By Opus Connect
Most advisors think the 2025 discount was about tariffs. The Capstone data says it was about something buyers did to their own balance sheets, and that changes which deals you take.
Here is the read most of the deal community has settled on: the 2025 tariff shock dented multiples, the Supreme Court has now struck the tariffs down, and pricing will drift back to normal. Wait it out, the thinking goes, and the discount lifts on its own.
That read is wrong, and the data that proves it is hiding in plain sight in Capstone Partners' 2025 Middle Market M&A Valuations Index, released in April 2026. Average mergers and acquisitions (M&A) valuations rose to 9.8x EV/EBITDA, up from 9.4x in 2024. A rising average looks like healing, but it's hiding a split, and not the one most people name.
It was never really about tariffs
Look at what buyers did to their own deals. Average net debt-to-EBITDA fell from 6.2x in 2024 to 3.4x in 2025, nearly halving the leverage on transactions in a single year, while interest coverage dropped from 6.0x to 2.9x, so even smaller debt loads got scrutinized harder against cash flow. That is the real event of 2025: buyers stopped paying with cheap debt and started paying with equity and conviction.
Once leverage leaves the table, a buyer can only justify a full multiple on a company whose cash flows they can underwrite with confidence years out. Tariff exposure became the fault line not because tariffs are uniquely dangerous, but because an exposed company's forward margins became un-modelable. "Tariff exposure" is a proxy. What buyers are actually pricing is cash-flow predictability in a market where they can no longer lever past a shaky forecast.
That reframe matters because it tells you the discount does not lift when the tariffs do. The Supreme Court ruled 6-3 on February 20, 2026, that the President lacked authority under the International Emergency Economic Powers Act (IEEPA) to impose the tariffs, but the administration replaced them within days under Section 122 of the Trade Act of 1974, now itself in litigation. Even if every tariff vanished tomorrow, the de-levered buyer still pays up only for predictable cash flows. The sorting outlives the policy that triggered it.
The split is in the distribution, not the average
The 9.8x average barely moved, but the shape underneath it went bimodal. Deals closing in the low double-digit EBITDA range jumped to 40.7% of disclosed multiples in 2025, up from 31.6% in 2024. Quality assets clustered at the top, weaker assets re-priced down, and the middle hollowed out. The single "average" describes almost no actual deal. The market now forecasts that gap as the baseline: Capstone's surveyed bankers expect a typical multiple of 6.8x against a premium of 9.8x for 2026, and 66% expect multiples to barely move. A three-turn spread is the consensus expectation, not a dislocation anyone is waiting out.
What to do before you sign
Re-price your own pipeline against the question buyers are actually asking, which is no longer "is this clean of tariffs" but "can a buyer underwrite these cash flows without leverage." Three moves follow:
- Lead with predictability, not just insulation. A target in an insulated sector with erratic margins still draws a discount in a de-levered market; a contracted, recurring-revenue business in a so-called exposed sector may not. Sell the cash-flow profile first.
- For independent sponsors, the leverage shift is your opening. At 3.4x average leverage, the buyers winning deals are not the ones with the most debt capacity but the ones with a credible operating thesis. That is the sponsor's natural ground, not the strategic's.
- Price the integration roadmap. Add-ons fell to 58.2% of sponsor activity from 61.3%, and the platforms still earning premiums have a defined integration plan and modern systems. A seller who hands a buyer that roadmap sells down the buyer's underwriting risk, which is what a de-levered buyer pays for.
The advisors who win the next two years will not be the ones waiting for tariffs to resolve. They will be the ones who saw that the 2025 repricing was a balance-sheet story wearing a trade-policy costume, and who position every mandate around the cash-flow certainty a de-levered buyer now pays a three-turn premium to get.
Want the underwriting-led positioning playbook that turns this into mandates? Opus Connect's BD workshops give LMM dealmakers the tools to put it into practice.
