Industry Trends
Largest Transactions Closed
- Target
- Buyer
- Value($mm)
Advised Western Milling in their sale to the Western Milling ESOP Trust
Executive Summary
Business Services M&A activity strengthened through Q4 2025, with 930 closed transactions over the last twelve months (LTM), up from 722 in the prior year. Valuations remained constructive, with median TEV/EBITDA at 11.60x and TEV/Revenue at 1.35x, reflecting steady investor appetite for scalable, recurring‑revenue service models.
Strategic buyers accounted for nearly 89% of deal flow, continuing to consolidate fragmented segments such as IT services, outsourcing, facilities management, and human capital solutions. Despite a mixed macro backdrop, demand for efficiency, automation, and digital transformation supported robust activity across the sector.
“This industry has strengthened through 2025 as it was supported by strong demand for outsourced and technology-enabled services,” said Ali Masoud, Director at PCE. “Strategic buyers prioritized predictable cash flows, customer retention, and scalable platforms heading into 2026.” 1
Market Dynamics
Valuations in Business Services held firm in Q4 2025 as buyers prioritized assets with predictable cash flow, technology‑enabled delivery models, and strong customer retention. EBITDA multiples of 11.60x reflect disciplined but active competition for high‑quality platforms, while revenue multiples of 1.35x signal continued interest in businesses with scalable service lines.
Transaction volume rose meaningfully year‑over‑year, driven by consolidation in outsourced services, back‑office automation, and specialized B2B service providers. Labor‑intensive segments continued to face margin pressure, but technology‑enabled operators benefited from expanding demand for workflow digitization and cost‑reduction solutions. 1
Buyer Landscape
Strategic Acquirers: Strategic buyers dominated Q4 2025 activity, representing 823 transactions (88.49%) in the LTM period. Corporate acquirers continued to pursue scale, geographic expansion, and integrated service offerings across IT services, business process outsourcing, environmental services, and professional services. The largest strategic transactions included acquisitions of Steelcase Inc., Aris Water Solutions, and AvidXchange Holdings, reflecting interest in technology‑enabled operations, infrastructure‑related services, and workflow automation platforms.1
Financial Buyers: Financial sponsors completed 107 transactions (11.51%) in the LTM period, selectively targeting recurring‑revenue platforms and niche service providers. Sponsor activity focused on compliance services, advisory firms, and infrastructure‑adjacent businesses. Representative transactions included acquisitions of Heidrick & Struggles International, Wicklander‑Zulawski & Associates, and TierPoint, highlighting continued sponsor interest in human capital, training, and data‑center‑related services. 1
Industry Comparison
Business Services M&A outperformed several cyclical sectors in 2025, supported by stable demand for outsourcing, digital transformation, and cost‑reduction solutions. While valuations moderated from peak levels, the sector remained more resilient than asset‑heavy industries facing higher capital costs. Compared with high‑growth technology segments, Business Services saw steadier but less valuation expansion, reflecting its mix of recurring revenue, labor‑intensive operations, and scalable service models. Looking ahead, the sector is positioned for continued consolidation in 2026 as companies pursue efficiency, automation, and integrated service delivery.
Geographic Expansion
Top U.S. States: Deal flow remained geographically diversified across major hubs. California led all states with 94 transactions, followed by Texas (91), New York (69), Florida (53), and Pennsylvania (52). 1
Cross-Border Trends: Cross‑border activity remained steady, with U.S. business services targets continuing to attract foreign buyers seeking scale, market entry, and access to the world’s largest B2B services economy. International acquirers remained active in technology‑enabled services, infrastructure‑related operations, and specialized professional services.
