Insights for Financial Advisors, Attorneys, CPAs & Professionals Advising Privately Held Business Owners
October 2026 | Topsail Capital Advisors
M&A MARKET UPDATE – Quality Businesses Are Still Getting Attention
As we enter the fourth quarter of 2026, the middle-market M&A environment remains active—but buyers continue to be selective.
GF Data reported 85 completed middle-market transactions during Q2 2026, matching Q1 activity. Average purchase-price multiples declined modestly from 7.3x adjusted EBITDA in Q1 to 7.0x in Q2. GF Data indicated that the decline appeared to be influenced more by the mix and size of transactions completed during the quarter than by a broad deterioration in buyer pricing.
The important takeaway for business owners is that not every company in the same industry receives the same multiple.
Buyers are increasingly differentiating between businesses based on factors such as:
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- Recurring and predictable revenue
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- Customer and vendor concentration
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- Strength of the management team
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- Owner dependency
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- Historical and projected growth
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- Quality and accuracy of financial reporting
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- Sustainable EBITDA margins
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- Systems, processes and technology
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- Employee retention
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- Competitive advantages and barriers to entry
This is why simply asking, “What multiple are companies in my industry selling for?” doesn’t tell the whole story.
A business may operate in an industry where transactions commonly occur at attractive EBITDA multiples and still trade at a substantial discount because of risks specific to that company.
Conversely, a well-prepared company with strong management, clean financials, diversified customers and consistent growth may attract considerably more buyer interest.
The multiple is only part of the equation. The quality of the business determines where within the range a buyer is willing to pay.
EXIT STRATEGY & VALUE ACCELERATION- Don’t Wait Until You’re Ready to Sell to Get Ready to Sell
One of the most common conversations we have with business owners begins with:
“I think I’m ready to sell.”
Unfortunately, that is often the point when we discover issues that would have been much easier to address two or three years earlier.
At Topsail Capital Advisors, we believe an owner’s exit should be treated as a process—not an event.
Ideally, serious exit preparation begins approximately 2–3 years before a contemplated transaction.
That doesn’t mean an owner must sell in three years. It means the company should begin operating today like a sophisticated buyer may eventually examine it.
That distinction can make a significant difference in both enterprise value and transaction risk.
WHAT NEEDS TO BE FIXED BEFORE GOING TO MARKET?
When Topsail works with an owner through our Exit Strategy & Value Acceleration practice, we look beyond simply calculating an EBITDA multiple.
We want to identify the potential cracks in the hull before a buyer does.
1. Owner Dependency
Ask a simple question:
If the owner disappeared for 90 days, what would happen to the company?
If sales relationships, pricing decisions, operations, vendor relationships and major customer decisions all flow through the owner, a buyer isn’t simply acquiring a business.
They’re acquiring a business and losing its most important employee.
Building management depth and transferring relationships away from the owner can materially reduce this risk.
2. Customer Concentration
Having a great customer isn’t necessarily the same thing as having a great customer base.
If one customer represents 30%, 40% or even 50% of revenue, buyers are going to ask:
“What happens to EBITDA if that customer leaves?”
Diversifying the customer base takes time—which is exactly why this problem is difficult to solve six months before a sale.
3. Financial Statements That Don’t Tell the Story
Privately held businesses are often managed to minimize taxable income.
That strategy can create a problem when it is time to sell.
A buyer is purchasing documented, defensible cash flow, not the owner’s explanation of what the business could have earned.
Legitimate adjustments and add-backs are common in lower-middle-market transactions, but buyers and lenders still need financial statements that can withstand scrutiny.
Clean accounting, consistent reporting and well-documented adjustments can make due diligence considerably easier.
4. Too Much “In the Owner’s Head”
A business may have excellent processes—but if none of them are documented, a buyer may not give the seller full credit for them.
Important procedures should increasingly become part of the company’s institutional knowledge rather than the owner’s personal knowledge.
That includes sales procedures, pricing, employee responsibilities, customer management, vendor relationships and operational processes.
5. Deferred Problems
Owners preparing for an exit sometimes stop investing in the company.
Equipment gets older. Technology isn’t upgraded. Key positions remain unfilled. Facilities aren’t maintained. Marketing expenditures are reduced.
