A company sale takes months. Getting a company ready to sell takes years. Most owners plan for the first part, and the second part is where the value is decided.

By the time a business goes to market, most of what a buyer will pay for, or discount, is already set: how clean the numbers are, how much depends on the owner, and which customers carry the revenue. Owners who treat preparation and the sale as one timeline keep more of what they built. Owners who start the clock when an offer arrives usually learn in diligence what they could have fixed.

Here is what the evidence says that gap is worth, and where to begin.

Buyers pay a premium for quality

Buyers pay more for a well-run business, and the gap is measurable. In the first half of 2026, private equity buyouts of companies with above-average margins and growth averaged 7.1x trailing EBITDA, according to GF Data. Other buyouts averaged 6.8x.

Margins and growth rarely change much in the six months before a sale. Both are built over years, through pricing, cost discipline and the customers you choose to serve.

A 0.3x difference sounds small until you apply it. On $10 million of EBITDA, it is $3 million of enterprise value for the same earnings.

The headline price is not the whole price

How much of the price arrives at closing depends on how far the buyer trusts what it has seen. When a buyer can’t get comfortable with a forecast, it moves part of the price into an earnout, paid only if the business hits future targets. In 2025, about a quarter of private deals outside life sciences included one, according to SRS Acquiom.

And earnouts often pay far less than their headline value. Overall, sellers collect about one in five potential earnout dollars. In lower middle-market deals that hit any target at all, the median payout is 43 cents on the dollar.

This is where preparation pays off. Every problem a buyer uncovers in diligence is a reason to reopen the price, either cutting it or shifting more of it into earnouts and escrow.

Most owners start too late

Even a sale that goes well takes most of a year. In the IBBA and M&A Source Market Pulse survey for Q2 2026, lower middle-market deals averaged 11 to 12 months from engagement to close. Yet across the five market sectors surveyed, 60% to 90% of sellers had done less than a year of exit planning, or none at all.

Buyers are not the constraint. In the same survey, 87% of deals over $5 million drew at least three offers, and a third drew ten or more. Readiness is the constraint.

For many owners, the business is also the retirement plan. Owners in that position cannot afford to sell on someone else’s timeline, or to take an unsolicited offer because nothing else is ready.

Where to start

The best time to prepare is two to three years before you plan to sell, though even one year helps. Each step below raises what a buyer will pay, or shrinks what it will hold back:

• Know your number. Get an independent valuation and learn what drives it.
• Make the financials diligence-ready. Reviewed or audited statements, a consistent monthly close and a sell-side quality-of-earnings review answer questions before a buyer asks them.
• Know your working capital. Nearly every deal adjusts the price against a working capital target. Set your own baseline before a buyer proposes one.
• Make yourself less essential. If customer relationships, pricing and key decisions run through you, build the team that can carry them.
• Reduce concentration. A customer or contract that carries too much of your revenue takes years, not months, to offset.
• Clean up the paperwork. Customer contracts, leases, licenses and any open disputes will all be read in diligence. Find the problems first.
• Decide what you want. Timing, your role after closing, how much cash you need at close and the kind of owner you want for your people all shape the right deal.

Start before you need to

Most owners sell a business once. The ones who get the outcome they wanted usually started preparing long before they decided to sell.

If you might sell within five years, start the conversation now, while there is still time to act on what you learn. We are glad to have it with you, whether or not a transaction is on the horizon: info@jamesearlco.com.

Contact Us

Sources

1. Middle-Market M&A Regains Its Footing as Growth Takes Priority, Association for Corporate Growth (ACG), October 1, 2026 (GF Data figures).
2. M&A Earnout and Milestone Trends, SRS Acquiom, 2026.
3. The Market Pulse Survey Q2 2026 Reports the Latest Trends in Business Sales up to $50M, IBBA and M&A Source via PR Newswire, August 25, 2026.

Back to all insights

The first half of 2026 gave owners a mixed picture. Private equity fundraising picked up in the second quarter and exit value nearly doubled, but lenders cut leverage and raised prices on middle-market deals. The result: capital is available for good companies, on tighter terms.