Notable Transactions
Largest Transactions Closed
| Target | Buyer | Value ($mm) |
| Steelcase Inc. | HNI Corporation | $2,857.90 |
| Aris Water Solutions, Inc. | Western Midstream Partners, LP | $2,753.90 |
| AvidXchange Holdings, Inc. | TPG Capital, L.P.; Corpay, Inc. | $2,088.20 |
| Heidrick & Struggles International, Inc. | Advent International, L.P.; Corvex Management LP | $1,397.20 |
| Purge Rite, LLC | Vertiv Corporation | $1,250.00 |
| Heartland Payroll Solutions, Inc. | Undisclosed | $1,100.00 |
| Paragon Energy Solutions, LLC | Mirion Technologies, Inc. | $585.00 |
Other Financial Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Heidrick & Struggles International, Inc. | Advent International, L.P.; Corvex Management LP | $1,397.17 |
| Wicklander-Zulawski & Associates, Inc. | Red Knot Capital LLC | n/a |
| Thompson Advisory Services, LLC | Mercer Global Advisors Inc. | n/a |
| Jones Lake Management | Leonard Green & Partners, L.P. | n/a |
| TierPoint, LLC | Argo Infrastructure Partners LP | n/a |
Other Strategic Buyer Transactions Closed
| Target | Buyer | Value ($mm) |
| Steelcase Inc. | Undisclosed | $2,857.90 |
| Aris Water Solutions, Inc. | Undisclosed | $3,753.90 |
| AvidXchange Holdings, Inc. | BlackRock, Inc.; The Vanguard Group, Inc.; FMR LLC; MasterCard Investment Holdings, Inc | $2,088.20 |
| Heidrick & Struggles International, Inc. | BlackRock, Inc.; The Vanguard Group, Inc.; Renaissance Technologies LLC; Dimensional Fund Advisors LP; MAK Capital One, LLC | $1,397.20 |
| Purge Rite, LLC | Milton Street Capital, LLC | $1,250.00 |
Source S&P Capital IQ as of 1/3/2026 and PCE Proprietary Data
Emerging Trends
Key trends shaping Business Services M&A:
- Digital Transformation & Service Delivery Optimization
Record U.S. business services contract values—including managed services and cloud outsourcing—rose 21% in Q4 2025, reflecting strong demand for digital solutions. Firms with proven automation and tech adoption are drawing higher buyer interest. This trend showcases that technology modernization is now a core M&A value driver in services.2 - Managed & Cloud‑Enabled Service Expansion
The U.S. managed services and cloud support market is growing fast: 44% of mid-sized companies invest in outsourced DevOps or cloud-native services, and 47% report faster service delivery via outsourcing. Digital service enablement is increasingly critical for client competitiveness. Buyers favor scalable providers that combine operational efficiency with tech adoption.4 - AI & Automation in Outsourcing Operations
AI adoption is accelerating: ~80% of outsourcing providers now integrate automation or generative AI, cutting routine-task costs and improving scalability. This trend is reshaping customer support and IT outsourcing and providers with measurable AI-driven efficiency gains are commanding valuation premiums.7 - Flexible & Skills‑Based Staffing Models
U.S. staffing trends show a marked shift toward skills‑based hiring and flexible workforce solutions, where AI‑enhanced candidate matching and automation have led to up to 50% higher placement quality and ~30% faster time‑to‑hire for firms deploying these tools. These tools are reshaping how labor‑intensive services scale.3 - Subsector Spotlight: Managed Business Services (Facilities & Operations)
Contract value growth in managed services and cloud-enabled operations highlights enterprises’ focus on outsourcing non-core functions. Predictable recurring revenue through service-level agreements makes these firms attractive acquisition targets. Technology adoption and efficiency are key differentiators.2 - Subsector Spotlight: Contact Center & Customer Support Services
Outsourced contact centers help U.S. firms scale customer service while controlling overhead. Providers offering 24/7 support and tech integration enhance retention and satisfaction. Outsourcing is now a strategic efficiency lever, not just a cost-saving tactic.5 - Subsector Spotlight: Tax & Accounting
Consistent industry growth is supported by regulatory changes, heightened audit risk, and increasing complexity in reporting requirements. Consolidation is accelerating as firms acquire niche practices to strengthen their position against larger competitors.
Outlook for Next Quarter
Opportunities: U.S. business services firms can capitalize on continued expansion even amid slowing growth — December’s purchasing managers’ index remained above expansion territory at 52.9 for services — signaling that demand persists despite moderation. Service providers with pricing power and cost‑management technology investments are likely to attract strategic interest as buyers seek stable revenue streams.6
Risks: Slower growth momentum — with the composite purchasing managers’ index sliding to 53.0, the weakest in six months — suggests that new order inflows are softening. This could compress topline growth and delay deal execution among smaller service firms entering early 2026.6
Predicted Activity: M&A activity in business services is expected to remain selectively robust, with deals concentrated in subsectors displaying resilient demand and margin expansion. However, slower macro growth in early 2026 could push some buyers toward smaller, accretive bolt‑on transactions rather than large platform deals.6
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