Middle-market M&A activity drives economic transformation
Writer: Mariana Hernández
September 2025 — Mergers and acquisitions amongst the middle-market sector have been accelerating across global and U.S. markets in recent years. With middle markets representing one-third of the nation’s private sector GDP, this segment is central to the economic stability of the nation. A mix of demographic transitions, technological disruption, regulatory shifts, and economic uncertainty is fueling a new wave of transactions, creating opportunities for new investors.
“In 4Q24, activity wasn’t as strong but it was still good. A lot of it was due to pent-up demand before the election. Deal flow started to pick up after the election, and demand was there despite not being as vibrant as in years past. The first quarter of 2025 has been crazy. From the economic standpoint, there is some resiliency because there are still deals being done despite market volatility,” said George Crawford, business services group and assistant practice group leader at Butler Snow LLP, in an interview with Invest:.
The U.S. middle market is defined by those companies with annual revenues between $10 million and $1 billion. It currently represents nearly 200,000 businesses and employs around 48 million people. This segment is the backbone of the economy, compensating larger enterprises during crises and consistently providing job opportunities and revenue growth.
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With approximately 12 million privately-held businesses owned by baby boomers, succession has become a pressing issue, with M&A deals unfolding as a consequence. Many industries, such as manufacturing and healthcare services, have fallen into outdated processes that lack innovation and technological upgrades. Many of these middle market businesses thrive on strong, long-standing relationships with suppliers and clients. However, investors acquiring these firms often see opportunities in bringing new strategies and modern practices to unlock growth beyond traditional word-to-mouth networks.
“The transition of leadership is a major issue. Many smaller firms are owned by a small group of equity partners who haven’t adequately planned for succession. […] That’s one reason private equity has entered the space — there’s still value in these firms, but not always the talent pipeline to sustain them,” said Christopher Stout, partner at Rosenberg Rich Baker Berman, P.A., and managing member at RRBB Advisors, LLC, in an interview with Invest:. “The investment has allowed senior partners to retire while helping us recruit top talent, improve technology, and maintain quality.”
U.S. firms are navigating the current complex economy, including rate volatility and a challenging tariffs landscape, through the acquisition of stable, profitable platforms. The lack of trust and the increase in tax policy changes boost M&A activity amongst dealmakers. Additionally, with the U.S. holding approximately $1.4 trillion in private equity dry powder and corporates possessing $3.5 trillion in cash, dealmakers are well-positioned to pursue middle-market opportunities.
Corporations are increasingly executing acquisitions to accelerate digital transformation. Sectors like tech, AI, fintech, and cybersecurity are major M&A targets, and deal values in these industries have more than doubled in recent months. In July, 33 deals in the technology sector were announced with a total deal value of $54.9 billion, more than double the deal value of the same month during 2024 of $24.5 billion.
The middle market is positioned to remain at the forefront of the country’s M&A activity. For business owners, these deals represent a chance to secure succession, attract investment, and modernize operations. For investors, the sector provides an entry into well-established, revenue-generating businesses with strong growth potential. As 2026 shows a clearer tax environment, the middle market is expected to become an even greater player in shaping the economic transformation.
“M&A activity and private equity investment are still strong, though valuations and multiples have softened,” Dan Klapheke, lead managing director/shareholder at CBIZ/CBIZ CPAs, told Invest:. “Exit strategies and capital sourcing remain priorities. Family offices are also becoming more active in investing in midmarket companies.”