Fundraising improved, but slowly

Capital raised by private equity funds rose to $191 billion in the second quarter, according to Preqin. Raising a fund still takes time, though: more than half of the funds that closed took between 19 and 30 months to get there.

Managers are not short of money to invest. Funds raised since 2021 hold far more uninvested capital than earlier funds did at the same stage, according to data from Private Equity International. That capital has to be put to work, which supports demand for good companies.

Deals held up, and exits came back

Deal value softened in the second quarter from an unusually strong first, Preqin reports. Even so, its midyear data has private equity on track to beat its 2025 full-year deal value. Buy-and-build led the way: add-on acquisitions made up more than half of global private equity deals in the first half.

Exits picked up sharply. Exit value nearly doubled in the second quarter, to $206 billion, even as the number of exits fell. The pattern was fewer, larger sales, and private equity-backed IPOs and follow-on offerings rose to 30, the most in a quarter since late 2024.

Lenders grew more selective

Middle-market debt got harder to come by as the half went on. On new platform buyouts tracked by GF Data, average total debt fell to 2.9x EBITDA in the second quarter, from 3.4x in the first. The average rate on senior debt rose to 7.8%, from 7.2%, which had been its lowest reading since 2022.

Less debt means buyers have to bring more equity to pay the same price. GF Data’s average purchase price slipped to 7.0x EBITDA, from 7.3x, though it attributes the dip to a mix of smaller deals rather than weaker bids.

What it means for owners

For a well-run company, capital is available. Investors have money to deploy, and buy-and-build keeps add-on buyers active. But lenders and equity investors are more selective than they were at the start of the year, and they are pricing risk more carefully.

• Expect more equity in the structure. With less leverage on offer, buyers fund more of the price themselves. Some will ask sellers to share the risk through an earnout, a seller note or equity rolled into the new company.
• Know the options short of a full sale. A minority recapitalization or a debt-funded dividend can provide liquidity while you keep control.
• Prepare for a careful buyer. Clean financials, documented contracts and a strong team below the owner are what get a deal financed on good terms.

If you are weighing a capital raise or a sale, we are glad to talk through how today’s market would treat your company.

Contact Us

Sources

1. Private Equity Q2 2026: Preqin Quarterly Update, Preqin, July 31, 2026.
2. Deal Flow Monitor: H1 2026, Preqin, August 16, 2026.
3. Data snapshot: Dry powder builds up in post-2021 PE funds, Private Equity International, October 12, 2026.
4. GF Data Reports Show Steady Middle-Market Deal Flow Amid More Selective Financing Conditions in Q2, Association for Corporate Growth (ACG), August 27, 2026.

Back to all insights

The industrial middle market heads into 2027 open for business but more selective. Deals are closing at a steady pace near 7x EBITDA. But debt has grown more expensive since early this year, and buyers are paying up only for businesses they can underwrite with confidence. For owners, preparation will matter more than timing.

Deal flow is steady and prices are holding

Deal flow in the middle market has settled into a steady rhythm. Private equity firms reporting to GF Data closed 85 deals in each of the first two quarters of 2026. At that pace, the full year would finish about 10% ahead of 2025.

Prices have held near 7x EBITDA. The average was 7.0x trailing EBITDA in the second quarter, down from 7.3x in the first. GF Data attributes the dip to the mix of deals that closed, which skewed smaller, rather than to weaker bids.

Buyers are paying for predictability

The right businesses still draw strong competition. What buyers pay up for is predictability: revenue that repeats, margins that hold through a cycle, and a team that can run the company without the owner in every decision.

In our sectors, that looks like an electrical contractor with multi-year utility service agreements, a distributor whose customers have bought from it for a decade, or a repair station whose certifications took years to earn. Each gives a buyer reason to believe next year’s numbers. A contractor that wins large, lumpy projects can sell well too, but it has to show the signed backlog and job margins behind those wins.

Many of the most active buyers are private equity-backed companies adding to a business they already own. For them, fit can matter as much as size.

Debt costs more, and lenders are choosier

Financing is where the market has tightened. On new platform buyouts tracked by GF Data, average total debt fell to 2.9x EBITDA in the second quarter, from 3.4x in the first. The average rate on senior debt rose to 7.8%, from 7.2%.

