The year began with high expectations for an active M&A environment, as private equity investors, lenders and businesses had
significant capital to deploy, says Craig Wolfanger, managing director and head of investment banking for FNB. However, despite that initial optimism, inflationary pressures, uncertainty regarding tariffs, increased Treasury yields and recession fears have led to a reflective pause in M&A activity in many sectors.
“Right now, many businesses await more stability in the economic outlook,” Wolfanger says.
Many dealmakers we spoke with expressed much the same sentiment: that uncertainty is largely having a dampening effect on M&A activity as buyers and sellers alike wait to see the impact recent policy decisions will have on the businesses they own or are targeting. But even as deal engines idle, some see this as a blip on a much longer time horizon, one that offers opportunity to strike.
Ahead of this year’s Cleveland Smart Business Dealmakers Conference, we checked in with several area dealmakers to get a sense of how they’re seeing the market, the opportunities and challenges facing both buyers and sellers, and how they expect the deal year to finish up. Here’s what they have to say.
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Eye on the market
Umberto Fedeli, CEO of The Fedeli Group, says there has been an overriding caution in M&A because of what has been happening on the world stage with tariffs.
“They’re waiting and seeing, just being cautious because people are often afraid of what they don’t know,” Fedeli says. “Fear and uncertainty create a tremendous amount of volatility in the public markets. But even in the private markets, when there’s uncertainty, sometimes people tend to just hold off, pull back, not be as aggressive.”
Adding to that sentiment, Jerry Kelsheimer, president and CEO of Medic Management Group LLC, says the M&A market generally likes stability and predictability over uncertainty. As the various geopolitical influences in play affect different industries, markets and submarkets differently, market force impact may be expected to vary
across segments more so than it might have in the past. But there are still opportunities.
“There’s liquidity in the market that continues to look for a home,” Kelsheimer says. “It’s always the case that challenges and disruption for some creates opportunities for others, and current times are no different.”
For example, Jerry Schill, founder and CEO of Schill Grounds Management, says while M&A this past year was influenced by a tentative mindset among many buyers and sellers, he sees a 2025 that is shaping up to be a more active year, driven by easing macro uncertainty and liquidity constraints, primarily in the form of interest rates.
“While risks remain, including tariffs and geopolitical uncertainty, a variety of encouraging trends are driving more confidence among buyers and sellers,” Schill says.
He says he expects the uncertainty around tariffs and interest rates to result in more competition for top-quality businesses, as well as an increased level of scrutiny during due diligence.
However, Daniel S. Murad, president and CEO of The Chemquest Group Inc., says the M&A market is sluggish as it pertains to specialty chemicals. Still, it’s seeing roughly the same number of deals year-over-year as 2024, which itself was a decline relative to the two prior years.
“Mid-market deals are lagging as volumes continue to be under pressure and prospective sellers struggle to show sustainable growth on an LTM basis,” Murad says. “We do see large caps divesting noncore businesses as they reshuffle their strategic portfolio.”
According to Kelly Greene, VP, Corporate Development & PMO at Park Place Technologies, the M&A environment today is active but cautious.
“There’s a healthy level of interest on both the buy and sell sides, but deals are taking longer to get across the finish line,” Greene says. “Strategic buyers are being more selective, with increased focus on integration fit and long-term value creation. Meanwhile, sellers are still holding onto 2021-style valuation expectations.”
Richard R. Hollington III, managing partner at CW Industrial Partners, also sees an M&A market that has slowed precipitously in the past couple of months.
“Those transactions that were underway have been delayed and/or abandoned due to the uncertainty in the markets attributable to the trade war and its uncertainty,” Hollington says. “Those contemplating bringing their business to market are pausing to get more clarity on the economic environment.”
Still, he says there remains a tremendous amount of capital both corporately and within PE funds to pursue good deals — strong assets with a domestic focus or a service business will still transact in this market. The industrial sector, however, is facing greater uncertainty due to the supply chain implications of the trade war.
“A buyer can’t practically determine the impact of tariffs on a given business because it is a moving target,” Hollington says. “Better to wait and see where it all settles before placing significant bets.”
When it comes to the macroeconomic issues, Greene says she’s keeping an eye on interest rates, inflation and global events that could impact markets.
“For international deals, currency swings can make valuations tricky,” Greene says. “But overall, buyers with strong balance sheets are still in a good position to get deals done.”
Corrie Menary, a partner at Kirtland Capital Partners, says she is closely watching consumer confidence and consumer spending.
“I have concerns about the price of groceries, general consumer goods and utilities,” Menary says. “When consumers feel a squeeze in the necessities, they pull back other spending, which will have a domino effect on the rest of the economy.”
