The National 2025 Summer M&A Market Survey provides critical insights into the current mergers and acquisitions landscape, analyzing over 2,000 deals closed in Q1 and Q2 2025 as well as active transactions in the pipeline.
This comprehensive analysis reveals important trends in deal structures, valuation multiples, and market dynamics that impact both buyers and sellers in today’s transaction environment.
Understanding these market patterns helps business owners and investors make informed decisions about timing, pricing, and deal structuring in the current M&A climate.
Key Takeaways:
- Cash remains the dominant deal structure at 97-98% across all investment banking deals
- Software and SaaS companies command the highest adjusted EBITDA multiples at 7.2x average
- EBITDA multiples for deals over $100M have increased significantly from 2020 to 2024
- Financial Services, FinTech, and Insurance sectors show notably high multiples in 2023
- Private equity firms report increased prospects despite declining active deal volume
- Healthcare, Medical, and Pharmaceutical sectors show returning deal flow after digest period
- Deal structure components remain stable, indicating mature market practices
Deal Structure Stability: Cash Dominance in Investment Banking Transactions
The National 2025 Summer M&A Market Survey reveals remarkable consistency in deal structures for investment banking deals valued between $4M and $250M. Cash components maintain their dominance at 97-98% across all time periods examined.
This stability reflects mature market practices and buyer preferences for straightforward transaction structures. Cash deals provide certainty for both parties while reducing complexity during negotiations and closing processes.
The consistency extends beyond cash components to other structural elements. Escrow usage ranges from 48-61% across periods, while stock components remain steady at 47-49%. Note usage shows slight variations between 38-50%, but overall patterns demonstrate established market norms.
What factors drive this cash dominance? Several market conditions contribute to buyer preferences for cash-heavy structures:
Financing availability remains strong for quality businesses, enabling buyers to structure cash-heavy deals. Low interest rates during much of the survey period supported debt financing for acquisitions.
Seller preferences often favor cash structures for tax planning and immediate liquidity needs. Many business owners approaching retirement prefer cash proceeds over ongoing payment obligations or equity positions.
Risk mitigation drives both parties toward simpler structures. Cash deals reduce execution risk while eliminating uncertainties associated with earnouts or complex equity arrangements.
Industry Valuation Patterns: Software and SaaS Leading Multiples
The M&A Market Survey data reveals significant variations in adjusted EBITDA multiples across industry sectors. Software and SaaS companies command the highest average multiples at 7.2x, with peaks reaching 11.4x for deals in the $10.01M-$25M range during the first half of 2025.
These premium valuations reflect several factors unique to technology businesses. Recurring revenue models provide predictable cash flows that buyers value highly. Scalability potential allows software companies to grow revenue without proportional cost increases.
How do Software and SaaS multiples compare to other industries? The differential is substantial:
Professional, Technical, and Scientific Services average 4.6x multiples, representing a 36% discount to software companies. Industrial and Chemicals average 5.0x, while Marketing and Media sectors average 6.2x.
The premium for software businesses reflects market demand for technology assets with growth potential and recurring revenue characteristics. But active Q3 2025 deals show software multiples at 2.3x, suggesting potential market correction or temporary pipeline composition effects.
Geographic and deal size factors also influence these patterns. Larger software deals often command higher multiples due to market position and scalability advantages. Regional variations may affect local market valuations differently than national trends.
Historical Multiple Trends: Significant Increases for Larger Deals
The survey data shows dramatic increases in EBITDA multiples for deals over $100M from 2020 to 2024. These larger transactions now average 10.6x compared to 6.7x for deals under $4M, representing a significant premium for scale.
What explains this notable increase in large deal multiples? Several market dynamics contribute to this trend:
Strategic buyer competition intensifies for larger, market-leading companies. These businesses often possess competitive advantages that justify premium pricing from acquirers seeking market position or operational synergies.
Private equity activity targets larger platform companies that can support add-on acquisition strategies. These buyers often pay premiums for businesses that provide consolidation opportunities within fragmented industries.
Scarcity value affects larger, high-quality businesses that rarely become available for sale. When such companies do reach the market, competitive bidding often drives valuations above historical norms.
The data suggests a structural shift in how larger businesses are valued relative to smaller ones. This bifurcation creates different market dynamics for businesses of varying sizes.
Financial Services Sector: Premium Valuations in Specialized Markets
Financial Services, FinTech, and Insurance sectors demonstrate notably high EBITDA multiples, averaging 8.8x with peaks of 12.5x for deals under $4M in 2023. These valuations exceed most other industries surveyed.
Why do Financial Services companies achieve such high multiples? Several sector-specific factors drive these premium valuations:
Regulatory barriers create moats that protect established businesses from competition. Licensing requirements and compliance costs limit new entrants while protecting incumbent market positions.
Recurring revenue relationships with clients provide predictable cash flows that buyers value highly. Insurance companies and financial service providers often maintain long-term client relationships that generate ongoing fees.
