There is mixed sentiment on the state of today’s M&A environment. For example, Thomas Pampush, vice chair – business group at Ice Miller, characterizes the market as “very robust,” as owners and buyers have adjusted to the higher interest rate environment.
However, Kevin Kroos, president and managing member of Hudson Bearings LLC says his business is currently in a “holding pattern” due in large part to tariffs.
“Notwithstanding our domestic capacity and commitment to USA manufacturing, the tariffs have caused our automobile OEM customers to place some existing deals on hold and refrain from issuing new deals.”
Similarly, Matthew Hartman, CEO and chairman of OneCompass Holdings, says the current M&A market is challenging.
“We are primarily focused on the logistics space, and the transportation sector is currently in the trough of the longest and deepest freight recession in history,” he says. “These businesses are asset heavy, they have aged fleets and interest rates are high. All of these factors contribute to a very challenging environment.”
Ryan McGovern, managing director and investment committee member at Star Mountain Capital, sees an M&A market that is improving from a slow start in the first half of the year given some of the federal economic and policy changes that caused some short-term uncertainties for the market.
With eyes on such distinct factors as the cost of capital, AI, tariffs, cuts to government spending, immigration policy and reshoring, there’s really one prominent thing on the minds of dealmakers: uncertainty.
“There’s still a lot of uncertainty in the macro economy,” says Rick Corcoran Jr., co-founder and partner at Slate Capital Group. “We are always concerned about interest rates, tariff risks, international relations, etc., but we cannot control any of that. Since we have a few investments in construction-adjacent businesses, we hope that the overall economy stays strong and especially that data center growth continues.”
Several area dealmakers offered their take on the current M&A market, sharing their perspective on how buyers, sellers, entrepreneurs and investors are fairing. Here’s what they have to say.
Swimming upstream
When it comes to sellers, Pampush says there are some currently sitting in a great position.
“There is fierce competition for well-run businesses and a lot of capital to be deployed,” he says.
However, valuation expectations continue to vex some sellers, so he says deals tend to have more earnouts to bridge the perceived value gap.
Kroos says service companies whose supply chain is not impacted by tariffs can command a relatively high multiple. But on a macro level, all manufacturers,
even those that are primarily domestic, are getting lumped together as high risk.
“It’s not a great time to sell for most manufacturing companies we are connected to,” Kroos says.
In the transportation sector, Hartman says there’s not a lot positive going on for any seller as equipment costs and interest rates are high while transportation rates are at the lowest they have been in history.
“The bigger factor for most of the sellers that we are engaged with is the market itself,” Hartman says. “With the transportation market being at the lowest point it has been in a long time and a trough that has been elongated, it has created significant challenges for those companies. When you add on top of that the continued increase in costs related to equipment and also the higher interest rates, it has devalued their companies significantly compared to what they were five years ago. So, for most sellers, they are trying to determine when is the right time to sell and how long can they actually survive in the current market conditions that they’re operating in today.”
managing director and investment committee member,
Star Mountain Capital
According to McGovern, given some of the macroeconomic challenges earlier this year and an increasingly negative view of companies deemed to have negative exposure to some or all of those factors, companies that do not have this risk were highly sought after in a slower-than-usual dealmaking environment and in some cases experienced record valuation multiples. On the flip side, there is still a view by some that a recession is imminent, so some sellers are facing the choice to delay a sale processes or risk not receiving the valuations they expect.
On the buy side, McGovern says there is increasing pressure in the private-equity-owned business world to exit portfolio companies to return capital to
investors and thus help in the fundraising of their next fund.
“This may provide some benefit to potential buyers of those companies,” he says, “although the scarcity of deals so far this year has largely negated that benefit to buyers.”
Kroos says if liquidity were not an issue, it’d be a great time to buy.
“Traditional bank financing is difficult for our industry focus,” Kroos says. “Cap rates have also increased, thus reducing the favorable impact offered by sale leaseback financing.”
Hartman says interest rates are a challenge for a lot of buyers. But on the flip side, he says there’s a tremendous amount of capital available for the right deals.
Pampush agrees that debt financing is available both from traditional banks and even more so from alternative lenders. So for buyers, the primary challenge is fierce competition for good targets.
“Many deals don’t have exclusivity, causing buyers to expend costs in an unprotected manner,” Pampush says.
Fighting perception
Among the obstacles to getting deals done in this environment are overly optimistic EBITDA forecasts from sellers, which Pampush says can result in value disconnects as diligence proceeds.
Corcoran says it’s uncertainty in general that’s the challenge.
“It’s very hard to underwrite deals given the financial and global risks,” Corcoran says.
CEO and chairman,
OneCompass Holdings
Hartman says if the credit market tightens up, it will continue to pose significant challenges to most buyers.
“Economic uncertainty is always a challenge when trying to get deals done and get people committed to the funding of a deal,” Hartman says.
However, for Kroos, the real obstacle is perception.
“Until headlines and the overused term of ‘uncertainty’ softens, it’s hard to interest capital investors and lenders,” Kroos says. “On a positive note, focusing on existing operations versus acquisitions is not a negative as we’ll be in better position when things start to revert back to norms.”
He says assuming business continues to trend upward between now and year end, he’s hopeful for an uptick in M&A opportunities.
