Before We Dig Into the Particulars, It’s Always Helpful to Understand the Macro Backdrop
Geopolitical tensions, persistent inflation, and the lingering impact of high interest rates continue to play a role in the broader market throughout Q3. However, despite these pressures, the Q3-25 M&A market showed notable resilience. A surge in large-scale deals and improved financing conditions contributed to greater confidence heading into Q4, which should persist into the new year.
The sharp pickup of Q3 contrasts with the more subdued first half of this year. There was a divergence in two key areas: deal counts and deal value. Overall deal count growth was modest, while deal value greatly increased. These larger transactions were responsible for lifting Q3 performance. Let’s explore some of these factors in greater depth.
- Are you on the list? Receive comprehensive market analysis and insights from our advisory team each quarter. Don’t miss out — sign up now.
Key Factors That Drove Q3-25 M&A Market Growth
- Large Transactions Led the Charge: Mega deals (a transaction with a value greater than $1 billion) dominated due to organizations seeking to drive scale through strategic priorities such as technology adoption, operational efficiency, and supply chain resilience. Along with private equity transactions, mega deals comprised a large amount of the activity in Q3.
- Private Equity: While private equity exit value has declined for three consecutive quarters, rising exit volumes and consistent dealmaking have created a countertrend. Private equity firms still have strong dry powder deployment goals, are benefiting from more favorable financing conditions, and are finding opportunities in resilient industries.
- Rate Cuts: Recent rate cuts have improved the financing landscape, reducing borrowing costs and encouraging dealmakers to re-enter the market. These lower rates have revived lender activity across traditional and private credit channels, creating opportunities for buyers that had paused or delayed transactions.
- Lower-Risk Sectors: Middle-market buyers are increasingly concentrating on more stable sectors that have lower exposure to geopolitical or regulatory challenges, such as tariffs. These include certain technology niches, business services, industrial automation, and select healthcare segments. Within these areas, buyers are prioritizing businesses with resilient supply chains, scalable operations, and clear opportunities for value creation.
What’s Ahead for Middle-Market M&A?
Deal activity is poised to remain strong, supported by improving financing conditions, a healthier capital markets environment, and elevated levels of dry powder across private equity. Many transactions that were paused earlier in the year due to rate uncertainty or valuation gaps are now picking up, creating a more active and competitive landscape.
Large strategic buyers continue to lead the way, while middle-market participants are becoming increasingly confident as borrowing costs ease and economic sentiment stabilizes. Barring any major macro shocks, momentum is expected to carry through the end of Q4 and set the stage for a solid start to the new year.
We’re Here to Support Middle Market M&A Leaders
For business owners and investors, this shift presents a timely window of opportunity. Sellers may benefit from renewed buyer interest and a more constructive financing environment, which together can support stronger valuations and broader interest from both strategic and financial acquirers.
Buyers, especially those focused on lower-risk sectors, may find that the return of delayed assets to market expands their list of opportunities. Whether you’re considering a sale, are pursuing acquisitions, or are evaluating other options, now is the time to engage the market and put these market dynamics to work toward achieving your goals.
Connect with our team today to learn more about this report and how we can help.
