AMAA’s Winter Conference 2025 just wrapped up several days of “Deals in the Desert” at the Scott Resort & Spa in Scottsdale, Arizona. We hope many of you were there to enjoy the lineup of educational content and networking opportunities, but for those who missed here, here are some top takeaways from the week’s programming.
Market Recovery Trends – After an M&A activity peak in 2021, 2023 saw significant declines due to high inflation, increased interest rates, and global uncertainty. Last year showed early signs of recovery: “Rates came down off their peak,” said Graeme Frazier, President at PCR Partners. “Plus, lenders started to go a little more risk-on, so the spreads on rates have also come back.” The “Market Update” panelists were generally optimistic for 2025, particularly for the second half.
Evolving M&A Environment – Sharon Heaton, CEO of sbLiftOff, noted that lower mid-market deals ($10–$50 million) are experiencing different pressures compared to larger deals, including stricter due diligence and challenges with financing smaller EBITDA levels.
Foreign Investment and On-Shoring – Andrew Tomat, Managing Director of Four Pillars, Inc., stated that European buyers are increasingly looking to invest in U.S.-based manufacturing to mitigate risks and diversify supply chains.
Challenges in Labor and Supply Chain – Heaton also noted that labor shortages in advanced manufacturing persist, prompting debates about H-1B visas and the growing value of skilled trades over traditional college education.
Strategic vs. Financial Buyers – Allan Siposs, Managing Director of Keystone Capital Markets, said that strategic buyers are dominating larger deals, while private equity is active in smaller, add-on acquisitions due to their flexibility in navigating less-than-perfect targets.
Getting to Know Continuation Vehicles – The event’s second panel examined how Continuation Vehicles allow GPs to transfer high-performing assets from older funds to newly created ones, providing liquidity to LPs while enabling further growth. As Tom Marking, Director, Private Capital, Advisory at William Blair, noted: “These deals can be very accretive to the GP… providing an option for LPs to take liquidity or roll over.”
Valuation and Fairness Concerns – Noam Hirschberger, Partner, PKF O’Connor Davies Advisory LLC, noted that transparency and conflict of interest management are critical for CVs, since the SEC requires fairness opinions for GP-led transactions, emphasizing the need for rigorous third-party valuations.
Market Trends and Constraints – The single-asset CV market has grown tenfold in six years, reaching $30 billion in 2024, but buy-side capital remains a bottleneck. Tom Marking said, “There’s about one and a half years of dry powder relative to annual supply in the secondary market.”
Tax and Structural Considerations for CVs – Tax implications, such as non-recognition of income and asset basis adjustments, require thorough diligence. Jamie Smith, Partner of Forvis Mazars, noted, “It’s a full financial and tax diligence scope of work, pre- and post-transaction.”
The Importance of Pre-LOI Due Diligence – In the “Foundations for Success” panel, Joe Basilico, Principal at Doeren Mayhew, explained that early involvement of financial, legal, and accounting advisors is crucial for identifying red flags. “Get your financial advisors involved early… to identify issues like GAAP non-compliance and messy financial statements.”
Trust and Disclosure – Lindsey Wendler, Managing Director at 414 Capital, said that undisclosed issues, such as legal history or undocumented employees, can erode trust and derail deals. Transparency is critical, from the outset.
Legal and Regulatory Trends – Changes in regulations, such as increased focus on E-Verify compliance, are influencing diligence priorities. Robert Schroeder, Partner at BakerHostetler, noted that sellers should prepare for stricter scrutiny of employee documentation and regulatory compliance.
Early Preparation by Sellers – Jeff Michelson suggested that sellers should engage advisors years in advance to ensure books are investor-friendly and operational risks are minimized. “Money spent early is money well-spent,” said Michelson.
Elongated Deal Timelines – In the “Accelerating Success: Proven Strategies to Shorten Deal Timelines” panel, speakers revealed that deal timelines have increased by 40%-80% since 2010, driven by heightened economic uncertainty, increased data availability, and more diligence on underperforming or B- and C-class assets. Lamar Standley, Managing Director at Highland Rim Capital, said, “Time is certainly in the top quartile of things that threaten deals.”
Common Bottlenecks – Bobby Kingsbury, Managing Director at MCM Capital Partners LP, spotlighted third-party consents, legal inefficiencies, and disclosure schedules as frequent culprits that delay deals. “Third-party consents, especially from irrational actors like landlords, can hold deals hostage,” said Kingsbury.
Streamlined Communication – Tim McCormack, Partner, Private Equity Services at RubinBrown, advocated for tools like data rooms and weekly calls, saying, “Email is not the answer for good communication.”
Keeping Negotiation Face-to-Face – Robert Rough, Co-Founder and Managing Director Telos Capital Advisors LLC, reminded attendees that in-person negotiations can reduce delays and foster trust. “Do it in person,” he said. “Lock the door until the deal is done.”
Impact of Rep and Warranty Insurance – Some buyers use rep and warranty insurance requirements to justify prolonged diligence, according to Kingsbury. “It’s sometimes used as a scapegoat to extend timelines and gain comfort with numbers.”
Alternative Financing Growth – In the “Trends in Financing You Should Know About” panel, Kenneth Saffold, Co-Founder and Managing Partner of o15 Capital Partners, noted that private capital markets, including SBIC-backed funds and non-bank lenders, continue to expand their presence in lower middle market transactions. “The private lending space now holds $3 trillion in deployable capital,” he said.
Leverage and Capitalization Discipline – Leverage levels for smaller deals average 2.5 to 4x EBITDA, with non-bank lenders reaching higher levels for high-quality opportunities with recurring revenue or SaaS models. Stefan Shaffer, Managing Partner at SPP Capital Partners, LLC, said, “In the lower middle market, senior bank lending tends to top out at 2.5x EBITDA.”
Flexibility in Capital Solutions – Creative deal structuring, including debt/equity hybrids, preferred equity, warrants, and unitranche loans, are becoming more common. Todd Morrissey, Founding Partner of Hidden River Strategic Capital, noted that, “Our deals often involve a 70/30 debt-to-equity split, but we can tailor capital structures based on company needs.”
Emerging Tools – Instruments like warrants, claw-backs, and holdco notes provide flexibility for addressing valuation gaps or capital constraints. Morrissey said, “We evaluate any structure that ensures alignment and strong returns.”
Uncertainty Around Future Tax Policies – With a new presidential administration entering the White House, the final AMAA panel focused on “Post-Election Tax Changes.” With many 2017 TCJA provisions potentially set to expire, Greg Wilder, Managing Member of Wilder Tax & Wealth Planning, LLC, said, “If Congress does nothing … individual rate cuts expire, but corporate provisions stay intact.”
Tariffs and International Deals – The rising focus on tariffs could disrupt margins and valuations in cross-border M&A. Greg Wilder, Managing Member of Wilder Tax & Wealth Planning, LLC cautioned, “You can’t rely on the last two years’ EBITDA when tariffs are introduced.”
PTE (Pass-Through Entity) Taxation – The workaround to the SALT cap via PTE taxes is likely to remain, with state-level variations continuing to influence planning. Richard Weiner, Partner at AAFCPAs explained, “PTE rules provide a back-ended way to deduct state taxes federally.”
