Industry Trends
Largest Transactions Closed
- Target
- Buyer
- Value($mm)
Advised Western Milling in their sale to the Western Milling ESOP Trust
Executive Summary
M&A activity in the Business Services sector remained robust in Q2 2025, with 811 transactions closed over the trailing 12 months—marking an 8% increase from the prior year. Strategic buyers accounted for nearly 89% of deal volume, continuing to drive consolidation across subsectors such as human capital services, compliance, and IT consulting. Private equity remained active, targeting scalable, recurring-revenue businesses. The sections below detail the trends shaping this performance.
Market Dynamics
While transaction volumes rose in Q2 2025, valuations in the sector softened slightly, reflecting increased buyer selectivity and a heightened focus on profitability and operational resilience. Median TEV/EBITDA declined from 12.43x to 11.60x, and TEV/Revenue fell from 1.56x to 1.50x year-over-year. Buyers remain focused on profitability and recurring revenue, favoring businesses with margin stability in an increasingly selective and cost-conscious deal environment.
Buyer Landscape
Strategic Acquirers: Strategic buyers led with 701 deals (nearly 89% of total), targeting digital transformation capabilities across human capital, compliance, and cloud-based services. Notable transactions included Paychex’s $4.2B acquisition of Paycor HCM and Arthur J. Gallagher’s $1.2B purchase of Woodruff-Sawyer.
Financial Buyers: Private equity firms completed 88 deals, focusing on scalable platforms in consulting, managed services, and outsourced solutions. CenterOak’s acquisition of Now CFO and Court Square’s investment in DCCM reflect continued interest in recurring-revenue, asset-light models.
Industry Comparison
In Q2 2025, the Business Services sector completed 811 deals, increasing its share of M&A transaction volume to 6.6%, up from 5.9% over the LTM. This underscores investor confidence in scalable, service-based business models.
Geographic Expansion
Top U.S. States: California (86 deals), Texas (70), and New York (55) led transaction volume, supported by dense business ecosystems and strong demand for tech-enabled and compliance-driven services.
Rising Activity: States like Georgia (35 deals), Ohio (37), and Virginia (37) saw rising activity, reflecting growing interest in secondary markets with lower operating costs and access to skilled regional workforces.
Notable Transactions
Largest Transactions Closed
| Target | Buyer | Value ($mm) |
| Moss Adams LLP | Baker Tilly US, LLP | $7,000.00 |
| Paycor HCM, Inc. | Paychex, Inc. | $4,230.77 |
| Woodruff-Sawyer & Co., Inc. | Arthur J. Gallagher & Co. | $1,200.00 |
| Giant Cement Holding Inc. | Heidelberg Materials US, Inc. | $600.00 |
| Workplace Options, LLC | TELUS Corporation | $420.00 |
Other Strategic Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| TrailRunner International LLC | Public Policy Holding Company, Inc. | $33.05 |
| Tech-X Corporation | Silvaco Group, Inc. | $7.00 |
| PennJersey Environmental Consulting, Inc. | Integral Consulting Inc. | n/a |
| Geohazards, Inc. | UES Professional Solutions, LLC | n/a |
| Janus Research, Inc. | Ardurra Group, Inc. | n/a |
Other Financial Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Now CFO, LLC | CenterOak Partners LLC | n/a |
| DCCM, LLC | Court Square Capital Management, L.P. | n/a |
| King Financial Group, LLC | Walkner Condon Financial Advisors LLC | n/a |
| Noble Insights Corporation | Slingshot Insights, Inc. | n/a |
| DecisionWise, LLC | TMA B.V. | n/a |
Source S&P Capital IQ as of 7/1/2025 and PCE Proprietary Data
Emerging Trends
Key trends shaping Business Services M&A:
- Digital Strategy as a Differentiator
Firms with visible AI strategies are nearly twice as likely to experience AI-driven revenue growth and 3.5× more likely to capture critical performance gains compared to those without a formal strategy. Professionals using AI save approximately 5 hours per week and around 240 hours per year, equating to $19,000 in value per professional. - Growth Leadership
A growing number of accounting firms are appointing Chief Growth Officers to spearhead acquisitions, expand service offerings, and ready themselves for PE engagement or independence consolidation. - Digital Resilience in Business Services
Strategic as well as financial buyers are placing a premium on firms with operational resilience and niche specialization, safeguarding performance amid macroeconomic uncertainty. - Subsector Spotlight: Engineering Services
Rising investment in U.S. infrastructure is boosting M&A activity in environmental and civil engineering, reinforcing the strength of engineering valuations . - Subsector Spotlight: Staffing
IT Staffing is poised for an uptick in activity in 2025 as both buyers and sellers appear intent on transacting in this sub-sector in the near-term.
Outlook for Next Quarter
Opportunities: With professional services actively deploying AI, firms that develop formal AI strategies are twice as likely to achieve revenue growth and gain approximately 240 productive hours per year per professional—translating to significant efficiency and cost-savings potential for business service providers.
Risks: High wage inflation and growing labor constraints continue to challenge staffing firms—despite resilient M&A momentum, staffing providers face pressure to invest in both recruitment technologies and competitive compensation strategies.
Predicted Activity: Given persistently elevated interest rates and the need for portfolio optimization, Q3 2025 is likely to see increased PE-led carve-outs and divestitures, especially in tech-enabled staffing and specialized business services, as firms seek capital efficiency and strategic alignment.
PCE Transactions
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