Then in September, the Federal Reserve raised its benchmark rate by a quarter point, to 3.75%–4%, its first increase since 2023. The Fed said inflation “remains elevated.”

Less debt per deal means buyers fund more of the price with their own equity. That makes them more careful about what they pay for. It also makes them more likely to ask a seller to share the risk through an earnout, a seller note or equity rolled into the new company.

Three things to watch in 2027

• Federal infrastructure money. The surface transportation programs of the 2021 infrastructure law ran through September 30. A stopgap signed September 2 extends them through December 11 (AASHTO Journal). A five-year replacement, the BUILD America 250 Act, has cleared the House Transportation and Infrastructure Committee but has not become law. Expect buyers to ask contractors how much of their backlog depends on federal money.
• Power demand. The U.S. Energy Information Administration expects commercial electricity use, which includes data centers, to grow 2.8% in 2027 and industrial use to grow 2.7%. That load needs generation, transmission and the contractors and suppliers who build and maintain them. We expect businesses that serve that build-out to stay in demand.
• The cost of money. If the Fed raises rates again, debt gets more expensive and buyers lean harder on equity and deal structure. An owner who is ready to sell can pick a window instead of waiting for one.

What it means for owners

The market rewards owners who are ready. If a sale or a capital raise is possible in 2027 or 2028, the work starts now:

• Have your numbers reviewed before a buyer does. A sell-side quality of earnings review finds problems while there is still time to fix them.
• Document your backlog and contracts. Show who the customer is, how long the work runs and what it earns.
• Know your exposure. Measure how much revenue depends on federal funding, a few large customers or a single market.
• Build the team below you. Buyers pay more when the business does not depend on its owner.
• Talk to an advisor early. The right window depends on your sector, your numbers and the buyers active in your space.

Preparation takes longer than the sale itself. For what preparation is worth in price and terms, see How much value are you leaving on the table?

Contact Us

Sources

1. GF Data Reports Show Steady Middle-Market Deal Flow Amid More Selective Financing Conditions in Q2, Association for Corporate Growth (ACG), August 27, 2026.
2. Federal Reserve issues FOMC statement, Board of Governors of the Federal Reserve System, September 16, 2026.
3. House Passes Senate CR to Extend Federal Gov’t Funding, AASHTO Journal, September 3, 2026.
4. Short-Term Energy Outlook, October 2026, U.S. Energy Information Administration, October 6, 2026.

Back to all insights

Data centers are all the rage. Spending to build them is rising faster than economists can easily describe, and most of the businesses we work with touch them in some way, from electrical and mechanical contractors to engineers, distributors and service providers. A boom can make a company bigger. Only preparation makes it more valuable. The owners who plan early are the ones who turn a great run into a great outcome.

The boom is real, and still accelerating

Data center construction spending in August was more than 73% above its level a year earlier, according to Census figures analyzed by Associated Builders and Contractors and reported by ENR. Since March, it has grown at a 149% annualized pace. “Frankly, it’s becoming difficult to contextualize the size and speed of this boom,” said Anirban Basu, ABC’s chief economist. Roughly one in six ABC member contractors now have data center work under contract, the highest share the group has recorded.

The power behind it is growing too. The Department of Energy estimates that data centers used about 4.4% of U.S. electricity in 2023 and could use 6.7% to 12% by 2028. That demand runs through substations, transmission lines, generators, switchgear, cooling and fiber, and through the contractors, engineers, distributors and service providers who deliver them.

A boom brings its own risks

Fast growth strains the very things buyers look at hardest:

• Concentration. A handful of data center owners and general contractors can quickly become most of your revenue. If one of them pauses a campus, your year changes.
• Capacity. Skilled people are the bottleneck. In a survey by the Associated General Contractors and NCCER, 58% of firms doing data center work said it had increased competition for skilled workers.
• Cash. Bigger jobs mean bigger payrolls, more materials and more retainage to carry before you are paid, and they demand more bonding capacity.
• Margins. Costs are climbing again. Construction input prices were 8.9% above their year-earlier level in August, according to ABC. Fixed-price work signed months ago can erode quickly.
• The cycle. Technology spending moves in waves. Plan for a slowdown even while the order book is full.

