Navigating the 2025 M&A Landscape: What’s Fueling (and Slowing) Deals in Today’s Market

By Dr. Aaron Mahl, EVP Business Development, iTValuations

you’re an IT business owner wondering whether to buy, build, or sell, you’re not alone—and you’re asking the right question. At iTValuations, we’ve spent the first half of 2025 deep in transactions, valuation modeling, and strategic conversations, and one thing is clear: this market rewards clarity and punishes hesitation.

In our recent webinar, I sat down with CEO Reed Warren and VP of M&A Corey Kerns to unpack what’s driving deal flow—and what’s making business owners hit pause.

Here are some of the key insights that emerged:

1. Turbulence Is Real—But It’s Not the Same as Trouble

Macroeconomic volatility is here: interest rates remain high, tariffs are creating logistical and profitability challenges, and inflation is clouding forecast models. But turbulence doesn’t always mean a market downturn. We’re seeing revenue growth in Q2, even as profit margins lag. Private equity infusion is up nearly 30% in Q1, and that momentum is continuing.

In other words: capital is still flowing. And firms with strong fundamentals—especially $2M+ in EBITDA—are commanding premium multiples.

2. Qualified Small Business Stock (QSBS) Is Back on the Radar

New federal legislation is giving sellers more room to reduce their tax burden. QSBS eligibility has expanded, gain exclusions increased to $15M, and holding periods are now tiered—meaning earlier exits can still benefit.

If your business is structured as a C-Corp (or could be), it’s worth reviewing with your tax advisor whether these updates could shape your timeline or legal structure ahead of a transaction.

3. R&D Tax Incentives and Retroactive Opportunities

Recent changes reinstated full deductibility of domestic R&D expenses—retroactive to 2022. For many MSPs, this could mean six-figure tax credits for investments in process improvement, team development, or internal tools.

If you haven’t explored this yet, talk to your CPA. The window to claim retroactive credits is closing fast.

4. Value Creation Is Shifting: Organic Growth and Operational Maturity Are Front and Center

Whether you’re aiming to sell or simply increase your valuation, the ability to demonstrate consistent organic growth post-COVID is critical. Buyers are scrutinizing sales and marketing engines, revenue mix, and retention strategies more than ever.

Sub-$1M EBITDA firms are finding it tougher to transact unless they present a clear path to scale, or they bundle with others to hit that sweet $2M EBITDA threshold, where multiples jump dramatically.

5. AI: The Next Value Driver—or Value Killer

The market is watching how MSPs respond to AI. Not having a strategy is starting to show up in lower valuations. On the flip side, firms helping clients navigate automation, AI implementation, or AI-readiness are becoming increasingly attractive to buyers and investors alike.

If you’re not leaning into this space, it may be time to reconsider your timeline—or your roadmap.

6. The Strongest Sellers Are Preparing Earlier and Smarter

Sellers seeing the best outcomes are planning ahead—financially, operationally, and emotionally. Owner dependency, succession planning, and cultural alignment are driving deal terms just as much as trailing 12-month EBITDA.

Start by assessing where you are. What’s your growth trajectory? How resilient is your revenue mix? How prepared is your leadership team?

Looking Ahead

Whether you’re aiming to grow, acquire, or prepare for an eventual exit, clarity is your best asset. The most successful business owners in today’s market are asking hard questions and acting with intention—before they’re forced to.

If you’d like to explore what a strategic path forward looks like for your business—whether that’s scaling through acquisition, optimizing value pre-exit, or simply getting clear on where you stand—connect with us. We’re here to help you navigate the landscape ahead.