Thinking of Selling Your Business in 2025? Here’s What Lower Middle Market Owners Need to Know
The Real 2025 Market: Opportunity Meets Caution
The 2025 lower middle market M&A scene is a wild mix of big opportunities and fresh challenges. If you’re a business owner in this segment, you might’ve heard it all: “Now is the time to sell,” or “Hold tight, turbulence ahead.” The reality is—as always—a little more nuanced.
After a bumpy start to the year (one of the slowest Q1s for deals since 2009!), momentum has picked up. By mid-year, quality businesses across the lower middle market are still commanding strong valuations, despite buyer pickiness and pockets of economic uncertainty. Knowing how to read (and ride) these trends will matter more than ever.
Let’s break down what matters most for lower middle market owners thinking about a sale in 2025.
2025 Market Conditions: Not All Sectors Are Equal
First up, the numbers. In early 2025, U.S. lower middle market M&A activity took a hit, with deal volume dropping sharply in April—think fewest monthly closings since the Great Recession. The culprit? Rising trade uncertainty, new tariffs, and pinch points in the global supply chain, all setting off fresh waves of business caution.
Even with this rocky start, the overall picture isn’t all doom and gloom. By mid-year, deal flow for strong companies is bouncing back, and the average pace for 2025 is actually 8% above the previous five-year average. The key? Buyers want proven stability and clear upside. If your business can show those, the market is still receptive—and potentially lucrative.
Who’s Buying?
Private Equity: Still out in force, especially for add-ons that strengthen supply chains or embrace automation.
Strategic Buyers: Selective but motivated if your company plugs a unique gap or delivers on innovation.
Family Offices & First-Time Buyers: Growing presence, often with a longer investment horizon and less reliance on heavy debt.
Valuation Trends: What Drives a Premium in 2025?
Let’s talk about what really moves the needle on your sale price this year.
Supply Chain Resilience
Buyers are laser-focused on risk. Businesses with local, diversified, or near-shore supply arrangements are fetching a premium. If you invested in just-in-time inventory or built multiple supplier relationships, you’re ahead of the game.
Consistent Profitability
Choppy earnings? Expect more skepticism. Buyers want to see healthy margins and a pattern they can count on.
Diversified Customer Base
Heavy reliance on a small handful of customers is a big red flag in 2025. If you’ve expanded your roster, your deal will look more attractive.
Automation & Technology Integration
Manufacturing, logistics, or service businesses that have modernized get extra attention—from both PE and strategic acquirers.
Clean Operations & Strong Teams
Succession is a hot topic. If your company can “run without you,” you’re checking a massive box for buyers.
Industry Nuances: Where Are Buyers Focusing?
A few industries are standing out… for better or worse.
Manufacturing: Still a hot spot, especially for companies with advanced automation, US-based production, or unique process know-how. If supply chain headaches taught big buyers anything, it’s the value of “local and nimble.”
B2B Services: Steady and resourceful companies (think staffing, business consulting, tech-enabled services) remain in favor, especially with recurring revenue streams.
Consumer Goods: More volatile due to inflation and shifting tastes, but brands with loyal followings or local footprints are holding value.
Franchising: Multi-brand operators and franchisees with sizable platforms are attracting both strategic and PE interest.
Check out some of our recent franchise deals for more insights.
Prepping for a Sale: Action Items for Owners
Ready to test the waters—or sell outright—in 2025? Here’s what should top your checklist:
1. Audit & Clean Up Your Financials - Go beyond just “good enough for taxes.” Lenders and buyers want to see:
Detailed, up-to-date financial statements
Clear documentation of major contracts and supplier agreements
Proof of revenue quality (recurring, diverse, and stable)
2. Strengthen Operations - Don’t wait for buyers to spot your “opportunity areas.” Tackle:
Lingering HR issues (key staff, leadership gaps, unresolved disputes)
Customer concentration risks—are you too reliant on a single client?
Outdated tech or manual processes that could be streamlined
3. Maximize Curb Appeal - Treat your business like a house going on the market.
Is your brand story polished?
Are your policies and procedures documented and scalable?
Can the company thrive without you? Position your leadership team to take center stage.
4. Plan (Way) Ahead for Transition - Deals are more complex and take longer. Early planning lets you:
Establish relationships with potential buyers or partners
Get a head start on diligence issues
Decide if a full sale, minority investment, or recap makes more sense
Understanding Buyers’ Mindsets
The buyers targeting lower middle market businesses in 2025 are:
Wary but Flexible: They’ll move quickly on the right deal but walk away from warning signs.
Value-Oriented: Premiums are paid for resilience, not just growth stories.
Relationship-Driven: Early conversations now often turn into deals 12-18 months down the line. Start networking before you need to sell.
Timing: Is 2025 the Right Year for You?
Timing a sale is never just about the market. It’s about your personal goals, your company’s performance curve, and the momentum in your industry. Here are factors to weigh:
Personal Readiness: Will a sale fund your next chapter comfortably?
Business Health: Ideally, you’re selling into a period of revenue and profit strength—not a recovery or decline.
Market Sentiment: Watch rates, deal flow, and buyer appetite in your niche.
If you’re not pressed for time, consider launching the process when your business can shine its brightest. That said, don’t overthink the “perfect” moment—chasing the top can mean missing your window if headwinds return.
Real-World Example: Success Through Preparation
Let’s look at a real scenario. Boxwood Partners recently advised on the sale of IFPG, a leading franchise organization, to a private equity firm. The keys to success?
Deep prep: Their team shored up operational processes and documented growth opportunities.
Diverse revenue: Growth wasn’t dependent on any single franchise or client.
Strong management: Buyers had no worry about leadership continuity.
That level of readiness turned a potentially complex transaction into a premium and smooth exit. Want more deal stories? Browse our recent transactions here.
Final Thoughts: Keys to a Successful 2025 Exit
If you’re thinking about selling:
Focus on what you can control—financials, operations, leadership, and customer mix.
Stay in the loop on industry trends and broader economic shifts.
Start early, be transparent, and surround yourself with experienced advisors who know this market—whether that’s your CPA, legal counsel, or an M&A specialist.
Questions or want a personalized read on where you stand? Connect with the Boxwood Partners team—helping lower middle market owners navigate these deals is what we do best. Check out our team or learn more about our approach.