and 0.4x above the historical average. This sector saw deal counts nearly as high as in 2021, underscoring sustained buyer appetite for asset-light, recurring-revenue models.
Conversely, the manufacturing sector has faced a more challenging environment. Manufacturing deal volume declined 43% from 2024, with average valuations falling to 6.6x EBITDA. This decline is largely attributed to fluctuations in global trade and ongoing tariff discussions. Investors currently focus heavily on international supply chain dependency.
We still see significant opportunity within manufacturing, however. While tariffs may have upended some supply chains, our team is seeing international buyers take measures to offset or minimize impact by purchasing domestic US plants. Manufacturers well-established in their regions who do not depend on items affected by tariffs represent a prime opportunity for corporations seeking to avoid those risks. A successful exit in 2026 will be about identifying the right buyers within the segment, which may be non-traditional.
The Rise of Value-Added and Essential Services
As our team looks deeper into the year, “Value-Added Services” remain a high-conviction sector for buyers. This includes essential segments such as fire safety, maintenance and repair, and disaster recovery. Additionally, anything related to data center construction, from engineering to HVAC, continues to show strength.
A strategic buyer may pay a higher multiple because they are not just looking for a financial return. They seek to expand a product offering or diversify markets. This is particularly true in the lower-middle market, where we are seeing managed services providers (MSPs) gain significant momentum over traditional software models.
Related post: Selling a SaaS Company: Understanding Vertical Market Software Consolidators
Shifts in Capital Structure and Leverage
The way deals are being financed is also changing. According to GF Data, average equity contribution on platform buyouts reached a record high of 57.6% in 2025. Meanwhile, senior debt contribution declined to a record low of 30.2%. This shift indicates sponsors are relying more heavily on their own capital and subordinated debt to complete transactions because senior leverage remains constrained.
At Walden M&A, we believe the reality is buyers actually need to deploy their cash, as evidenced by the record-high equity levels seen in the GF Data report. The market remains disciplined. While total debt utilization across platform deals rebounded modestly in the fourth quarter to 3.2x EBITDA, rolling averages continue to trend lower. For a seller, this means the quality of financial reporting is more important than ever. Buyers need absolute confidence in the financial infrastructure before committing such a high level of equity.
Preparing for the Flight to Quality
In a market where overall transaction volume may remain flat, buyers are becoming increasingly selective. They seek high-quality deals with strong management benches and proven financial strength. This “flight to quality” means preparation is the primary factor influencing success.
We often recommend a sell-side Quality of Earnings (QoE) report to ensure the owner dictates the financial narrative. There is nothing worse than entering due diligence and having financial discrepancies appear unexpectedly. Identifying these issues early helps preserve the integrity of the deal and prevents “re-trading” later in the process.
Successfully navigating the 2026 M&A landscape requires more than just a good business; it requires a strategic partner who understands these localized valuation trends and can match a seller with a buyer whose investment horizon aligns with the company’s goals.
Source Note: Data in this article are provided by GF Data®, an ACG® Company. GF Data provides reliable valuation and leverage data on private equity-sponsored middle-market transactions.