Valuations Climb Across Midmarket Deals Despite Slower Activity

Why It Matters

Higher multiples signal that buyers are rewarding scale and profitability, but the subdued deal flow means only the strongest assets command premium prices, reshaping capital allocation in the middle market.

Key Takeaways

• Median EV/EBITDA rose to 9.2x, up from 8.4x in 2024.
• Deals $200M-$500M hit 11.4x, highest growth segment.
• Earnouts now 16.5% of deal value, median 24‑month term.
• High‑margin firms command 7.2x multiples versus 6.3x for low‑margin peers.
• Overall deal volume stays subdued despite valuation gains.

Pulse Analysis

The latest PowerComps snapshot shows a clear divergence between valuation momentum and transaction activity in the U.S. middle market. While the median EV/EBITDA multiple rose to 9.2× for deals ranging from $10 million to $500 million, overall deal count stayed flat, indicating that pricing strength is being extracted from a narrower pool of high‑quality companies. Larger deals benefited most, with the $200 million‑$500 million cohort jumping to 11.4× and the near‑$1 billion tier reaching 12.0×, underscoring the premium placed on scale and stable cash flows.

Profitability emerged as the key differentiator. Manufacturing deals at the $10 million‑$50 million level posted a median multiple of 6.7×, but firms with above‑median EBITDA margins (23.9%) earned a 7.2× multiple versus 6.3× for lower‑margin peers. Earnouts, now averaging 16.5% of enterprise value with a typical 24‑month horizon, have shifted from a concessionary tool to a core structuring mechanism, allowing buyers to hedge against uncertain forward performance while still offering sellers upside potential. Sector‑specific trends also surfaced: business services and manufacturing saw stronger multiple expansion than construction or distribution, which remain pressure‑filled by tariff and political headwinds.

For private equity and strategic buyers, the data signals a tightening of competition around high‑margin, cash‑generating assets. Sellers of lower‑quality businesses may need to accept lower multiples or rely heavily on earnout structures to bridge valuation gaps. As deal volume stays restrained, the market is likely to continue rewarding operational excellence, prompting firms to sharpen cost controls and margin visibility to capture the premium pricing currently available in the middle market.