News & Resources
Quarterly Market Update | Q1 2025
At the end of 2024, many bankers and economists anticipated the coming year would bring high volumes of deal activity and rising valuations. In the first quarter of 2025, the Northwest M&A market experienced a slight decline in deal volume with 147 deals completed (compared to 162 deals in the previous quarter). Although the expected activity rebound did not materialize in the first quarter, deal-makers remain positive that momentum will shift as the year progresses.
As we highlighted in our 2025 Market Outlook, a combination of anticipated pro-M&A policies from the changing political administration and continued rate cuts were major trends expected to drive deal activity. The news in April from the Trump administration on trade policy has certainly put buyers and sellers on pause (primarily manufacturing). However, at Alexander Hutton we have never been this busy with both sellers wanting to sell (mostly aging owners) and inbound interest from acquirers, despite the headlines. In fact, we have seen instances where our US manufacturing clients are winning business that in the past, they would be noncompetitive against parties that source abroad.
Equipped with substantial dry power, at levels still exceeding $2 trillion, private equity capital is looking for a home. Middle-market private equity firms continued to focus on add-on investments, representing almost 75% of PE buyout activity in Q1 2025, highlighting a strategic shift towards investments with lower transaction sizes and proven operational synergies. However, lower M&A levels in the past three years have resulted in an increasing inventory of aging private equity-owned assets that need to be monetized. At the start of the year, 3,800 US PE-backed portfolio companies were held for five to twelve years. Already, we are seeing signs of PE-exit activity and new funds being raised. With 7 million private companies in the US with owners over 55, we expect deal volume across all sectors will be positively impacted in the Pacific Northwest and nationally in the coming years.
Certain sectors in the Pacific Northwest saw further consolidation in Q1 as both strategic and financial investors continued to show interest in the technology and professional services sectors. The rise of AI adoption and digital transformation has driven demand for companies seeking to expand their technical capabilities. Private equity investors are looking to build platforms in an attractive industry, directing attention to the Pacific Northwest’s high concentration of innovative start-ups and established technology firms. The professional services industry saw high levels of consolidation as firms looked to grow market share and expand services in a demanding market. For example, legal firms such as Philadelphia-based Ballard Spahr and Seattle-based Lane Powell merged in January 2025 to create a firm of over 750 lawyers with 18 offices, expanding both legal services across key industries and geographic areas.
As key M&A drivers continue into the next quarter, deal activity and valuations are expected to rebound and end a period of gradual decline. The Pacific Northwest’s deep bench of founder-led businesses and quality companies positions the region for continued M&A strength across the middle market.
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.
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