The owner thinks:
“Why spend the money if I’m selling?”
The buyer thinks:
“How much money am I going to have to spend immediately after closing?”
Those are two very different perspectives.
THE BIGGEST MISTAKE? Waiting Too Long to Exit
There is another issue that doesn’t get discussed enough:
Some owners simply hold on too long.
Business owners naturally believe tomorrow will be better than today.
“One more good year.”
“Let’s get revenue to $20 million.”
“I’ll sell when EBITDA reaches $3 million.”
“I want to wait until the market gets a little better.”
Sometimes waiting creates tremendous value.
Sometimes it does the opposite.
Industries change. Competitors consolidate. Technology changes. Key employees leave. Customers disappear. Margins compress. Owners become tired. Health and family circumstances change.
And occasionally an owner discovers that the business they could have sold three years ago is worth considerably less today.
Your Business Doesn’t Know Your Retirement Date.
The best time to begin planning an exit isn’t when an owner has to sell.
It’s while the owner still has options.
An owner with time can improve the company, choose the timing of a transaction, evaluate multiple buyers and walk away from an offer that doesn’t make sense.
An owner who must sell has considerably less leverage.
Optionality has value.
TOPSAIL’S EXIT STRATEGY & VALUE ACCELERATION PRACTICE-
Our goal isn’t simply to help an owner sell a business.
Our goal is to help an owner build a more transferable, less risky and ultimately more valuable company before the sale process begins.
Our process begins by understanding the company today and establishing a realistic baseline valuation. From there, we identify the factors potentially suppressing value and develop a strategy around the areas that can realistically be improved.
Depending upon the company, that may include:
Valuation → Risk Assessment → Value Drivers → Management Depth → Financial Reporting → Customer Diversification → Systems & Processes → Growth Strategy → Exit Readiness → Sell-Side Process
Some owners may be ready to sell immediately.
Others may discover that spending the next 24–36 months improving the company is the better financial decision.
Either way, knowing today is better than discovering it during buyer due diligence.
THE LIGHTER SIDE OF M&A- “But My Business Is Worth $10 Million…”
Owner: “My company is worth $10 million.”
Advisor: “Great. How did you arrive at $10 million?”
Owner: “That’s what I need to retire.”
Unfortunately, buyers have yet to adopt the Retirement Needs Valuation Method.
Other popular valuation methodologies we’ve encountered include:
“My competitor sold for…”
“My friend at the country club told me…”
“I’ve put 30 years into this company…”
and the always popular:
“I know what I’ve got.”
All kidding aside, this highlights an important issue.
The amount an owner needs from a business and the amount the market will pay for the business are two completely different numbers.
That is why valuation should happen before retirement planning reaches the finish line.
If an owner believes the company is worth $10 million but a realistic market valuation is $6.5 million, discovering that three months before retirement creates a problem.
Discovering it three years beforehand creates a strategy.
A NOTE TO OUR PROFESSIONAL ADVISOR NETWORK
Financial advisors, attorneys, CPAs and estate-planning professionals are often the first people to hear an owner say:
“I may want to sell the business in the next few years.”
That’s an important conversation.
You don’t have to wait until the owner is ready to hire an M&A advisor to introduce us.
In fact, we would rather meet them earlier.
Topsail can confidentially help establish where the company stands today, identify potential risks and opportunities, and work alongside the owner’s existing professional advisory team to develop a realistic path toward an eventual transaction.
The objective isn’t necessarily to sell today.
The objective is to make sure that when the day comes, the owner—and the business—are ready.
TOPSAIL CAPITAL ADVISORS
Lower Middle-Market M&A | Business Valuations | Exit Strategy & Value Acceleration | Sell-Side Advisory
Topsail Capital Advisors works with owners of privately held lower-middle-market businesses throughout the United States. From initial valuation and exit planning through buyer outreach, negotiations, due diligence and closing, our team helps owners navigate one of the most significant financial transactions of their lives.
Thinking about an exit doesn’t mean you’re ready to sell. It means you’re ready to plan. Come Sail With Us!
Greenville, South Carolina I Atlanta, GA
(864) 320-9442
Firm Member of the Alliance of Merger and Acquisition Advisors and Certified Commercial Investment Institute.