More Platform Deals, a ‘Silver Tsunami’ and Lengthy Closings—2025 Has Arrived
GF Data's Bob Dunn and Carter, Morse and Goodrich's Ramsey Goodrich discussed the latest M&A data during an ACG member-exclusive webinar
Last year’s deal market was either extremely active or incredibly dull, depending on who you ask.
Although GF Data, ACG’s M&A data provider, tracked 379 transactions in 2024—the highest since 2021’s 501 transactions—the sentiment among dealmakers was that “nothing happened,” said Bob Dunn, managing director of GF Data, which collects data on private equity-backed middle-market transactions.
Dunn and Ramsey Goodrich, managing partner at investment bank Carter, Morse and Goodrich, discussed the divergence between data and perception in 2024 along with their forecast for the coming year during a webinar titled “A New Season for M&A: ACG’s M&A 2024 Recap and 2025 Outlook.”
The live webinar was broadcast on Jan. 30 exclusively for ACG members and moderated by Middle Market Growth’s Carolyn Vallejo.
A Building Wave
Last year was “definitely the year of the bolt-on,” Goodrich noted, which helped drive up total deal count. In the first two quarters of 2024, 44% of deals tracked by GF Data were add-on investments, compared with 35% of deals in 2023.
Event Recap
WHAT: “A New Season for M&A: ACG’s M&A 2024 Recap and 2025 Outlook” webinar
WHEN: Jan. 30, 2025
THE TAKEAWAY: GF Data’s Bob Dunn and Carter, Morse and Goodrich’s Ramsey Goodrich explained their key takeaways from the 2024 M&A data, and what’s ahead for 2025
Closing an add-on transaction isn’t the same experience as closing on a platform, said Dunn, which may have contributed to the feeling of slowness. Further, add-on activity was spurred by debt markets that weren’t “playing nice,” which also may have muted dealmakers’ enthusiasm about the year. High interest rates and a continued pullback from the market by traditional banks raised the cost of capital and reduced its availability, prompting private equity firms to use existing debt facilities to finance add-ons, rather than try to arrange new costly debt packages to fund platform investments.
In Q4, perception and reality converged. GF Data tracked 94 deals—notably lower than the volume observed in recent years’ fourth quarters. Dunn and Goodrich attributed the slowdown in large part to the U.S. election. After a flurry of preparation in advance of election day, Goodrich recalled, “everyone sort of exhaled and said, ‘The business environment is going to be good with this new administration, and so we don’t need to rush to close.’”
The lull late last year could boost closed deal volume in early 2025, if those delayed closings materialize in the new year. Notably, add-ons made up a smaller share of deal count—40%—in late 2024 than earlier in the year, as platforms gained ground.
Mounting pressure from limited partners should also help spark deal activity in 2025, following extended holding periods.
Private equity sellers won’t be alone in putting assets up for sale. Goodrich has seen a sea change in interest among the family- and founder-owned businesses that Carter, Morse & Goodrich works with. “More deals have come in in the last 60 days than we had all of last year,” Goodrich said, adding that aging owners, in particular, are increasingly exploring a sale after waiting amid economic uncertainty. “I call it the ‘silver tsunami,’” he added.
A more liquid market coupled with confidence in the economy will help bring companies to market, Goodrich predicted. “Private equity is going to lead the way in Q1 and Q2 while we all get private companies ready for sale in Q2, Q3 and aim for a year-end closing—but again, no rush here,” he said.
Driving Down Prices
As they close deals, M&A professionals should anticipate lengthy closing times, which are likely here to stay. After the fast-tracked closings of 2021, timelines began slowing in 2022. By 2024, deals were undergoing an “unbelievable level” of due diligence, according to Goodrich. “Now, we’re checking all the boxes.”
Average valuations for companies between $10 million and $500 million of enterprise value dropped slightly from 7.2x to 7.1x between 2023 and 2024, according to GF Data, a level above the historical average of 6.8x. “It’s not a terrible market in terms of value,” Dunn noted. “It’s just challenging if you compare it to 2021 and 2022.”
But Goodrich predicted that valuations will fall in the next two years, as that “silver tsunami” of gray-haired owners pursue a sale and the private equity backlog comes online. A surge in volume coupled with elevated interest rates and a challenging credit market could drive down prices. “I think you’re going to start to see these numbers come down,” Goodrich said.
Katie Maloney is Vice President of ACG Media.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.