Grow without breaking

The owners who come out of a boom in the best shape use it to build something that lasts:

• Spread the work. Serve several owners, contractors and regions, and use your data center experience to win adjacent work in power, utilities and advanced manufacturing.
• Build the service side. Data centers run around the clock and need maintenance, testing and upgrades for decades. Recurring service contracts are worth more to a buyer than one-time installation work.
• Write better contracts. Escalation clauses, clear change-order terms and payment schedules that keep cash moving protect margins when costs rise.
• Invest in people. Training programs, retention plans and a strong safety record let you add capacity without losing quality.
• Upgrade your systems. Job costing, backlog reporting and a monthly close that keep pace with growth are what let a buyer trust your numbers.

What buyers will pay for

Buyers want data center exposure. What they discount is data center dependence. Expect them to ask how much of your revenue comes from a few customers, whether this year’s margins can be repeated, how much of your backlog is signed and what your business looks like if spending slows.

A company that answers those questions with data, showing a broad customer base, recurring service revenue and margins that hold, earns a premium and gets more of the price at closing rather than in an earnout. A company that cannot will find buyers pricing in the risk for it, and treating this year’s results as a peak rather than a new baseline.

Get advice before you need it

The best time to plan is while growth is visible and every option is still open. An early conversation can help you decide whether to keep growing, raise capital or sell, and when. It can show you which buyers value your work most, from strategic acquirers to private equity platforms. And it can tell you what to fix now so this year’s results count fully in your valuation.

Waiting has a cost. If the cycle turns before your business is ready, the market sets the timing and the terms. Owners who prepare early sell on their own schedule, from a position of strength.

If your business touches data centers, we would welcome the conversation now, while you have the most options.

Contact Us

Sources

1. Data Center Construction Spending Accelerates at 149% Annualized Pace, Engineering News-Record, October 1, 2026.
2. DOE Releases New Report Evaluating Increase in Electricity Demand from Data Centers, U.S. Department of Energy, December 20, 2024.

Back to all insights

For most of the last decade, project-based contractors were the ugly duck of industrial services M&A. Buyers wanted recurring revenue: maintenance agreements, service contracts, inspection routes. A business that won its work one bid at a time, and had to win it again the next year, was harder to underwrite and was usually priced that way.

That view is changing fast. Private equity is buying the trades at a record pace, and much of the demand behind it is project work, led by data centers. For owners of electrical, mechanical and specialty contracting businesses, that opens a window. Getting full value through it still takes preparation.

Why buyers used to pass

The objections were familiar. Revenue was lumpy and tied to a backlog that could run off in a slow year. Fixed-price bids put margin at risk on every job. Key relationships with general contractors and developers often sat with the owner. And unlike a service route, a finished project did not renew itself.

None of those concerns has gone away. What has changed is how buyers weigh them against what a strong project contractor brings: trained crews, licenses, bonding capacity and a record of delivering complex work on time.

What changed

Three things moved at once.

Deal activity. PitchBook reports that private equity activity in construction and engineering hit a record 529 deals in the second quarter of 2026, up 56.5% from a year earlier. HVAC contractors logged 76 PE deals worth $3.8 billion in the first half of the year, already more than the 63 completed in all of 2025. Electrical contractors recorded 38, also topping last year’s total.

Backlog. Backlogs are growing. The Construction Backlog Indicator from Associated Builders and Contractors rose to 8.7 months in September, Construction Dive reported. Contractors with data center work under contract, about 15% of ABC members, reported 11.3 months. Work booked further out makes project revenue more visible than it used to be.

Labor. Skilled people are the binding constraint. In the 2026 workforce survey by the Associated General Contractors of America and NCCER, 87% of firms reported openings for hourly craft workers, and 88% of those firms said the positions were as hard or harder to fill than a year earlier. A buyer cannot build a trained, safe, licensed workforce quickly. It can acquire one. More and more, buying a project contractor means buying capacity in a market that cannot get enough of it.

