Valuations for transactions under $25 million climbed to their strongest level since late 2024 as buyers competed aggressively for smaller acquisition targets despite muted deal volume.
Private equity-backed acquisitions in the lower middle market showed renewed strength during the second quarter of 2026, according to GF Data’s Second Quarter Small Deals Report. Valuations for transactions between $1 million and $25 million in enterprise value (TEV) improved even as the broader middle-market M&A environment softened.
GF Data reported that average TEV/EBITDA multiples for small deals increased to 6.1x in Q2 2026, up from 5.7x in the first quarter and the strongest level since late 2024. Year-to-date valuations reached 6.0x, exceeding both the 2025 full-year average of 5.9x and the dataset’s long-term average of 5.8x.
Smaller Transactions Lead Recovery Despite Muted Deal Volume
Unlike larger middle-market transactions, where valuation growth has been driven by larger platform acquisitions, the rebound in the small-deal market was concentrated among the smallest transactions. Companies valued between $1 million and $10 million saw the biggest pricing gains, while larger businesses in the $20 million to $25 million range saw valuation declines; an unusual reversal of the traditional size premium that typically rewards larger companies with higher multiples. GF Data noted that competition for smaller assets appears to be supporting valuations, suggesting that buyers continue to view these businesses as attractive acquisition targets despite broader market headwinds.
While pricing improved, transaction activity did not follow the same trajectory. GF Data recorded 63 completed transactions during the second quarter and 118 deals through the first half of 2026, putting the market on pace to roughly match 2025 volume levels rather than deliver meaningful growth. The data indicates that buyers remain selective, with valuation gains driven more by competition for quality assets than by an overall increase in deal activity.
Business Services Gains Momentum
Sector performance varied across the small-deal landscape. Business services rebounded strongly, with average valuations improving to 6.0x EBITDA and transaction volume more than doubling to 49 completed deals in the first half of the year.
Healthcare services also improved, reaching 6.9x EBITDA, while manufacturing moved in the opposite direction. Manufacturing valuations declined to 5.4x EBITDA, falling below both recent historical levels and the sector’s long-term average. Much of the weakness was concentrated among manufacturers at the upper end of the small-deal size range.
Outlook
The Q2 data suggests that the lower middle market continues to operate under distinct dynamics from larger private equity transactions. While borrowing capacity has tightened and deal volume remains subdued, strong buyer demand for smaller acquisition targets is supporting valuations. For business owners considering a sale, the market appears to be stabilizing above recent historical norms, particularly for companies in the business services and healthcare sectors.
For advisors and investors, the report highlights the importance of evaluating opportunities by size tier and transaction type rather than relying on broader middle-market valuation trends. As the first half of 2026 showed, the strongest pricing opportunities may be found not in larger businesses, but in the smallest and most competitive market segments.
How Windes Can Help
Whether you are preparing for a sale, evaluating an acquisition, or refining your growth strategy, Windes can help you navigate the M&A process with confidence. Our team provides strategic guidance, financial insight, and transaction support to help you assess opportunities, strengthen deal readiness, and make informed decisions at every stage.