Similarly, McGovern says some of the policy changes and potential negative impacts to some businesses did rattle the market in the first half of the year, and some of that remains fresh in people’s minds along with a view that the U.S. is long overdue for a recession. And although it will not be as robust of a year for deals as many of expected it would be on January 1, there has been a steady increase in opportunities over the course of the summer.
“I am optimistic that 2025 will end well,” McGovern says, “though it will have to be very back-ended with a rush of closings in Q4.”
Hartman has a similarly optimistic outlook.
“I tend to believe that economic uncertainty is going to stabilize over the coming months and it is going to create a significant amount of deal flow prior to the close of 2025.”
View from the early stage
From the perspective of Faith Voinovich, principal at Ohio Innovation Fund, the fundraising landscape can be seen as split into two broad categories: those
who are raising around a compelling, differentiated data/AI play, and those who are not.
Founders in the former category, she says, are experiencing the benefits of a red-hot AI market, helping them close often-oversubscribed funding rounds relatively quickly. Those who are repeat entrepreneurs with one or more previously successful exits are especially attractive to investors and are experiencing a robust funding landscape. However, a majority of companies outside this space are currently facing a more difficult fundraising market, particularly those in biotech/life sciences where federal funding sources are seeing cuts and investors are tightening their purse strings in favor of reserving funding for existing portfolio companies.
Todd Federman, managing director of North Coast Ventures, says energy is high but capital is choosier.
“Seed is open for teams with real customer proof and efficient go‑to‑market. Series A/B is more selective with higher bars on traction,” Federman says. “M&A for venture-path companies is definitely tight, but available. ‘Rule of 40+’ companies have the most options given how many exits involve PE sponsors.”
AI or nothing
For entrepreneurs, the democratization of sophisticated AI models is allowing early-stage founders to accomplish meaningful progress with very little funding, Voinovich says.
“The Midwest has historically been highly capital efficient,” she says. “AI is taking this to the next level, providing founders a path to important value inflection points while remaining bootstrapped or minimally funded. Even relatively non-technical founders are able to utilize AI to help them build a website, hone their target market, deliver a technical product MVP or alpha prototype, and rapidly iterate based on customer/user feedback, all while maintaining very lean teams.”
However, she says the AI hype cycle is a double-edged sword. Founders with a clear, compelling, differentiated AI/data narrative are having a much easier time raising capital with the current investor focus on the area. But those without this positioning are being pushed to find ways to incorporate some kind of AI into their narratives simply to gain investor attention, even in instances where their core business does not benefit in mission-critical ways.
“Finding investors who are more focused on longer-term investment outcomes versus caught up in the AI hype can be challenging, but they do exist,” she says.
Federman says when it comes to B2B SaaS ventures, most buyers continue to have budget for automation and AI that clearly drive productivity or reduce risk. Teams can ship faster with leaner headcount thanks to better toolchains, and valuations are rational enough to build durable companies.
But CFO scrutiny on major purchases is high and makes the sales cycles longer, putting a premium on quick, provable ROI.
“The ‘A‑round crunch’ is real, so momentum and efficiency matter more than headlines,” Federman says. “True AI differentiation is hard without unique data rights or some other kind of moat.”
Pick your punches
Investors, Voinovich says, are seeing a light at the end of the tunnel looking toward 2026 for what has been a challenging IPO market. She’s also seeing an uptick in quality early-stage deals that are raising more modest rounds of capital as a direct result of AI-aided development and scaling efficiencies.
“Many founders who have successfully raised capital over the last couple years are demonstrating incredible grit in stretching budgets — and by extension, runways — to ensure they’re hitting targeted milestones while maintaining a strong focus on growth,” she says.
Because investors are focused on funding innovative startups building for the future, she says uncertainty is far more of a feature than a bug. Still, macroeconomic impacts, volatility and uncertainty can stress the early-stage investment market when it comes to writing new checks versus reserving dry powder for existing portfolio companies.
Federman says entry prices for investors have normalized.
“There is alignment on efficient growth over growth-at-all-costs,” he says. “Less syndicate crowding means cleaner ownership and more chances to lead. Strategics and PE are active on tuck-ins that deepen workflow or add AI-native capability.”
Conversely, time to liquidity is longer and uneven across sectors, making fundraising a longer process. Follow‑on capital is concentrated, so reserve planning is critical. And diligence has to go deeper on data rights, model performance and security to avoid “AI‑washing.”
Looking ahead, Voinovich says she’s cautiously optimistic about the IPO window for the latter half of 2025, at least for tech-focused companies.
“I don’t anticipate early-stage investment appetite for new investments will increase meaningfully prior to 2026, primarily due to portfolio/cash/runway management factors,” she says. “It seems the biotech/life sciences market will continue to face challenges for the foreseeable future as a result of meaningful budget cuts, agency turnover, capital requirements for late-stage clinical trials, and a tough fundraising market.”
She says big pharma is facing a significant patent cliff in the near-future with billions of dollars in blockbuster drugs coming off patent, something that is likely to drive a high level of urgency to bring on earlier-stage assets with significant patent protection. That will increase M&A opportunities for those startups that are able to weather the current biotech market successfully. ●