Middle-market M&A entered 2026 with renewed momentum, and one of the clearest signs of improvement was the rebound in manufacturing deal activity. After a volatile 2025 in which transaction volume and pricing often moved in opposite directions, Q1 marked a notable shift: completed transactions and average valuation multiples rose together for the first time in five quarters. GF Data contributors reported 80 completed transactions at an average of 7.3x trailing 12-month adjusted EBITDA, both above full-year 2025 levels.
Manufacturing, which had been one of the market’s most challenged sectors last year amid tariff uncertainty and broader macro pressure, emerged as a Q1 bright spot. The sector led major industry categories on the strength of renewed B2B activity, signaling that buyers may be returning to manufacturing platforms after a period of caution. While it is still too early to call the rebound a durable trend, the shift appears more directional than incremental.
The broader recovery was supported by improving credit conditions. Senior pricing on platform deals declined sharply, and platform leverage increased, allowing larger transactions to capture more of the valuation lift. This financing improvement benefited platform underwriting more than smaller deals or add-ons, widening the gap between higher-quality, scalable assets and the rest of the lower middle market.
Deal composition also became healthier. Traditional buyouts climbed back to roughly 86% of activity as leveraged recapitalizations and growth financings eased from their elevated 2025 levels. That matters because Q1’s pricing strength came from the buyout cohort itself rather than alternative transaction structures, suggesting a firmer foundation for price discovery.
Overall, Q1 showed a market that is improving but increasingly selective. Manufacturing’s bounce back stands out because it reverses last year’s defensive sector narrative, when business services held safe-haven status and manufacturing drew heavier scrutiny. The return of buyer interest in manufacturing, combined with better financing terms and stronger platform activity, points to renewed confidence in industrial and B2B assets—though sustained momentum will depend on continued credit availability and buyer conviction.
How We Can Help
In a market where buyer interest is returning but selectivity remains high, early preparation can make a meaningful difference. Our Transaction Advisory Services team supports business owners, investors, and advisors with sell-side Quality of Earnings engagements, diligence readiness, and transaction preparation designed to present clear, defensible financials and reduce friction during the process.
If you or a client is considering a transaction in the current environment, we would be glad to share our perspective on how proactive financial preparation can influence valuation, lender confidence, and overall process dynamics.
As always, please feel free to reach out if you would like to discuss further.
