Industry Trends
Largest Transactions Closed
- Target
- Buyer
- Value($mm)
Advised Western Milling in their sale to the Western Milling ESOP Trust
Executive Summary
The Business Services sector saw measured M&A activity in Q1 2025, with 751 transactions closed (LTM), reflecting a slight rebound from Q1 2024’s 747 deals but remaining below 2023’s peak of 902. Strategic buyers dominated 85% of transactions, while private equity (PE) firms focused on consolidating fragmented subsectors like staffing and facilities management. Valuation moderated multiples, with median TEV/EBITDA declining to 11.43x and TEV/Revenue to 1.27x, down from 12.25x and 1.50x, respectively, signaling a broader shift toward profitability-focused metrics. The following section explores key drivers and trends shaping the sector.
Market Dynamics
Transaction volume showed signs of stabilization in Q1 2025, following a 14% YoY decline from 2023’s peak—largely influenced by persistent macroeconomic uncertainty and higher borrowing costs. Valuation trends indicate a shift in investor focus toward profitability, as revenue multiples declined 13% YoY. Notably, companies with recurring revenue models continued to achieve stronger EBITDA multiples, underscoring a key strategy for business owners navigating a more selective market environment.
Buyer Landscape
Strategic Acquirers: Drove 636 deals (87.2% of total), targeting tech-enabled capabilities in AI, compliance automation, and cloud consulting. Examples include Thomson Reuters’ $600M acquisition of cPaperless.
Financial Buyers: PE firms accounted for 93 deals, prioritizing platform builds in fragmented markets. Silver Lake’s $20.6B take-private of Endeavor Group exemplified large-scale consolidation in tech-enabled services.
Industry Comparison
The Business Services sector showed resilience with transaction volumes stabilizing at 751 deals in Q1 2025, highlighting its attractiveness amid economic uncertainty. Valuation multiples moderated to 11.43x EBITDA and 1.31x revenue, reflecting investors' measured confidence and continued interest in the sector.
Geographic Expansion
Top U.S. States: California (91 deals), Texas (62), and New York (46) led activity, driven by tech hubs and regulatory complexity.
Cross-Border Trends: Nearshoring to Latin America (LATAM) surged in BPO and IT services, offsetting geopolitical risks in Asia.
Notable Transactions
Largest Transactions Closed
| Target | Buyer | Value ($mm) |
| Endeavor Group Holdings, Inc. | Silver Lake Technology Management, L.L.C. | $20,588.00 |
| Summit Materials, Inc. | Quikrete Holdings, Inc. | $12,224.00 |
| cPaperless, LLC | Thomson Reuters Corporation | $600.00 |
| Registered Agent Solutions, Inc. | Wolters Kluwer Financial Services, Inc. | $415.00 |
| Stronghold Digital Mining, Inc. | Backbone Mining Solutions LLC | $219.00 |
Other Strategic Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Educational Partners International, LLC | Markel Group Inc. | $167.70 |
| Fiber Materials Inc. | Tex Tech Industries, Inc. | $165.00 |
| Healthcare Staffing Professionals, Inc. | TrueBlue, Inc. | $42.00 |
| Applied Energy Group, Inc. | ICF International, Inc. | $38.00 |
| TRS Group, Inc. | Parsons Corporation | $36.00 |
Other Financial Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Carolinas Investment Consulting, LLC | CapFinancial Partners, LLC | n/a |
| Berkeley Research Group, LLC | TowerBrook Capital Partners L.P. | n/a |
| The Crom Corporation | Frontenac Company LLC | n/a |
| Geller & Company, LLC | Corient Private Wealth LLC | n/a |
| Aperture LLC | Genstar Capital, LLC | n/a |
Source S&P Capital IQ as of 4/21/2025 and PCE Proprietary Data
Emerging Trends
Key trends shaping Business Services M&A:
- Digital Capability Acquisition
Strategic acquirers are prioritizing digital transformation through M&A, with a sharp focus on technologies like AI, automation, and data analytics. This push is especially evident as companies seek long-term operational resilience and integration of scalable solutions to drive value. - PE-Backed Consolidation
In business services—particularly staffing and consulting—private equity firms continue to execute platform roll-up strategies, leveraging fragmented markets to create operational synergies and expand geographic reach. - Recurring Revenue Premiums
Valuations remain favorable for companies with recurring revenue models, especially in tech-enabled service areas. These businesses are often perceived as lower-risk and more scalable, commanding stronger EBITDA multiples than project-based peers. - Subsector Spotlight: Engineering Services
DOGE-driven reforms have increased compliance burdens and contract unpredictability for defense-focused government contractors. While large primes have remained relatively insulated, mid-sized and ESOP-owned contractors have faced stop-work orders, delayed payments, and increased financial strain—particularly those linked to non-core DoD missions and foreign service support. - Subsector Spotlight: Staffing
Demand for healthcare, IT, and education staffing continues to drive consolidation, particularly for firms with specialized verticals and government contracts.
Outlook for Next Quarter
Opportunities: Demand for tech-enabled cost reduction tools and ESG advisory services is expected to accelerate through acquisitions that deliver process efficiency or meet evolving compliance standards.
Risks: Rising wage inflation and labor costs continue to pressure staffing and business services providers, particularly in labor-intensive verticals.
Predicted Activity: A steady uptick in PE-driven divestitures and carve-outs is expected in Q2, as firms respond to high interest rates and portfolio optimization strategies.
PCE Transactions
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