In today’s volatile economic climate, many prospective business buyers hesitate, waiting for more stability before making significant investments. However, history and current market dynamics suggest that periods of uncertainty often present the most compelling opportunities. As Warren Buffett famously advised, “Be fearful when others are greedy, and greedy when others are fearful.”
The Current Economic Landscape
The first quarter of 2025 has been marked by significant economic turbulence. Geopolitical tensions, fluctuating interest rates, and new trade tariffs have contributed to a climate of uncertainty. Notably, the U.S. imposed a 145% tariff on Chinese imports, prompting retaliatory measures from China. These developments have led to cautious behavior among investors and a slowdown in M&A activity.
Interest rates, once expected to fall, are holding steady amid ongoing inflationary pressures, especially in labor and materials. This has influenced how buyers and lenders are approaching acquisitions. According to Calder Capital’s Q1 2025 Market Update, traditional lenders are cautious and selective, primarily favoring businesses with strong recurring revenue, diversified customer bases, and established management teams.
Despite these headwinds, the market remains resilient. While inflation has eased slightly in some areas, the Federal Reserve has made it clear that further rate cuts are unlikely without significant progress on inflation. This leaves the cost of debt relatively high, which in turn makes equity-rich or low-leverage buyers more competitive.
M&A Activity: A Closer Look at Small and Mid-Sized Deals ($5M – $50M EV)
Contrary to mainstream headlines dominated by mega-deals, the lower middle market has remained active and dynamic. According to GF Data, Q4 2024 saw 94 completed transactions in the $10M-$25M range – a notable increase from 82 in Q3.
Importantly, add-on acquisitions now account for 40% of all tracked transactions, reflecting private equity firms’ eagerness to scale existing platforms. At the same time, platform deals made a comeback in Q4 – a sign that investors are once again willing to back standalone growth opportunities.
Calder Capital has already closed 22 transactions in 2025, with its Buy-Side team contributing to 8 of those closings. This is a strong indication that the market is alive and well for smaller, quality businesses. Calder’s database of over 250,000 buyers and its disciplined process helps match sellers with highly qualified acquirers – from niche family offices to lower middle market private equity firms.
Despite the negative headlines, deals continue to get done. With some nervous buyers standing on the sidelines, this has opened the door for bold buyers to succeed.
Why Now Is an Opportune Time to Buy
- Valuation Opportunities: Economic uncertainty often leads to more attractive valuations, allowing buyers to acquire businesses at favorable prices.
- Less Competition: With many potential buyers adopting a wait-and-see approach, there is reduced competition for quality assets.
- Strategic Positioning: Acquiring a business during a downturn can position buyers to capitalize on growth when the economy rebounds.
- Access to Talent and Resources: Economic slowdowns often result in a more available and affordable talent pool, as well as other resources.
Conclusion
While uncertainty can be daunting in your business search, it also creates unique opportunities for those prepared to act decisively. As Buffett’s wisdom reminds us, embracing strategic risk during times of fear can lead to substantial rewards. Those who are sitting on the sidelines today are not winning.
If you’re considering buying a business, now is the time to explore your options. Let’s discuss how you can take advantage of the current market to achieve your acquisition goals.