The middle market has entered a reset phase where momentum is building, but only for the right deals and the right sponsors. Valuations have not fully rebalanced. Credit is tighter, slower and far more selective. And while liquidity remains abundant for high-quality opportunities, lenders and buyers are filtering more aggressively than at any point in the last decade. Against this backdrop, dealmakers are navigating a landscape defined by uneven sector performance, legacy capital structures that no longer pencil and valuation expectations that still have room to converge.
To understand how buyers, sellers and lenders are making decisions in this environment, ABF Journal sat down with two seasoned practitioners who live in the middle of these conversations every day: Tom Goldblatt of Ravinia Capital and Evan Nadler of Crown Partners. Both bring a clear view of what’s changed, what’s working and what will shape the next wave of M&A activity.
They offer candid insight into the new deal math, the structures that unlock stalled negotiations and the themes gaining traction as 2025 approaches. From capital stack creativity to liquidity-first strategies, the message is consistent: today’s market rewards clarity, discipline and a willingness to adjust to a higher-cost world.
What’s your assessment of the current M&A environment in the middle market — are buyers and sellers aligned on valuation and strategy?
TOM GOLDBLATT: The bid-ask gap has narrowed meaningfully in the second half of 2025, but it is not fully closed. Bulge-bracket deals corrected faster; the middle market is still adjusting to higher-for-longer financing costs.
Buyers are paying up for resilient revenue, clean customer concentration and limited tariff/supply-chain risk. Everywhere else, we’re using structure to bridge value.
The practical takeaway is simple: momentum is back, but disciplined expectation management still decides who closes.
EVAN NADLER: From what I’m seeing, the middle market feels sluggish, especially in the asset-heavy industries I tend to work in. There’s real valuation friction — sellers are still anchored to pre-2022 pricing while buyers are underwriting to much tighter credit and thinner margins. Many of these companies are carrying legacy capital structures that are difficult to refinance, and rising input costs have squeezed what used to be dependable EBITDA.
That said, I suspect the story looks different in tech or other growth sectors where capital still chases scale and recurring revenue. But in the capital-intensive parts of the market, deals are only getting done when both sides accept that we’re in a higher-cost, lower-leverage world.
How are PE sponsors and investment banks navigating tighter credit conditions and more selective lender participation in deals?
GOLDBLATT: Regulated banks remain cautious, while private credit has stepped in with decisive, bespoke capital — often unitranche or stretch senior — at execution speed. Sponsors are underwriting more equity and, in the lower middle market, we are again seeing seller notes and PIK-preferred to balance risk.
Well-run processes win. We lead with lender-ready materials, early credit dialogues and a credible deleveraging path, which shortens diligence and reduces re-trades.
NADLER: Liquidity hasn’t disappeared, but it’s a lot more discerning. Lenders are laser-focused on sponsor quality — not just reputation, but the willingness and ability to call capital and support a company when things get bumpy. That’s become one of the biggest underwriting screens.
For good deals with credible sponsors and clean stories, it’s still very much a borrower’s market. There’s plenty of capital chasing those opportunities, and competition among non-bank lenders remains intense. But the difference now is discipline. The market isn’t clearing the “stretch” or story-based credits that would have flown in the past. If the structure makes sense and the fundamentals hold, lenders line up. If not, the deal dies quietly.
What are the defining characteristics of deals that are still getting done efficiently despite the market headwinds?
GOLDBLATT: “Must-do” deals continue to clear because certainty of close outranks price. Covenant pressure, customer risk or capex needs compress timelines and focus minds.
Transactions tied to the AI infrastructure build-out — power, thermal management, grid interconnects and specialized construction — move quickly and often at premium valuations.
Pre-wired capital stacks matter. When private credit indications and seller paper are aligned up front, processes run faster and with fewer surprises.
NADLER: The deals that are getting done efficiently have three things in common: a credible sponsor, a clean capital story and assets that hold up under stress. Lenders want visibility, not hope. Strong working capital management, transparent reporting and a sponsor willing to support the business make all the difference. When those pieces are in place, liquidity is deep and competitive. What’s missing from the market are the stretched structures and story credits — lenders just aren’t chasing those anymore.
What sectors or investment themes are gaining traction heading into 2025 and what are you avoiding?
GOLDBLATT: We are constructive on AI infrastructure and its enablers, selected reshoring-benefit industrials with pricing power and healthcare services where payer visibility offsets labor intensity.
We are cautious on consumer-exposed names with weak pricing power, auto suppliers managing EV mix and tariff volatility, and import-reliant businesses deferring processes unless liquidity forces action.
Our edge is finding non-obvious strategic buyers and synergy value when headline EBITDA is under pressure.
NADLER: Across our world, the most active theme heading into 2025 is liquidity generation — not through M&A, but through capital structure optimization. We’re seeing strong momentum in asset-based refinancings, FILO tranches and hybrid bank–private credit partnerships designed to create incremental runway for companies that aren’t in a position to transact.
Sponsors are using these structures to bridge valuation gaps and preserve equity until markets normalize.
Crown is heavily focused on these situations, helping borrowers unlock liquidity from working capital and fixed assets where traditional term lenders have pulled back. It’s a constructive, solutions-oriented market for those who understand collateral and can execute across both bank and non-bank capital. What we’re avoiding are highly leveraged growth stories or anything reliant on multiple expansion — this cycle rewards credit discipline and creativity, not optimism.
How is value creation evolving beyond cost-cutting to include strategic growth levers like digital transformation, operational efficiency or ESG?
GOLDBLATT: Cash comes first. Working-capital programs, pricing science and SKU discipline produce bankable improvements that make the sale narrative sturdier.
Technology should be pragmatic, not performative. We back automation and analytics that compress cycle times or lift conversion, and we avoid “AI theater.”
Operational ESG plays well when it lowers energy intensity and unit costs. Those upgrades expand the buyer universe and support valuation.
NADLER: For Crown, we’re not the operators driving digital transformation or ESG initiatives directly — our focus is on creating the financial headroom that makes those initiatives possible. In this market, the most immediate form of value creation often starts with liquidity and stability. Through asset-based refinancings, FILO facilities and structured liquidity solutions, we’re helping sponsors buy time and optionality so they can execute operational plans on their own timeline rather than under distress.
CONCLUSION
If there is one constant in this shifting market, it’s that discipline now defines the winners. Deals with clean stories, committed sponsors and transparent financials still attract deep competition. Liquidity solutions are giving companies room to breathe and reposition. And while valuation tension persists, buyers and sellers who adapt to the new cost of capital are finding ways to meet in the middle.
As 2026 unfolds, expect selective aggressiveness, faster movement in sectors tied to AI infrastructure and reshoring and continued creativity across both credit and M&A structures. The middle market is not stalled — it’s sorting. And for those who understand today’s constraints and tomorrow’s opportunities, it remains a highly actionable landscape.
