M&A activity in 2025 has been marked by cautious optimism, unexpected headwinds, and shifting buyer behavior. In this Q+A, Brian Andreosky, President of Aldrich Capital Advisors, talks with Eliot Peters, Principal at RA Capital, to discuss the current transaction landscape, where the market is heading, and what private company owners should consider when planning for a sale. From interest rate realities to valuation trends, to impacts of the One Big Beautiful Bill Act (OBBBA), and what buyers value most in the current environment, this conversation offers timely advice for leaders navigating uncertainty.
Brian Andreosky: As we passed the midpoint of 2025, how would you characterize M&A activity so far this year?
Eliot Peters: It’s been choppy. We started the year with a lot of enthusiasm, expecting a growth-focused administration. But the introduction of tariffs brought a lot of uncertainty into the market, right when confidence was starting to return after the interest rate shocks.
Private equity firms and company leaders had to reassess how these new policies might impact their portfolios or operations, and the result was a noticeable pause in deal activity. It’s similar to the early days of COVID when people were trying to figure out what the new normal was going to be.
Certainly, some deals are still happening, but there’s been a slow walk happening.
Brian: Compared to the first half of 2024, how does the market look now?
Eliot: In early 2024, we saw cautious optimism. Interest rates were higher, but buyers were coming to grips with that and starting to dip their toes back into the market. Transaction volume wasn’t booming—aside from a few mega deals—but activity was gradually picking up.
That same trend continued into early 2025 until the policy shifts disrupted momentum. I expect the real difference between this year and last will show up in Q2 results. Uncertainty tends to dampen closings and slow even in-progress deals, and I think that will show up in both Q2 and Q3 of 2025.
Brian: With interest rates staying higher for longer, how are buyers adapting in terms of deal structure financing and even behavior?
Eliot: The mindset has definitely shifted. Buyers are no longer treating high rates as temporary—they’re planning around them. For lower-growth companies, this has made leveraged transactions harder to do, resulting in lower multiples. We’re also seeing lower valuations and more structured deals, such as seller financing, especially for businesses that don’t generate strong cash flow or have favorable growth prospects.
Private equity buyers are being more cautious. When your borrowing costs nearly double, your deal model changes. Buy-and-build strategies still exist, but there’s a growing preference for companies with solid organic growth because they’re cheaper to scale and less reliant on expensive debt.
In terms of where rates might be going, the consensus seems to be a 50 to 100 basis point reduction at some point, but that keeps getting put off further and further into the future. That means people are going to be much more mindful of cash, since there’s going to be less of it.
Brian: What trends are you seeing in seller motivation so far in 2025?
Eliot: It seems mostly that sellers are holding back. Some for good reason, others because they assume negative market sentiment will impact them, even if that’s not the case. The tariff shock came fast, leaving little time to act. But since late May, we’ve seen some sellers re-engage.
Uncertainty makes people hesitant. Even when their business fundamentals are sound, the headlines alone can make owners second-guess their timing.
In today’s market, quality really stands out. The days of getting an A price for a B company are over. Now, A+ companies get A+ prices, while B companies might struggle to attract interest. Ironically, many owners who aren’t materially affected by these issues are holding back due to negative headlines—when in fact, they could be well positioned to stand out in a market where volumes are low.
Brian: How have valuations been impacted?
Eliot: Valuations for high-quality companies have held up well. The averages might be down slightly, but that’s more about deal size. Most M&A activity lately is in the lower middle market, where multiples are naturally smaller.
Lower-quality businesses have seen more pressure on valuations due to financing constraints. But for well-performing companies, demand is still strong—there’s a lot of capital on the sidelines and not enough high-quality deals to go around, so well positioned companies can be very successful in today’s transaction environment.
Brian: Are any sectors standing out in terms of activity or renewed interest?
Eliot: It’s been a steady climb across most sectors. Industries with global supply chains have seen some hesitation due to risk exposure, but energy and healthcare are showing strong activity—particularly in large-scale transactions.
Business services continue to perform well, and overall, most sectors are benefiting from a slow, rising tide—though some, more than others, are being impacted by macro factors and are taking a step back.
Brian: The One Big Beautiful Bill Act (OBBBA) was signed into law in early July. How do you think that legislation could impact M&A?
Eliot: The extension of the pass-through deduction is a great savings tool for sellers of those businesses (S-Corps and LLCs). If the transaction is structured a certain way, there is an opportunity for some savings for sellers in high-tax states.
The most impactful provision will be the expansion of qualified small business stock. Not only did this bill increase the amount of the federal exclusion for taxes from $10 million to $15 million, but it also expanded the types of businesses eligible and created opportunities for partial use of this exclusion starting in three years, rather than having to wait the entire five years. I have seen creative ways this has been used in family businesses to use multiple exclusions for the same family, which could amount to some huge savings.
Brian: What advice would you give to business owners considering a sale in the next 12–18 months?
Eliot: Take a hard look at your business and how it’s truly impacted by current conditions and remember, you’re in the same boat as everyone else in this market. If you’re a top performer with solid growth and margins, don’t assume the negative headlines apply to you. Talk to experienced advisors who understand your market and can help you understand what’s happening with businesses like yours.
There’s still a lot of capital ready to be deployed. Most of what I’m hearing from buyers is they wish more companies were coming to market. Buyers are active and willing to pay for great businesses—they just don’t want to inherit problems. If your fundamentals are strong, now could be an ideal time to come to market.
Brian: What about businesses that aren’t quite in top shape? What should they focus on in the coming year or two?
Eliot: First, be realistic about where you stand and determine if you can get into better condition. You can’t wait for interest rates to “bail you out.” Even if rates come down a bit, it won’t bring back the frenzied deal activity of a few years ago.
The difference between an A business and a B business is metrics. The metrics people look at what is your customer mix and how diversified and recurring is it, what are your margins and what’s your growth? Anything you can do to improve those three metrics puts you higher up the ladder of quality in the eyes of the buyers. And that really transcends any macro events, interest rates, or anything else.
Control what you can control, especially if you’re targeting an exit in the next few years, the time to make the hard decisions is now to improve your business.
About Eliot Peters
Eliot Peters is a Principal with RA Capital and brings over 20 years of experience advising clients. Mr. Peters plays a key role in the firm’s strategic direction and execution of client engagements, and is also one of the architects of RA Capital’s global network. He leads the firm’s cross-border practice and oversees relationships with corresponding firms in Europe, Asia, India, Australia, and the Americas.
RA Capital Associates LLC (“RA Capital”) is a member of FINRA and SIPC.
About Brian Andreosky
Brian Andreosky is the President of Aldrich Capital Advisors, and is dedicated to helping business owners transition their companies. In this role, he provides exit planning services to help business owners find the right solution to transition and maximize the value of their business. Brian is a member of the Exit Planning Institute (EPI).
Prior to joining Aldrich, Brian held roles in investment management, management consulting, and private equity.
About Aldrich Capital
Aldrich Capital LP provides advisory services for business transactions, including succession planning, acquisitions, or mergers. We help business owners navigate challenges and unlock growth opportunities with actionable insights. Our innovative team is dedicated to your success.