However, Ed Weinfurtner, executive chairman and co-owner of Great Day Improvements, says he fears dealmakers collectively pay too much attention to near-term macro issues, especially in today’s noisy environment.
“Winning dealmaking is done with a long-term strategic view,” Weinfurtner says. “And success ultimately is not overly influenced by the issues of the day, but rather the quality of the deal and the execution of business performance.”
Seller view
From Greene’s perspective, sellers in sectors with strong tailwinds — that could include mission-critical IT services, cybersecurity, and hybrid cloud — still have plenty of buyer appetite. Well-run companies with recurring revenue, strong customer retention and a clear growth narrative garner solid valuations. Those that come to market well-prepared and with a clean diligence story are seeing good results.
Similarly, Kelsheimer says sellers who have adequately prepared and planned can clearly differentiate themselves and stand out in today’s market.
“Those who demonstrate an ability to react to changing markets, invest in their differentiation, leverage technology to their advantage and bring talent to the table clearly rise to the top of the board, and may benefit from the challenges that competing sellers face,” he says.
While businesses that are prime assets are getting a lot of attention and going for strong multiples, there aren’t a lot of them,
Menary says.
“There is a scarcity premium for good deals,” she says. “If you have a business that is less susceptible to cyclicality or tariff impacts, it will be well received by buyers that have a lot of pressure to put money to work.”
Also, there are a number of challenges sellers in this market face. For instance, Murad says factors such as sluggish growth, the availability of capital, labor shortages, the risk of a recession and supply chain relocation, volatility and availability are all creating headwinds for sellers.
Greene says the biggest challenge for sellers right now is the disconnect between their valuation expectations and what the market is willing to pay.
“Diligence standards have increased, and buyers are scrutinizing profitability, customer concentration and net revenue retention more closely,” Greene says. “If there’s softness in these areas, it can be tough to maintain a premium valuation. Also, longer diligence periods and buyer caution are leading to deal fatigue on the sell side.”
Hollington says sellers are having difficulty determining the ultimate impact of tariffs on their business and financial profile. That will lead a seller to wait and see the outcome, which, for some, can create a situation that’s not ideal.
“For those businesses that really need to sell — due to their fund dynamics if they are a sponsor or due to an event like a death of the owner without succession — this environment poses a real problem,” he says. “Buyers are likely to put a substantial discount on future cash flows due to the level of unpredictability of outcomes.”
In this market, Kelsheimer says legitimate, premium sellers must narrow potential partners down to the one that they know can and will execute.
“Given known market uncertainties, one doesn’t want to put their future in the hands of a potential buyer whose resolve and commitment to transact may be shaken by uncontrollable outside macroeconomic events, whether real or speculated,” he says.
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Buyer perspective
On the buy side, Kelsheimer says difficult markets and uncertain futures can clearly serve as motivation for sellers to consider transacting. This is, perhaps, most prevalent in the middle market where aging owners may find the intersection of that point when they have “had enough” relative to dealing with ongoing challenges of ownership and their ability to “have enough” relative to generation of liquidity gained in a transaction.
“The simple desire to financially de-risk can put deals into the market that might not otherwise have been in the supply chain,” he says. “Likewise, challenging operating environments as they exist in certain industries today will drive opportunity for consolidation and transaction opportunity.”
Similarly, Hollington says anytime there are major dislocations in a market, there are opportunities that arise.
“A target company may find itself in a position that they need to sell, creating a value opportunity for a buyer,” he says. “In an active sale process, a finalist bidder may lower their bid due to the environment and find that the seller accepts the discount due to their fear of the uncertain environment.”
And Fedeli adds that, because interest rates have gone up and there is a lot of fear and uncertainty, buyers may take advantage, especially if they’re not as concerned about the current macroeconomics as others. That could give them an opportunity to be more aggressive where other people are being more cautious.
Menary says investment bankers recognize that it is going to be tougher to get deals done in 2025, so they are rolling up their sleeves more, and being pragmatic about both the questions that buyers have and the analysis needed to get folks comfortable.
“It feels like a more collaborative, solutions-oriented market,” she says.
Schill, however, sees a benefit to buyers from the strong backlog of opportunities, as many sellers who sat on the sidelines in 2024 are coming to market in 2025.
However, Fedeli says the uncertainty that could be a benefit is also presenting challenges for buyers. For example, if they don’t know what the tariffs are going to be, then there’s concern for whether the purchase will be a successful venture and whether they’ll be able to sell the target company’s products to the level the company had been prior to the changes. For businesses that are local or more regional, it may be less of a problem. But those companies doing international business or that import materials or products, factoring in those costs will be tough.
Weinfurtner says the biggest buyer challenge is “group think,” which pervasively says “now is not a good time to buy.”
