Middle-market M&A activity in North America showed meaningful signs of stabilization in Q4 2024, marking a potential turning point after a difficult period in 2022-2023. Overall deal count and value increased quarter-over-quarter, with the financial services sector and lower-middle-market transactions leading the recovery. Private equity firms began selectively re-engaging as financing conditions improved and clarity around interest rates emerged.

Although overall transaction multiples remain compressed, especially for leverage-reliant upper-middle-market deals, investor sentiment has improved. A more competitive lending environment—fueled by both banks and non-bank lenders—is helping to unlock capital for quality transactions, particularly in the lower-middle-market range.

Looking ahead, expectations of additional Federal Reserve rate cuts in 2025 are likely to support continued momentum. Middle-market participants are cautiously optimistic, and with elevated dry powder on the sidelines, we anticipate a gradual increase in deal activity as buyers and sellers realign on valuation expectations.