2025 Is a Favorable time to Consider Selling a Business, as Buyers and Sellers both find factors working in their favor in M&A mergers and acquisitions

The M&A outlook for 2025 has taken a decided uptick since November's election, as key policy and regulatory risks have dissipated. Gone are fears of punitive tax policy on unrealized gains, enhanced regulatory focus on the investment banking community, and aggressive Federal efforts to curtail aspects of specific industries and their access to foreign markets. While some of that fear has been replaced with new concerns, like tariff policy impacts and geopolitical conflict, the investment community is looking for a strong rebound from its 2023-2024 doldrums in 2025.

Beyond politics, the macro climate has improved. Interest rates have declined 75 basis points from their September highs, lowering weighted average cost of capital, and shifting many negative NPV investments to the positive side. While the premium for parking dry powder declines, the risk reward equation has titled some industries into a "risk on" mode.

Business valuations have been both positively and negatively impacted by these trends, creating opportunity for buyers and sellers.

Below, we provide the outlook in 2025 for business buyers and business sellers by industry, suggesting who has the advantage, and why 2025 is attractive to buyers in that industry.

SECTOR VALUATION OVERVIEW

Below we detail the average historical multiples we've seen for businesses under $50M serving these sectors. Obviously, these multiples are impacted by a wide range of factors, but transaction benchmarking gives us an approximate range

Utilities

Energy (Non Renewable)

Energy (Renewable)

Telecommunications and Media

Healthcare

Consumer Discretionary 

Materials

Industrials

Technology

Consumer Staples

Real Estate

Financial Services

ADDITIONAL COMMENTARY

Utilities

The utilities sector is expected to benefit from increased capital expenditures, inflation, and deregulation, positioning it for potential outperformance in 2025. Advancements in AI, and the rapid growth and apparent health of AI as a growth driver are shifting capital investments away from other enterprise software into AI data centers, associated components, and AI server infrastructure. This move is clearly benefitting utilities, who are seeing unprecedented growth in demand for electric generation, transmission, and distribution. Water utilities are also benefitting from a supply/demand imbalance based on weather deviation from historic norms. Outlook is positive in 2025.

Energy

The energy sector, particularly oilfield services, anticipates increased consolidation due to regulatory easing, with significant production growth expected in U.S. shale regions like the Permian basin.

Telecommunications and Media

The telecommunications and media sector is experiencing growth, especially in sports investing, with valuations outpacing the S&P 500 by up to five times, driven by high demand for live sports viewership and media rights.

Healthcare

The healthcare sector is considered defensive, with expectations of decelerated earnings growth compared to more cyclical sectors.

Consumer Discretionary

The consumer discretionary sector has shown strong performance, with significant gains driven by resilient consumer spending. However, future performance will depend on broader economic conditions.

Materials

The materials sector is expected to outperform, benefiting from capital expenditures and inflationary trends.

Industrials

The industrials sector is poised for growth, supported by federal investments in infrastructure and corporate investments in onshoring, which could fuel long-term expansion.

Technology

The technology sector has experienced substantial gains, particularly in mega-cap tech stocks. However, there is caution regarding high valuations and potential deceleration in earnings growth.

Consumer Staples

The consumer staples sector is viewed as defensive, with expectations of stable but slower earnings growth compared to more cyclical sectors.

Real Estate

The real estate sector is expected to outperform, benefiting from capital expenditures and inflationary trends, albeit with some major risks, including US white collar employment trends and the ongoing impact of AI on high paying sectors.

Financial Services

The financial services sector may face challenges, with potential declines in share prices due to concerns over valuations and muted earnings growth.

About ShadowHornet

We’ve played the M&A game with the most aggressive  sharks in finance - and consistently won. Through our experience we’ve learned that many in the M&A industry do not have what we do…integrity, humility, and unyielding dedication to our customers. Despite our success, it’s been made very clear to us. We’re not like them. And that’s exactly why we do what we do the way we do it - to win the right way for our customers.

Each ShadowHornet partner shares a similar background – hyper intelligent hard workers who’ve leveraged their experienced perspective to achieve hard earned success in the M&A world. They’re driven to share that dedication to help clients achieve things they didn’t realize were possible. We all know that authentic, sustainable ROI is earned – never given. 

We guide you through a world of dark shadows and skilled players, looking to extract maximum value from you at your expense. And our name? We wanted something that represented what we are - aggressive winners looking to guide you out of the shadows to an outcome that exceeds your expectations. 

We like to say that ShadowHornet means, “beat the competition before they ever see you coming.” And when you work with us you get that and nothing less, guaranteed. At ShadowHornet we are:

Maniacally-focused on customer ROI.

Razor Sharp. 

Hard Working. 

Versatile. 

With Integrity.

Let's start achieving more, together, contact us at info@shadowhornet.com to get started!