GCG’s Q2 2025 Middle Market Update provides an overview of the latest trends in the market, including the recent performance of select sectors and the state of the middle market M&A environment.

Key findings include the following:

• Valuations under pressure: Elevated treasury yields and expensive financing continue to weigh on middle market deal values, keeping bid-ask spreads wide and deal flow constrained.
• Policy shifts reshaping costs: New tariffs, subsidy rollbacks, and trade realignments are beginning to affect margins and deal certainty, lengthening diligence and structuring timelines.
• Private equity on the sidelines (for now): Despite significant dry powder, PE deployment remains selective. Mounting exit pressure could unlock more activity once macro signals stabilize.
• Deal activity uneven but resilient: Q2 2025 middle market M&A volumes declined ~33% from Q1 and remain sluggish, but average deal value climbed to $130M, with high-quality assets attracting strong buyer interest.

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