Technology disruption in financial services creates acquisition opportunities for traditional companies seeking digital capabilities. FinTech companies with proven technology platforms command premium prices from strategic acquirers.
Asset quality and client relationships often justify higher multiples for financial services businesses. Well-capitalized firms with diversified client bases and strong compliance records appeal to multiple buyer types.
The sector’s high multiples also reflect the specialized nature of these businesses and the expertise required to operate them successfully. This specialization limits the buyer pool while increasing value for qualified acquirers.
Transportation and Warehousing: Sustained High Multiples at Scale
Transportation and Warehousing sectors maintain impressive EBITDA multiples, averaging 8.6x with peaks of 13.2x for deals in the $100.01M-$250M range in 2023. These multiples reflect strong market dynamics in logistics and distribution.
Several factors contribute to sustained high valuations in this sector:
E-commerce growth drives demand for logistics and warehousing capabilities. The shift toward online commerce creates ongoing need for distribution infrastructure and transportation services.
Supply chain reconfiguration following recent disruptions increases the strategic value of established logistics operations. Companies with proven capabilities and established networks command premium pricing.
Real estate components often contribute significant value to transportation and warehousing deals. Strategically located facilities with modern infrastructure provide tangible asset value along with operational cash flows.
Labor and equipment resources create barriers to entry in many logistics markets. Established operations with trained workforces and modern equipment fleets appeal to buyers seeking immediate operational capabilities.
The sector’s high multiples at larger deal sizes reflect the strategic importance of scale in logistics operations. National and regional networks often justify premium valuations due to their market coverage and operational advantages.
Private Equity Activity: Rising Prospects Despite Declining Active Deals
The survey reveals an interesting pattern in private equity firm activity. While active deals in process have declined to 3.2 in Q3 2025 from a peak of 7.5 in Q4 2024, current prospects have increased to 9.0, representing the highest level in the survey period.
What drives this increase in prospects despite declining active deals? Several market factors contribute to this apparent contradiction:
Capital availability remains strong for private equity firms, with substantial dry powder available for deployment. Fund raising success in recent years provides resources for acquisitions when attractive opportunities emerge.
Valuation expectations between buyers and sellers may have created temporary gaps that slow deal progression. High prospect numbers suggest interest exists, but pricing disagreements might prevent transitions to active status.
Due diligence standards have potentially increased, requiring more thorough evaluation before deals move to active status. This could extend evaluation periods while maintaining high prospect levels.
Market timing considerations might cause private equity firms to build larger prospect pipelines while waiting for optimal market conditions to execute transactions.
The combination of high prospects and lower active deals suggests a building pipeline that could drive future transaction volume when market conditions align with buyer and seller expectations.
Revenue Multiple Trends: Increasing Valuations in Active Pipeline
The survey data shows revenue multiples for active deals under LOI in Q3 2025 reaching 6.1x, representing increases from both 2024 (4.5x) and first half 2025 (5.3x) levels. This trend suggests rising valuations for businesses entering the transaction pipeline.
Several factors contribute to these increasing revenue multiples:
Competition among buyers may be driving up valuations as market participants compete for quality opportunities. Limited supply of attractive businesses can create bidding situations that increase multiples.
Interest rate environment and capital availability continue supporting higher valuations as financing remains accessible for qualified buyers. Low cost of capital enables buyers to pay higher multiples while maintaining target returns.
Quality of businesses entering the pipeline might be higher than historical averages. Business owners who delayed sales during uncertain periods may now be bringing better-prepared companies to market.
Sector composition of active deals could skew toward higher-multiple industries like technology and healthcare. If these sectors represent larger portions of the active pipeline, average multiples would increase correspondingly.
The increasing trend in revenue multiples for active deals suggests continued strength in the M&A market despite some sectors showing volatility in closed transaction multiples.
Healthcare Sector Recovery: Returning Deal Flow After Digest Period
The Healthcare, Medical, and Pharmaceutical sector shows returning deal flow in 2025 after what the survey describes as a “digest period.” This sector averages 7.6x EBITDA multiples, positioning it among the higher-valued industries.
What factors contribute to healthcare sector recovery? Several industry dynamics support renewed M&A activity:
Aging demographics drive sustained demand for healthcare services across multiple segments. This demographic trend provides fundamental support for healthcare business valuations and growth prospects.
Technology integration in healthcare creates acquisition opportunities as traditional providers seek digital capabilities. Telemedicine, electronic health records, and data analytics represent areas of strategic interest.
Consolidation opportunities exist in fragmented healthcare markets where independent practices and service providers can benefit from scale advantages through combination with larger organizations.
Regulatory clarity may have improved following the digest period, providing more certainty for transaction planning and execution. Understanding compliance requirements helps both buyers and sellers structure appropriate deals.
Capital availability specifically for healthcare deals remains strong, with specialized healthcare investment funds and strategic acquirers actively seeking opportunities in this growing sector.
