Update on M&A Marketplace Dec 2025

This week’s article is going to be a bit different in that I want to give you a snapshot of what’s happening in the M&A space for small- to mid-sized independent firms (where we focus). I want to cover three things: activity in our M&A engagements, valuations, and the main point of the article: who are the passive sellers who are contemplating a change.

Buy- and Sell-Side Searches

There are nine Buy- and Sell-Side searches we are conducting or are set to start or restart in the new year. That’s the most concurrent activity we’ve seen, ever.

On the non-conforming side, we are managing another five deals: internal sales, partner buyouts, etc.

Valuations

We’ve performed 53 valuations so far this year, and will probably do another 8 or 10 before the year ends. Some of these precede a full engagement, but most are for planning purposes as firms think about their near and distant futures. We consistently hear how valuable the process is. Each valuation does some limited benchmarking of your firm and assigns a proprietary “Sellability Score”, but we also talk you through the levers in detail and explain what you might want to work on over time.

Passive Sellers

That’s all background to what I really want to write about, which is a database we keep of “Passive Sellers”. These are firms who aren’t ready to go public, but they are open to hearing of opportunities if we come across one that might be a fit. Essentially it’s a window into how thousands of you are thinking. There are only 160 firms or so in this database (submit your name here), but we just started collecting names, and so it’s just a microcosm of what’s afoot in the industry.

I’ve analyzed each of the entries and I’m going to summarize the findings in this list:

• Vast majority are founder-led.
• One-half are $1-3m EBITDA, with the biggest concentration in the $1-2m EBITDA range.
• 97% are <$10m revenue.
• Most represented countries, in descending order: USA, Canada, UK, Australia.
• When you adjust for population, no single state dominates the list.
• Broader areas of focus, in descending order: B2B, Digital/Web, Branding/Design, Content/SEO/UX.
• Biggest vertical focus, in descending order: healthcare, professional services, non-profit, tech, financial services, and higher ed.

That’s the bigger picture. But “why” they are considering an exit is even more interesting. There were three big themes across the ca. 160 recent entrants in the database. And keep in mind that these are self-reported reasons; not things that we have deduced:

• Plateaued Growth. Many report stable revenue but difficulty scaling beyond their current size. This is a top-line observation.
• High Profit Margins but Limited Scale. Many have low overhead and high retainers but also see being acquired as the better prospect to scale. This is a bottom-line observation. In other words, their margins are great, but they want more topline against which they can continue to apply those margins.
• Play on a Bigger Stage. They have ambitious people on the team who want to keep growing in an expanding ecosystem, but who are not in a position to buy the agency from the founder(s). The founders view an exit as “keeping the growth story coming.”

And what makes many of them attractive targets?

• >$1m EBITDA to make a meaningful difference for the acquirer.
• Not too small to lack systems but not too large to complicate integration.
• Established track record of >5 years.
• Limited or manageable client concentration.

One Last Note

The M&A market right now does not mirror the economic market. There’s a lot of uncertainty and slow pipelines in our industry, but you’d never know that given how much M&A activity there is. Just hit reply if you’d like to chat about your situation, either to fix what ails the firm through our advisory work or to think about a valuation or transaction.