When is the right time to sell? This key question should be considered at least every year and involves personal factors (like What is your number?), business factors, and macroeconomic factors beyond your control. While the fundamentals of your business matter most, broader economic conditions also play a role in shaping valuations and deal activity.
Paul Daigle from BizAdvisoryBoard and I have been tracking these dynamics closely, especially how they affect MSPs and IT service providers. Here are seven key macroeconomic trends shaping M&A valuations today.
1. Interest Rates & Cost of Capital
Why it matters: Buyers (especially private equity groups) rely heavily on debt financing. Higher interest rates increase their borrowing costs, which usually reduces how much they’re willing—or able—to pay.
Evidence: In the U.S. mid-market, M&A multiples for leveraged deals tend to compress when benchmark rates like the Federal Funds Rate rise. We’ve seen this in past tightening cycles (e.g., 2000–2001, 2007–2009).
Implication: If interest rates ease, valuations may get a modest boost. Conversely, when they stay elevated, buyers demand more conservative deal structures.
2. Capital Markets & U.S. Debt
Why it matters: The U.S. debt load is at historic highs (over 120% of GDP, and projected to reach 200% of GDP by 2050!). Long-term concerns about government spending will push up borrowing costs and tighten access to credit. Weakening the independence of the Federal Reserve will do the same.
Evidence: Periods of fiscal stress often correspond with more selective lending (e.g., post-2011 debt ceiling crisis). This tends to slow M&A activity, particularly for smaller buyers who rely on SBA or mid-market bank financing.
Implication: If credit availability narrows, the pool of qualified buyers shrinks, and valuations may soften—regardless of your company’s quality.
3. Inflation & Operating Costs
Why it matters: Persistent inflation affects both you and your buyers. Higher wage costs and vendor prices can squeeze margins, making a business appear less attractive.
Evidence: MSPs with strong contracts that allow for annual CPI-based price escalators have protected margins better than those with fixed-fee agreements. Learn more about this on my “From Startup to Sale” podcast, Episode 8.
Implication: Businesses with pricing power (i.e., ability to pass along cost increases) retain more value in inflationary environments.
4. Industry Consolidation & Strategic Demand
Why it matters: MSPs continue to be in high demand because of their recurring revenue and embedded customer relationships. Consolidators and private equity funds still view IT services as a “defensive” sector.
Evidence: Even during higher rate environments, MSP multiples have remained relatively resilient compared to cyclical industries like manufacturing or retail.
Implication: A strong MSP with sticky clients can often command premium valuations even in tougher markets.
5. Demographics & Succession Trends
Why it matters: Many IT and MSP owners are baby boomers nearing retirement. This creates a growing supply of sellers, which can affect bargaining power.
Evidence: Surveys show that over 50% of small business owners plan to retire in the next 10 years, and MSP ownership skews toward older demographics.
Implication: A wave of supply may create more competition among sellers, which will soften multiples over time—another reason to consider timing carefully.
6. Global & Tech-Specific Risks
Cybersecurity: Rising cyber risks increase MSP relevance but also expose gaps in compliance and insurance. Buyers pay premiums for firms with strong security offerings.
AI & Automation: Larger buyers are evaluating how automation reshapes MSP delivery models. Businesses positioned as “AI-enabled” may command higher multiples.
Geopolitics: Events that disrupt supply chains (e.g., semiconductors, cloud infrastructure) can shift valuations quickly.
7. International Monetary Patterns
Weakening Dollar: Current US monetary and fiscal policies, a weakening job market, slowing US growth compared to global players, and tariffs are reducing the strength of the dollar. It weakened 9.2% in 2025, and another 2% last month.
Implication: Uncertain. A weaker dollar often incentivizes foreign money to enter the US market, but other factors are countering this trend.
Bottom Line for Owners
Macroeconomic conditions do influence valuations, but your business fundamentals remain the biggest driver of value: recurring revenue, customer stickiness, operating efficiency, and strategic positioning.
If you’re weighing retirement or exit timing, consider:
Selling during a low-rate, high-liquidity environment often yields stronger valuations.
Waiting too long in hopes of a “perfect” market can backfire if broader conditions tighten or if more sellers flood the market.
For many owners, the most profitable course of action comes from preparing the business for sale well before you actually plan to exit—so you’re ready to move when market conditions align.
What You Can Do Now to Be Ready
Book a Meeting
Schedule a 30-minute strategy session with Jeff or Paul to discuss how current economic trends may impact your valuation:
Jeff: https://calendly.com/fms-jeff/30-minute-free-strategy-session-w-jeff-greenspan
Paul: https://bizadvisoryboard.bookafy.com/service/30-minute-Free-1st-strategy-sessionDownload New Free Content
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Warm regards,
Jeff.Greenspan@FinancialModelingService.com