By Lou Sokolovskiy
The mergers and acquisitions (M&A) market has recently been quieter than usual for the big players with professionals whispering that larger transactions are “really struggling to get done” as they’re caught in a web of credit market uncertainty and valuations that just won’t align, according to some of the nation’s leading independent sponsors and other M&A professionals who participated in our May Independent Sponsor Roundtable.
Some even lament that over the past 6-9 months, deal quality has also “deteriorated.” In this subdued landscape, however, a vibrant story unfolds—one where independent sponsors, the nimble underdogs of the M&A world, are seizing the moment and thriving, experts say.
A Buyer’s Paradise
The M&A market in 2025 feels like a rare opportunity for buyers, reminding someone of a “weird stretch in the beginning of” the Covid-19 pandemic before the pendulum swung to favor sellers.
Today, it’s likely the “most buyer friendly market in… 10 years,” said one of over two dozen independent sponsor experts that joined the call. They said that transactions are “happening at sort of depressed valuation certainly compared to what things were a couple years ago.”
Lower entry costs are drawing in savvy investors, particularly independent sponsors who, operating without committed capital, appear to strike deals with greater agility and precision.
According to EY M&A Activity Insights, US private equity (PE) deal volume for transactions over $100 million dropped 3.6% year-over-year in April 2025, signaling a market ripe for those who can move fast.
The Rise of Independent Sponsors
In this quieter market, one segment shines brightly. “Independent sponsor activity is probably… the hottest area of the market,” says a voice from the roundtable, capturing the buzz.
Relying on deal-by-deal financing, these sponsors are finding fertile ground.
“The second half of 2024 proved that sponsors are back in control,” read an X post by Brian Heckler, head of Head of Strategy and Development at Florida-based Virtas Partners, noting the results of a recent PitchBook study saying that sponsor-to-sponsor exits dominated middle-market activity, reaching 51% by count and 56% by value.
But why are they thriving?
It’s a combination of market conditions and their unique playbook. With over $2 trillion in global PE dry powder, as per McKinsey’s 2025 report titled M&A Annual Report, and exit hold times stretching to a record 8.5 years, independent sponsors are stepping in to seize what an expert called “arbitrage” opportunities (strategic exploitation of market inefficiencies).
Crafting Deals with Creativity
In a market where valuations are tricky, independent sponsors, known for creative deal structuring, have the leverage to “have more structure in your transaction whether that’s rollover equity or a note or an earnout,” said one expert.
One deal, for instance, where “70% is an earnout,” is a bold move to bridge the gap between buyer and seller expectations. These structures allow sponsors to “put structure into deals to get valuation kind of where sellers need to be,” ensuring both sides walk away satisfied. Meanwhile, “clean” deals still fetch “a higher multiple,” but assets with flaws often trade with more creative terms.
This flexibility is rooted in relationships—trust, as one professional put it, is “the glue that keeps it going.” A compelling example comes from a deal where a company performed “way better than expected during the acquisition process” after the Letter of Intent (LOI) was signed.
The buyer and seller, bonded by trust built “during that period of exclusivity,” renegotiated terms, slashing the cash purchase price multiple from 7x to 5x while tripling the earnout. This adaptability is where independent sponsors outshine traditional private equity firms, which are often weighed down by rigid processes.
Sector Bright Spots in a Quiet Market
While the broader market lags, certain sectors are buzzing with potential. Technology, logistics, energy transition, and digital infrastructure are drawing attention, with a January study from Morrison Foerster reporting a 27% increase in technology deal value and a 39% surge in sponsor-led buyout value in North America, reaching $1.7 trillion in 2024.
The EY report also points to robust PE activity in high-growth areas, while distressed opportunities in logistics and energy transition offer additional avenues for independent sponsors to flex their muscles.
The Road Ahead
The M&A landscape in May 2025 tells a tale of contrast: a sluggish market for large deals, weighed down by credit woes and valuation struggles, and a thriving niche for independent sponsors. With depressed valuations, creative deal structures, and the power of relationships, they’re navigating challenges with agility. As the Deloitte 2025 M&A Trends Survey Report notes, flexibility is key for dealmakers this year, and no one embodies that better than independent sponsors.
Any creative deal structuring strategies you want to share?
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June 2025