The swan test

Interest is not the same as value. Buyers are competing for project contractors, but they pay most for the ones that can prove the quality of their work and their numbers. Margins are the pressure point: in the same ABC survey, more than one in four contractors expected profit margins to shrink over the next six months, the highest share since November 2025. Expect diligence to focus on five questions:

• Is the backlog real and profitable? Signed versus verbal awards, contract type, expected margin by job and the share that comes from repeat customers.
• Do margins hold from bid to closeout? Job-level history showing that estimated margins survive to completion, without a pattern of fade or unbilled change orders.
• Can the WIP schedule be trusted? Percentage-of-completion accounting, over- and under-billings, and a work-in-progress report that ties to the financial statements.
• Who runs the work? Depth among project managers, superintendents and foremen, and whether customer relationships sit with the team or only with the owner.
• How is risk managed? Safety record, bonding capacity, and contract terms on escalation, delays and retainage.

A different pond

The objections to project-based businesses have not gone away. What has changed is the market around them. With deal activity at record levels, backlogs stretching further out and skilled labor this scarce, a contractor that can show durable margins and a deep team is increasingly valued as scarce capacity rather than as a cyclical risk.

The duck hasn’t changed. The pond has.

Contact Us

Sources

1. AI data center boom sends PE into the trades, PitchBook, August 31, 2026.
2. Contractors’ backlog jumped in September as profit outlook fell, Construction Dive, October 14, 2026.
3. 2026 Workforce Survey Analysis, Associated General Contractors of America and NCCER, September 2026.

Back to all insights

Reshoring has been a headline for years. For regional distributors, the payoff is arriving in a different form than the headlines suggested. Groundbreakings are slowing. The plants they produced are now running, and running plants buy every day.

That shift favors distributors with local inventory, technical people and real service capability, and it is drawing buyers who want exactly that.

What reshoring means

Reshoring is the return of manufacturing to the United States after it had moved overseas. Two related trends often travel with it: foreign direct investment, when companies based abroad build or expand plants here, and nearshoring, when production moves to a nearby country such as Mexico instead of coming home. The Reshoring Initiative’s job counts combine reshoring and foreign direct investment.

The reasons have shifted. In the Reshoring Initiative’s 2026 survey with Regions Recruiting, manufacturers that had reshored since January 2025 cited tariffs (67%) and geopolitical risk (61%) almost equally, according to Harry Moser, the group’s founder. Supply chain resilience, skilled labor, proximity to customers and government incentives also weigh on the decision. The choice of where to manufacture, he writes, “is no longer based on cheap labor or price alone.”

For a distributor, the label matters less than the address. A plant in your territory buys the same supplies whoever owns it.

Fewer groundbreakings, busier plants

Spending on new factories is falling. Manufacturing construction spending in August was 19.2% below its level a year earlier, according to Census Bureau data reported by Modern Distribution Management.

Activity inside the plants tells a different story. The Institute for Supply Management’s manufacturing index registered 54.5% in September, the ninth straight month of expansion, IndustryWeek reported. New orders grew faster, at 55.3%. Any reading above 50% signals growth.

The pipeline of new capacity has not dried up either. The Reshoring Initiative counted about 247,000 manufacturing jobs announced through reshoring and foreign direct investment in 2025, in line with 2024, and projects about 309,000 for 2026, Moser wrote in September. More than 2.3 million such jobs have been announced since 2010. As those projects come online, each new plant becomes a customer.

The biggest obstacle: skilled workers

As plants shift from construction to production, the constraint on reshoring is no longer capital. It is people. The Reshoring Initiative’s 2026 survey found that workforce remains the binding constraint on how much reshoring can happen, and employers reported the hardest hiring in the skilled trades, especially technicians and maintenance and repair staff.

The longer view is no easier. A study from The Manufacturing Institute estimates that manufacturers could need as many as 3.8 million additional employees between 2024 and 2033, and that 1.9 million of those jobs could go unfilled if manufacturers cannot close the skills and applicant gaps. Today’s plants are highly automated, and the people who can keep that equipment running are among the hardest to find.

Why running plants favor regional distributors

A plant under construction buys from contractors and equipment makers, often through national accounts. A plant in operation buys maintenance, repair and operating supplies every week: replacement parts, bearings and power transmission, fluid power, electrical components, cutting tools, safety gear and packaging. And it needs them fast. Unlike construction work, that demand does not end when the ribbon is cut. It lasts as long as the plant runs.

