Capstone Partners Reports: Middle Market M&A Valuations Prove Resilient Despite Macroeconomic Disruption as Confidence Builds Entering 2026
BOSTON, April 15, 2026 /PRNewswire/ -- Capstone Partners, a leading middle market investment banking firm, released its 2025 Middle Market M&A Valuations Index, reporting that dealmaking conditions began to normalize entering 2025 as buyers regained confidence after facing significant pressure throughout 2024. Prior to Liberation Day, Q1 2025 middle market merger and acquisition (M&A) volume rose 10.3% year-over-year (YOY) compared to a 15.8% YOY decline in Q1 2024. At the same time, deal values rose 21.2% YOY in Q1 2025 compared to a 4% YOY contraction in Q1 2024, demonstrating a clear upturn in M&A market activity to start 2025. However, Liberation Day immediately stunted this momentum as industries reliant on global supply lines delayed dealmaking. The response from buyers was violent and swift. This collapse created a dramatic valuation gap in M&A dealmaking between buyers and sellers, forcing Q2 transactions to be re-priced, restructured, or abandoned outright as uncertainty soared and due diligence timelines stretched far beyond historical norms. By mid-2025, the Trump administration tempered parts of its tariff escalation and investors regained confidence. Firms began building strategies designed to thrive within geopolitical uncertainty, using M&A as a tool for resilience, expansion, and competitive positioning.
Amid the tumultuous year, M&A valuations remained resilient for quality assets and insulated sectors in the middle market. Average M&A valuations settled at 9.8x EV/EBITDA in 2025, up from 9.4x in 2024 and 9.0x in 2023. The Aerospace, Defense, Government & Security (ADGS), Business Services, Energy, and Technology, Media & Telecom (TMT) industries all posted YOY improvements in average purchase multiples, reflecting select areas of strength. Agriculture also saw higher average multiples, illustrating a push-and-pull dynamic in which high-margin Agriculture sectors buoyed valuations, even as several distressed transactions weighed on specific subsectors. Investor appetite remained robust and was matched by disciplined execution. More than a quarter (27.4%) of advisors surveyed by Capstone anticipate M&A transaction multiples in 2026 to rise compared to 2025, according to Capstone Partners and IMAP's 2025-2026 Trends in Global M&A Survey Report. However, most (66%) advisors foresee little to no change in M&A multiples in 2026. Across all investment bankers surveyed, the average typical and premium M&A EBITDA multiples are expected to reach 6.8x and 9.8x, respectively—an uptick from the 2025 outlook. Lower-quality assets saw buyers accelerate diligence timelines while the upper end of the market remained healthy, competitive, and reminiscent of more robust transaction environments. This was reflected in the rebound of deals closing in the low double-digit EBITDA range, which comprised 40.7% of disclosed multiples in 2025 compared to 31.6% of 2024 transactions.
In 2025, private equity (PE) continued to do what it has done historically—adapt. High-quality portfolio companies remained the core component of sponsor exits and enabled these players to maintain internal rate of return (IRR) levels, according to Capstone Partners' bi‑annual Middle Market Private Equity Index Report. Add-on acquisitions remained the majority of sponsor activity at 58.2% in 2025 though this share has declined from 61.3% in 2024. The buy-and-build model has evolved from a distinct strategy to becoming the industry's default operating framework. Sponsors showed a strong preference for platforms equipped with a clear integration roadmap, defined targets, and modern systems to support seamless onboarding of subsequent acquisitions. Additionally, leverage decreased meaningfully, with average net debt-to-EBITDA falling from 6.2x in 2024 to 3.4x in 2025, indicating lesser reliance on debt financing than in prior years. As debt usage decreased, interest coverage weakened, with the average EBIT/interest expense ratio falling to 2.9x from 6.0x in the prior year, suggesting higher interest burden relative to operating earnings. Despite the severity of Liberation Day interruptions, the middle market appears positioned for a steady M&A re-acceleration in 2026, supported by stabilizing valuations, continued sector-level resilience, healthier balance sheets, and rising investor demand for high-quality opportunities.
Also included in this report:
- A breakdown of average middle market M&A valuations by industry.
- Discussion of middle market M&A transaction volume on an industry level.
- Commentary on the operating performance of target companies sold in 2025 compared to prior years.
To access to full report, click here.
ABOUT CAPSTONE PARTNERS
For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services. Headquartered in Boston, the firm has 175+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams. Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ:HBAN). For more information, visit www.capstonepartners.com.
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SOURCE Capstone Partners