As we go into 2025, business owners considering selling their businesses should assess the current state of U.S. and global markets, which offer both opportunities and challenges. Economic conditions have stabilized following the U.S. elections, creating a more predictable environment for dealmaking. The global M&A market is rebounding strongly, with deal activity up 27.6% year-to-date in 2024.
This resurgence, fueled by favorable economic indicators, lower interest rates, and renewed private equity (PE) activity, presents a unique window of opportunity for sellers. Yet, opportunities and challenges persist – competition among buyers is driving valuations higher for sellers, and uncertainties around tariffs and international trade continue to impact some industries for both buyers and sellers. To achieve maximum value, business owners must prepare strategically and stay informed about the trends shaping 2025’s evolving landscape.
Table of Contents
1. A Seller’s Market: Stabilizing/Improving Fundamentals and Favorable Tax Policies
2. Resurgence in M&A Activity: Private Equity’s Role
3. Sector Trends: Where Buyers Are Spending
4. Navigating Risks: Tariffs and Trade Uncertainty
5. Timing Your Exit: Preparing for Success
Conclusion: Is 2025 the Right Time to Sell?
1. A Seller’s Market: Stabilizing/Improving Fundamentals and Favorable Tax Policies
The completion of the U.S. elections has brought greater clarity to financial markets, creating a more stable environment for business owners considering an exit. Falling interest rates, current relatively low unemployment, and relatively strong consumer demand have helped boost buyer confidence, while the U.S. Federal Reserve’s monetary policies continue to support economic growth.
One potential advantage for sellers is the current tax environment. The lower capital gains tax rates introduced under the Tax Cuts and Jobs Act (TCJA) remain in effect, and some experts suggest these rates could be extended (or even lowered) in 2025, potentially benefiting business owners exploring an exit. After the past few years of uncertainty – marked by market volatility and shifting tax policies – economic conditions appear more predictable, and private equity and strategic buyers are expected to actively pursue acquisitions. This creates an opportunity for sellers to secure competitive offers.
However, challenges and opportunities remain, particularly around trade tariffs. Proposed tariffs on imports to the U.S. could impact U.S. businesses and their suppliers reliant on global supply chains, potentially affecting profitability and valuations. Business owners should evaluate these potential risks and consider how they might influence their company’s positioning in the market.
With greater clarity returning to the markets and the expected increase in M&A activity, sellers now have the opportunity to command competitive offers. By selecting the right M&A partner, like STS Capital Partners, sellers can significantly benefit from a competitive bidding environment to realize the maximum potential value of their business.
2. Resurgence in M&A Activity: Private Equity’s Role
The M&A market has experienced a remarkable recovery, with deal count rising by 13.3% in 2024, according to PitchBook’s Q3 2024 Global M&A Report. After years of sluggish buyout activity, private equity (PE) is driving much of this momentum, fueled by declining interest rates. In fact, PE buyouts accounted for 41.2% of global M&A deal value in 2024.
Lower borrowing costs and increased debt availability have made leveraged buyouts (LBOs) more feasible. However, the relationship between falling interest rates and PE returns is more complex than it seems. As borrowing costs fall, competition for attractive assets increases, driving up seller valuations. With lower debt costs for buyers, this increased competition results in rising valuation multiples for sellers, with the recent average EV/EBITDA multiple stabilizing at 9.0x in North America and Europe.
For business owners, this competitive environment means buyers (whether financial, PE, or strategic) are willing to pay a premium for high-quality, well-prepared businesses. It’s essential to align your exit strategy with the improving market conditions for 2025 and 2026 to capitalize on these stronger valuations.
3. Sector Trends: Where Buyers Are Spending
To maximize value, it’s important to understand which sectors are in high demand.
Key areas attracting significant buyer interest include:
- Technology, Media, and Telecom (TMT): Software and Media companies, due to their recurring revenue, subscription-based business and scalability with strong margins, are seeing high demand and valuations.
- Energy and Sustainability: Businesses aligned with renewable energy and sustainability, that are not cyclical, are attracting considerable attention.
- Healthcare: Healthcare-related businesses are increasingly sought after due to resistance to economic cycles, with strong buyer interest pushing up valuations.
- Consumer: While consumer services have faced slower deal momentum, consumer durables and apparel are seeing a modest recovery in valuations, especially with subscription-based, recurring revenue/profit business models.
For sellers in these high-demand industries, the competitive environment among buyers offers an opportunity to secure premium valuations. Companies in slower-growth sectors can differentiate themselves through unique value propositions and operational efficiency.
4. Navigating Risks: Tariffs and Trade Uncertainty
While the broader market is favorable, some risks remain, particularly with proposed upcoming tariffs and trade policies. Businesses importing goods to the U.S., especially from China, face potential profitability challenges, which could influence buyer confidence and valuation discussions.
If your business is exposed to tariffs, consider the following strategies to strengthen your position:
- Optimize Supply Chains: Near-shoring, on-shoring, and diversifying suppliers can reduce exposure to tariff-related risks.
- Highlight Resilience: Show how your business has mitigated trade challenges, such as passing costs to customers or improving operational efficiency.
Businesses less affected by tariffs, or those operating in sectors where competitors face these risks, can position themselves as lower-risk investments.
5. Timing Your Exit: Preparing for Success
Given the current market conditions, 2025 presents an excellent opportunity for a sale. However, success requires careful preparation. Here’s how you can position your business for a successful exit:
- Align with Current Favorable Market Timing: Work with advisors to identify periods of high buyer activity and favorable valuation trends.
- Focus on Financial Health: Buyers are looking for businesses with strong cash flow, clean financials, and scalable operations.
- Engage Expert Advisors: A trusted M&A partner, such as STS Capital Partners, can help you navigate trends, find the right strategic buyers, and secure the best deal terms with maximum strategic valuation. Also, engage with tax, estate, and wealth planning advisers to ensure tax efficiency and optimal wealth preservation.
Conclusion: Is 2025/2026 the Right Time to Sell?
“2025 and 2026 present an exceptional opportunity for business owners looking to sell, driven by favorable tax policies, strong M&A activity, lower borrowing costs, and increased borrowing availability. However, the competitiveness of the market and sector-specific risks require a strategic approach to ensure you realize the full value of your business,” states STS President of North American Strategies & Managing Director, Andy Harris.
STS Capital Partners are your expert guides to targeting buyers who view your business strategically, believe in your business and will pay a premium to acquire it. Our sell-side-only approach enables us to target the right strategic buyers and emphasize your unique, integrated value to deliver the maximum value possible for your business and achieve your desired personal outcomes.