That is where a strong regional distributor earns its place: inventory close to the customer, reliable delivery, and technical people who can help a maintenance team when a line goes down. With maintenance technicians this hard to hire, many plants also lean on suppliers for vendor-managed inventory, repair services and product training.

That is also what buyers want. National distributors and private equity-backed platforms grow by acquiring regional businesses that bring customer relationships, supplier authorizations and technical talent they cannot easily build themselves.

What buyers look for

A distributor is valued on how durable its earnings are, and diligence follows that:

• The line card. Which manufacturers you represent, on what terms, and whether those authorizations survive a change of control.
• Gross margin and pricing. Margin by product line and customer, and the discipline to pass supplier price increases through.
• Customers and end markets. Concentration, program business versus spot buying, and how much revenue comes from plants that are growing.
• Inventory. Turns, aged and obsolete stock, and how reserves are set. Buyers will not pay for inventory that will not sell.
• Services. Vendor-managed inventory, kitting, repair and engineering support that make you hard to replace.
• Systems and people. Branch-level profitability, a reliable ERP system, e-commerce capability, and outside sales and technical staff who will stay.

Where the opportunity sits

Reshoring is usually told through groundbreakings and job announcements. For distributors, the more durable opportunity comes once plants are running: years of maintenance, repair and operating demand from customers who are short on skilled hands. The distributors best placed to capture it pair local inventory with technical expertise and service, the same qualities buyers look for.

Contact Us

Sources

1. The Next Wave of Reshoring, Trade & Industry Development, September 23, 2026.
2. August U.S. Construction Spending Unexpectedly Jumps, Modern Distribution Management, October 1, 2026.
3. September ISM Report: Manufacturing Industry Extends Expansion Streak for Ninth Consecutive Month, IndustryWeek, October 1, 2026.
4. Manufacturers Need as Many as 3.8 Million New Employees by 2033, The Manufacturing Institute, April 3, 2024.

Back to all insights

Three of the country’s biggest infrastructure programs are running at once. Utilities are rebuilding the grid, water systems are replacing aging pipe, and states are putting federal broadband money to work. All three run through the same kind of company: the contractors, engineers and specialty service firms that build, inspect and maintain the networks.

Few corners of the middle market draw sponsor capital as consistently. If you own one of these businesses, the reasons are worth understanding, because they shape what buyers will pay for and how they will test it.

The spending is committed

The demand behind these businesses is long-dated, and much of it is already funded.

• Grid. America’s electric companies are projected to invest $239 billion this year alone and $1.4 trillion through 2030 in transmission, distribution and new generation, according to the Edison Electric Institute.
• Water. The Environmental Protection Agency’s most recent needs survey puts the country’s 20-year drinking water infrastructure need at $625 billion in 2021 dollars, with $420.8 billion of that for transmission and distribution pipe.
• Broadband. In August, the National Telecommunications and Information Administration approved the last of all 56 state and territorial final proposals under the federal BEAD broadband program, moving it from planning toward construction.

This is not a single construction cycle. Grid and water work stretches over decades, and much of it is replacement and maintenance that cannot be put off indefinitely.

Why sponsors are drawn to it

Capital is plentiful. Unlisted infrastructure funds raised a record $216.1 billion in 2025, up from $135.5 billion in 2024, and as of early July, 731 infrastructure funds were in market globally seeking a combined $463 billion, according to Preqin.

The country’s largest bank is moving in the same direction. JPMorganChase has launched a $1.5 trillion, 10-year plan to facilitate, finance and invest in industries critical to national economic security, with grid resilience, battery storage and distributed energy among its focus areas, and it will make up to $10 billion of direct equity and venture investments. Together, that is a large pool of money looking for businesses with infrastructure-like qualities, and many infrastructure services companies fit that profile.

What draws sponsors to services businesses in particular is the shape of the revenue:

• Recurring work. Utilities, municipalities and carriers often award multi-year master service agreements, which turn project work into a steady flow of orders.
• Creditworthy customers. Regulated utilities and public agencies are reliable payers, which lowers risk for buyers and lenders alike.
• Necessary work. Aging pipe, poles and lines have to be replaced, and regulators require much of the inspection and maintenance.
• Financing capacity. Predictable, contracted cash flow supports more debt, and in a leveraged buyout, more debt capacity usually means a higher price.