Road ahead
For Weinfurtner, the biggest obstacle to getting deals done in this environment is the mentality that in times of uncertainty, we should get conservative and not take risks.
“There are some great deals to be had as a result of the market’s uncertainty,” he says. “There is opportunity in the uncertainty if you seek it with the right mindset.”
Similarly, Fedeli says the central deal obstacle is that people are in a wait-and-see phase. That leads to delays as people are hesitant to make decisions.
“It may take more time, and people are going to be more cautious and more defensive,” he says.
Looking ahead, Greene expects the second half of 2025 will be busier than the first.
“As interest rates settle and buyers and sellers get closer on price expectations, more deals should hit the market and successfully close,” she says. “For buyers who have a clear strategy and know how to integrate well, it could be a great time to invest and drive long-term value.”
FNB’s Wolfanger has a similar sentiment.
“We are cautiously optimistic that the second half of the year will be busier for middle market M&A because there may be fewer unknowns surrounding the economy and tariffs,” he says. “In the meantime, prospective buyers and sellers can use this time to talk with their banker, consider the ways to work through obstacles and implement solutions that increase their value. Those businesses that are proactive now will have an advantage in the months and years ahead.”
Schill expects 2025 will see continued strengthening in the market, with an increased sense of urgency for both buyers and sellers.
“2025 will likely be a year highlighted by strong transaction volume of larger and more desirable assets,” he says.
To the contrary, Menary says her expectation is that it will be flat to down from 2024.
“I will be delighted to be wrong on this point, but uncertainty always causes a pullback and we have a lot of it right now,” she says.
Hollington believes there is likely a binary outcome to the M&A markets in 2025.
“If the (Trump) administration can solidify enough trade deals for the market to get a sense of where their ultimate end game is heading, the M&A spigot may let loose and see a great number of transactions getting done,” he says. “If not, this will be a very slow year and only those that desperately need to sell and those ‘A’ businesses that are bulletproof will sell in this market.”
Chaos in the cannabis market
As the fledgling legal cannabis market blooms, dealmakers are looking to harvest opportunities. However, according to Jared Maloof, CEO of Standard Wellness Holdings LLC, there is a lot of carnage in the sector at the moment.
“There is very little capital out there, but sellers still view their value from the lens of 2018,” he says. “Things have changed and deals are trading hands at four to five times EBITDA. There are very few buyers and a number of distressed assets. In cannabis, there is about $3 billion of debt maturities in 2026, and it is anyone’s guess how much of that can get refinanced. I anticipate a lot of stock-for-stock transactions where the acquirer agrees to take on some component of the acquiree’s debt.”
Among the macroeconomic issues he says he’s watching in the sector are the regulatory environment at both the state and federal levels. Federally, the hope is cannabis is rescheduled from a Schedule I drug — with heroin and LSD — to a Schedule III drug, which includes codeine and anabolic steroids. This, he says, would greatly improve the tax environment in which the industry operates. At a state level, he says the hope is for laws to pass that would limit the sale of intoxicating hemp.
As far as capital markets go, at the federal level, if some form of the SAFER Banking Act — which would provide protections for federally regulated financial institutions that serve state-sanctioned marijuana businesses — passes, there is a chance that more capital will become available. However, he says given the fundamentals of cannabis, it is an open question as to whether or not federally chartered banks will try to get in.
The view from the buy- and sell-side
Maloof sees little to nothing going well for those looking to sell a cannabis business right now.
“In some markets, you can effectuate a successful exit. But when non-cannabis people think about what markets are good, the opposite is normally true,” Maloof says. “California, Colorado, Michigan, these states are blood baths right now and it would not be good to be a seller there. Some states like Florida, Ohio, Missouri and Arizona are places where you do see exits occurring.”
For buyers, lack of capital is allowing them to name their price, in many instances. Also, the structure of transactions can be interesting. For example, he says he sees a lot of deals where a third of the consideration is cash, a third is a sellers note with terms more favorable than buyers could get from institutions, and a third is in the stock of the acquirer.
Still, securing financing is difficult for all but the most seasoned operators. And the credit funds, which were the first and sometimes only lenders in the space, have gotten much more judicious regarding who they will lend to.
The big picture
Uncertainty in every aspect of the business — regulatory, lending, pricing, licensing — is a hurdle for businesses in this space.
Looking to how the year ends in the sector, Maloof says for cannabis, it’s steady state.
“Tariffs will have some impact on packaging and new builds, but interest rates in cannabis generally operate in a vacuum,” he says. “There are rumors that the Trump administration is going to pivot to cannabis to address lower poll numbers. We are cautiously optimistic about that. Actually, given everything I have seen over the last seven years, I am cautiously pessimistic about it.” ●