At ACG Chicago’s recent Midwest Capital Connection, a dynamic assembly of private equity investors, dealmakers, and business owners gathered to discuss emerging M&A trends and insights for 2025. The event, held on October 29-30 at the Hilton Chicago, revealed cautious optimism for an uptick in M&A activity, signaling renewed demand for business valuation services and offering valuable insights for the valuation community.
Positive Shift in M&A Market
Speakers highlighted a shifting momentum in the M&A landscape, with increased deal volume expected as conditions become more favorable. Despite the slower pace of finalized deals in 2024 due to macroeconomic factors and extended due diligence, recent data from GF Data and insights from professionals like Michael Norton of Houlihan Capital suggest a marked improvement. Norton noted growing eagerness among business owners to sell, as well as increased pitch activity, hinting that 2025 could bring a busier market for both buyers and sellers.
Private Equity’s Influence
Private equity (PE) players are motivated to deploy their “dry powder” – unspent capital that has accumulated during the recent market slowdown. Panelist Holly Smyth of B. Riley noted that leveraged buyouts and acquisition financing have picked up, setting the stage for accelerated activity in 2025. This trend could significantly impact valuation professionals, as they are likely to see an increase in requests for valuations associated with financing, exit planning, and mergers.
The Complex Rise of Earnouts
With ongoing challenges in reaching agreed-upon valuations, earnouts are increasingly used to bridge price gaps between buyers and sellers. Panelists observed a marked rise in the complexity of earnout structures, with Norton from Houlihan Capital noting that nearly 80% of deals now involve some form of contingent consideration. Given this trend, valuation professionals should anticipate a greater need for expertise in assessing and structuring earnouts, as well as the potential for earnout disputes.
AI and M&A: The Road Ahead
A prominent theme at this year’s Midwest Capital Connection was the transformative role of artificial intelligence (AI) in business valuation and M&A processes. Jason Molesworth, CEO of Accelerated Innovation, predicted that AI’s impact will be most visible in customer support, marketing, and technical functions in 2025. He emphasized that firms that integrate AI effectively could see growth in both revenue and business valuation. Panelist Rick Schweiger of GTreasury highlighted the “paradox” of AI’s dual impact, saving IT costs while presenting significant upfront expenses – a reality that may challenge mid-sized firms to balance budget constraints with AI investments.
Key Takeaway
For the business valuation community, the insights shared at ACG Chicago’s Midwest Capital Connection underscore an exciting time for the M&A market, with both challenges and opportunities ahead. As deal volume is expected to rise, PE investments ramp up, and AI begins to reshape valuation methodologies, staying updated on these trends will be critical.