The sector’s recovery aligns with broader economic trends supporting healthcare spending and investment in medical services and technology platforms.
Financial Performance Metrics and Deal Structure Evolution
The survey provides detailed insights into financial performance metrics across different deal size categories. Total transaction values show consistency across periods, but composition of consideration reveals interesting patterns.
Earnout percentages have remained relatively stable at 13-15% across the survey periods. This stability suggests established market practices for risk sharing between buyers and sellers through performance-based compensation structures.
Escrow usage varies more significantly, ranging from 48% in first half 2025 to 61% in second half 2024. These variations might reflect changing risk perceptions or deal complexity factors that influence escrow requirements.
Deal structure evolution shows maturation in market practices. The stability across multiple survey periods indicates established norms for transaction structuring that both buyers and sellers have accepted as standard.
Regional and industry variations likely exist within these broader trends. Arizona businesses, particularly in manufacturing and distribution sectors, may experience different patterns based on local market conditions and industry-specific factors.
Frequently Asked Questions
How do current EBITDA multiples compare to historical averages across industries?
Current multiples show significant increases for larger deals, with transactions over $100M averaging 10.6x compared to 6.7x for smaller deals under $4M. Software and SaaS companies lead at 7.2x average multiples, while more traditional industries like manufacturing and construction average 5.8-6.9x.
Technology-driven sectors consistently command premium multiples due to scalability and recurring revenue characteristics. Traditional industries maintain more modest multiples but often include tangible asset values that provide additional transaction value.
Industry-specific factors significantly influence these patterns, with regulated industries like financial services achieving higher multiples due to competitive barriers and recurring client relationships.
What deal structures are most common in today’s market?
Cash components dominate at 97-98% of all investment banking deals, reflecting buyer preferences for straightforward transactions and seller desires for immediate liquidity. Stock components appear in 47-49% of deals, while notes are used in 38-50% of transactions.
Escrow arrangements are common in 48-61% of deals, providing protection for both parties against potential post-closing adjustments or issues. Earnout provisions appear in 32-46% of transactions, typically used to bridge valuation gaps or align interests around future performance.
The stability of these percentages across survey periods indicates mature market practices that have become standard in middle-market transactions.
How has the private equity market changed based on the survey data?
Private equity firms report the highest number of prospects (9.0) in the survey period despite active deals declining to 3.2. This suggests strong capital availability and deal interest but potential disconnects between buyer and seller expectations.
Closed deals over six months have remained relatively stable around 1.0-1.2, indicating consistent transaction completion despite pipeline fluctuations. Expected closings range from 2.3-4.7, suggesting moderate optimism about near-term transaction completion.
The data indicates private equity firms remain active but potentially more selective, building larger prospect pipelines while being disciplined about which opportunities advance to active status.
Which industries show the strongest growth potential based on the survey?
Healthcare, Medical, and Pharmaceutical sectors show returning deal flow after a digest period, with 7.6x average multiples indicating strong buyer interest. Software and SaaS continues leading with 7.2x multiples, though active pipeline shows 2.3x, suggesting potential temporary correction.
Financial Services, FinTech, and Insurance maintain high multiples at 8.8x, driven by regulatory barriers and recurring revenue models. Transportation and Warehousing shows strong performance at 8.6x average multiples, particularly for larger deals.
These sectors benefit from demographic trends, technology adoption, and structural market advantages that support sustained buyer interest and premium valuations.
How should business owners interpret these trends for exit planning?
Current market conditions favor sellers in many sectors, with stable deal structures and strong buyer competition for quality businesses. Revenue multiples for active deals have increased to 6.1x, indicating rising valuations for well-positioned companies.
Business owners should focus on factors that drive premium multiples: recurring revenue, scalability, strong management teams, and defensible market positions. Industry selection and business positioning significantly influence achievable multiples.
Timing considerations include understanding that larger deals command higher multiples, while certain sectors like healthcare and technology continue showing strong buyer interest. Professional preparation and market positioning can help businesses achieve optimal valuations.
Market Implications Moving Forward
The National 2025 Summer M&A Market Survey reveals a mature transaction environment with established practices and continued buyer interest across multiple sectors. Deal structures have stabilized around market-tested approaches that balance buyer and seller interests effectively.
Valuation trends show clear patterns favoring larger, technology-enabled, and strategically positioned businesses. While traditional industries maintain solid multiples, premium valuations flow to companies with scalable models and recurring revenue characteristics.
Private equity activity suggests a building pipeline of opportunities that could drive future transaction volume when market conditions align with participant expectations. The high level of prospects indicates continued interest in middle-market acquisitions despite some near-term pipeline challenges.
With 25 years of experience in Arizona business transactions and deep understanding of national market trends, Arizona Business Sales Advisors helps clients navigate these complex market dynamics while positioning their businesses optimally for successful exits.
Ready to understand how the National 2025 Summer M&A Market Survey findings apply to your business exit or acquisition strategy?
