Week 1 - January 2026

This week: PE dry powder hits record levels, manufacturing multiples show surprising resilience, and new SBA lending changes take effect.

Deals & Announcements

  • Paladin Capital Partners acquires Midwest HVAC distributor - Reported at 6.2x EBITDA, representing continued PE interest in essential services. The deal included a significant earnout component tied to customer retention.

  • Healthcare staffing consolidation continues - Three regional staffing firms announced merger intentions, creating a $50M+ combined revenue entity. Valuation details not disclosed, but sources indicate multiples above historical norms.

  • Manufacturing exit in food processing - Family-owned food ingredient supplier sells to strategic after 45-year run. Deal structure included extended transition period with founder remaining in advisory role.

PE Dry Powder Update: Private equity firms are sitting on an estimated $2.1 trillion in committed capital waiting to be deployed. This capital overhang continues to support valuations in the lower middle market, though deployment pace has moderated from 2024 peaks.

Interest Rate Impact: With rates stabilizing, we’re seeing renewed buyer confidence. Several deals that stalled in late 2025 are now moving forward. Financing availability remains strong for quality businesses.

Multiples Watch:

  • Manufacturing: 5.5-7.0x (holding steady)
  • Business Services: 6.0-8.0x (slight compression)
  • Healthcare Services: 7.0-10.0x (still elevated)
  • Technology/SaaS: 8.0-15.0x (wide variance by growth rate)

Notable Commentary

“The lower middle market remains surprisingly insulated from broader economic uncertainty. Buyers are focused on recurring revenue, customer diversification, and management depth—fundamentals that matter regardless of macro conditions.”

— Industry analyst, Pepperdine Private Capital Markets Report

Regulatory Update

SBA 7(a) Changes Take Effect: New lending limits and fee structures for SBA-backed acquisition financing are now in place. Key changes:

  • Maximum loan amount increased to $5.5M
  • Guarantee fees restructured for loans over $1M
  • Seller financing can now count toward equity injection in certain cases

These changes could meaningfully impact deal structures for transactions in the $3-10M range.

What We’re Watching

  1. Q4 2025 earnings reports - How are portfolio companies performing? Early indicators suggest resilience in essential services, headwinds in discretionary sectors.

  2. Cross-border activity - Canadian and European buyers showing renewed interest in US lower middle market targets. Currency dynamics and market access driving exploration.

  3. Consolidation in professional services - Accounting, engineering, and consulting firms continue to attract aggregator interest. Retirement-driven succession creating opportunities.

Have a deal or trend we should cover? Reach out to our team.

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