That last point is where capital markets meet valuation. Two businesses with the same earnings can command very different prices depending on how confidently a lender can underwrite them.

What sponsors underwrite

Sponsors and their lenders will test whether the revenue really behaves like infrastructure:

• The agreements. Term, renewal history, pricing and escalators, and whether you are a sole provider or one of several.
• Concentration. A few large utilities can make up most of the revenue. Buyers will weigh the depth and tenure of each relationship and the risk of a lost renewal.
• Storm and emergency work. It is profitable but unpredictable, so buyers tend to normalize it out of earnings. Report it separately.
• Crew economics. Revenue and margin per crew, utilization, and the cost of keeping a fleet current.
• Safety. Many utilities will not use a contractor with a weak safety record. Incident rates and experience modifiers are core diligence items.
• Timing. Rate cases, grant disbursements and permitting can shift when work arrives. Buyers want to see how the business has handled delays before.

A long runway

Grid, water and broadband work will run for years, and a record pool of infrastructure capital is looking for businesses tied to it. Among services companies, sponsor interest is strongest in those whose revenue holds up under a lender’s scrutiny: contracted, recurring and well documented.

Contact Us

Sources

1. America’s Electric Grid Delivered Record-Breaking Output as Heat Dome Blanketed the Nation, Edison Electric Institute, July 9, 2026.
2. 7th Drinking Water Infrastructure Needs Survey and Assessment: Fact Sheet, U.S. Environmental Protection Agency, April 2023.
3. Closing the Digital Divide Once and for All: NTIA Announces All 56 BEAD Final Proposals Now Approved, National Telecommunications and Information Administration, August 25, 2026.
4. Unlisted infrastructure in 2026 and why selectivity matters, Preqin, September 9, 2026.
5. JPMorganChase launches $1.5 trillion Security and Resiliency Initiative to boost critical industries, JPMorganChase, October 13, 2025.

Back to all insights

Most founders decide to sell the way they decided to start: when it feels right. The trouble is that the things buyers pay most for take longer to build than the decision takes to make. A management team that can run the business without you, clean financials, a broad customer base, and a tax and estate plan that fits the deal all take time, and none of them can be rushed once a buyer is at the table.

That is why the exit conversation is best started early, well before an owner plans to leave.

A generation of owners nearing the exit

The numbers explain why succession is on so many owners’ minds.

• In the Census Bureau’s 2019 Annual Business Survey, more than half of U.S. business owners were 55 or older. That survey measured 2018. Those owners are eight years older now.
• In the Exit Planning Institute’s 2023 national owner survey, 73% of business owners said they would like to exit within the next 10 years, and 48% of those owners wanted to exit within five.
• In the second quarter of 2026, retirement was the leading reason owners went to market in every deal size segment, according to the IBBA and M&A Source Market Pulse survey.

Many owners have a date in mind. A date is not the same as a plan.

Why start early

Selling a business is a process, and most of the value is created before it starts.

• Assess. Get a realistic view of what the business is worth and what a buyer would question. Decide what you want from a sale: timing, price, your role afterward and what happens to your people.
• Build. Close the gaps. Develop the leaders who will run the business after you, reduce dependence on a few customers or on your own relationships, and bring financial reporting up to the standard buyers expect. None of it happens quickly.
• Sell. Lower middle market deals averaged 11 to 12 months from engagement to close in the second quarter of 2026, according to the same Market Pulse survey. That time goes to preparing materials, meeting buyers, negotiating and diligence, not to fixing the business.

Most owners also stay on for a transition period after closing, so even a well-planned exit takes longer than many founders expect.

Conversations to have now

Starting early is mostly about having the right conversations before they become urgent:

• With your family. What you want next, whether anyone in the family wants to run or own the business, and how the proceeds fit your long-term plans.
• With your leadership team. Who could run the company without you, and what it would take to keep them through a sale. Retention and incentive plans work best when they are in place well before buyers arrive.
• With your CPA and estate attorney. Entity structure, tax planning and estate planning often need years, not months, to deliver their full benefit.
• About your real estate. If you own the property the business operates from, decide whether to sell it with the company, keep it and lease it to the buyer, or sell it separately. Each choice affects value and taxes.

