News & Resources
The lower middle market in 2024 demonstrated resilience amid economic uncertainty, underscoring its importance as a dynamic segment of the broader M&A landscape. In the absence of a significant volume of larger deals, the lower middle market was a focal point for private equity (PE) firms, family offices, and strategic acquirers.
At Alexander Hutton, we saw a rebound in deal activity in 2024, including inbound interest from potential sellers, new client projects launched, and deals closed. We were fortunate to work with impressive entrepreneurs running durable businesses and sophisticated buyers that were consummate professionals. We also are blessed to have a highly curated network of service providers that offer top-notch wisdom in the areas of accounting, legal, commercial banking and wealth management. We believe wholeheartedly that it takes a team of advisors to in all areas to successfully transition a business to new owners for the next stage of growth.
2024 in Review
While deal activity in the lower middle market faced headwinds from rising interest rates and cautious investor sentiment, the market held steady due to strong performance in the healthcare, technology, and niche manufacturing sectors.
Private equity buyers remained a driving force, leveraging dry powder to invest in scalable businesses. Despite macroeconomic uncertainties, valuation multiples stabilized, narrowing the gap between buyer and seller expectations compared to 2023. Strategic acquirers also maintained strong activity levels, seeking smaller, bolt-on acquisitions to enhance existing capabilities.
Family-owned and founder-led businesses continued to dominate deal pipelines, with aging ownership demographics and tax planning concerns prompting many owners to pursue exits.
2025 Expectations
Our outlook for 2025 is cautiously optimistic. While economic uncertainties persist, signs of interest rate stabilization and a potential softening of inflation may boost confidence and transaction volume. Our pipeline of active engagements has never been larger.
Private equity firms are expected to maintain their focus on add-on acquisitions to optimize portfolio companies (our recent sale of Quick Dry to Alpine as an example). Strategic buyers will continue seeking agile targets that align with growth or diversification strategies (we are currently working on a strategic tuck-in for a public company). We do believe that as lingering financing challenges persist, alternative funding structures and flexible negotiation strategies will remain critical for optimal outcomes.
Key risks for 2025 include geopolitical instability and potential shifts in regulatory frameworks. However, strong demand for quality assets and the entrepreneurial nature of the lower middle market provide a solid foundation for continued activity.
About Alexander Hutton
Led by a team of former business operators and executives who have built and sold companies, Alexander Hutton is a boutique, middle market M&A advisory firm that has completed 229 successful transactions. We offer a unique understanding of what it takes to run a business and an accessible team dedicated to client service. By running a high-touch, competitive transaction process for each of our clients, we are able to help them achieve their ideal outcome.
Connect with the team at Alexander Hutton and talk to us about the future of your company.
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