The cost of waiting

Owners who wait often end up selling on someone else’s timeline. A health issue, a partner dispute, the loss of a key employee or an unsolicited offer can force a decision before the business is ready. When that happens, buyers find the gaps and price them in, through a lower value, more of the price tied to an earnout or a longer commitment from the owner after closing.

The founders who exit well tend to treat the sale as a project, not an event, and they start it early.

Contact Us

Sources

1. Business Owners’ Ages: Over Half of U.S. Business Owners Were Age 55 and Over, U.S. Census Bureau, September 25, 2020.
2. A Decade of Development: 10 Findings in 10 Years of SOOR, Exit Planning Institute, March 12, 2024.
3. The Market Pulse Survey Q2 2026 Reports the Latest Trends in Business Sales up to $50M, PR Newswire, August 25, 2026.

Back to all insights

Backlog gets a buyer’s attention, but it doesn’t set the price. What sets it is how durable the firm behind the backlog is: how long clients stay, whether the licensed engineers stay with them and what kind of work fills the pipeline. With demand for engineering strong, firms that can show all three are well placed.

Demand is strong, and talent is scarce

Engineering firms are going to market from a position of strength. The 500 largest U.S. design firms grew revenue 7.4% in 2025, to $158.7 billion, according to ENR. Data centers and power grew fastest. In the third quarter, half of the firms surveyed by the American Council of Engineering Companies reported backlogs of a year or more, and 88% had at least one open position.

The people to do the work are the constraint. The Bureau of Labor Statistics projects about 22,700 openings for civil engineers each year over the next decade. For many buyers, an acquisition is the fastest way to add licensed engineers and the clients they serve.

Clients who keep coming back

Backlog shows a buyer the next year. Client tenure shows the next ten. Buyers want to know how long your top clients have worked with you, how much of your revenue is repeat work, and how much runs through on-call contracts or master service agreements that renew without a full pursuit.

Concentration cuts the other way. A firm that earns a large share of its fees from one agency or one developer should expect questions about what happens if that relationship changes.

Licensed talent is the asset

In an engineering firm, the most valuable assets go home every night. Buyers look closely at how many licensed professional engineers you employ, how many staff are on the path to licensure, how long key people have been with the firm and who holds the client relationships.

If the relationships and the stamps run through one or two founders, expect a buyer to protect itself with retention agreements, employment terms and more of the price paid over time. A firm with a second layer of licensed leaders gives a buyer less to protect against, and more reason to pay at closing.

What kind of work, for whom

Two firms with the same revenue can look very different to a buyer. Buyers look at the end markets you serve, the balance between public and private clients, and how your contracts are priced, whether cost-plus, time-and-materials or fixed-fee. They will also check how often fixed-fee jobs run over budget.

Work in growing markets such as water, power and data centers helps. So does a mix that does not lean on a single funding source. Public work brings steady demand, but it moves with funding cycles, and buyers will ask how much of your backlog depends on federal programs.

What buyers will ask to see

Most of this already lives in a firm’s project and accounting systems. In diligence, buyers typically ask for:

• Client history. Revenue by client for at least five years, with tenure and contract type.
• Backlog detail. Signed work separated from awarded but unsigned work, with expected margins and timing.
• Staff and licensure. A roster showing licenses, years with the firm and the clients each senior person covers.
• Project performance. Utilization, net service revenue and write-offs by project manager and contract type.
• Working capital. Unbilled work and receivables aging, which a buyer will measure against a target at closing.

Backlog opens the conversation with a buyer. Client tenure, licensed talent and the mix of work are what set the price.

Contact Us

Sources

1. ENR 2026 Top 500 Design Firms: AI Boom Buoys Design Revenue, Engineering News-Record, April 22, 2026.
2. Engineering Business Sentiment Q3 2026, American Council of Engineering Companies, August 24, 2026.
3. Occupational Outlook Handbook: Civil Engineers, U.S. Bureau of Labor Statistics, updated August 27, 2026.

Back to all insights