Deal Activity Surging With a Robust Pipeline: Q3 2025 M&A Update

Summary: M&A activity remained strong in Q3 2025 despite longer deal timelines caused by valuation gaps and economic uncertainty. KSM’s pipeline expanded to include more than 50 new buy- and sell-side engagements, signaling a robust fourth quarter of deal activity.

While deal activity remained healthy in the third quarter, transactions are taking longer to close. Lingering global economic uncertainty and valuation gaps continue to extend deal timelines. Despite these challenges, KSM signed up over 50 new buy- and sell-side engagements in the quarter. The large number of active sell-side engagements is a strong indicator of rising deal activity in the fourth quarter.

What Trends Shaped Deal Activity in Q3 2025?

As the broader market adjusts to valuation pressures and longer closing timelines, KSM’s experience offers a closer look at where investors are deploying capital across the middle market. In 2025, KSM’s transaction advisory services team has seen over 35% year-over-year growth, with the most activity in business services, industrials, technology, and consumer-related sectors, with a particular focus on percentage-of-completion (POC) accounting engagements. Much of this growth has come from financial due diligence work for add-on acquisitions. However, platform investments in the third quarter have outpaced the first two quarters, which is an encouraging indicator that buyers are growing more confident amid uncertainty.

Top Sectors Driving Deal Activity

Deal flow remains strongest in the services and industrials sectors, which together account for 60% of current deals in the pipeline:

• Services: 32.5% of active deals
• Industrial: 27.5% of active deals

This concentration highlights where capital is most active and signals sustained investor confidence. The remaining 40% of deals span the consumer, software and technology, healthcare, and transportation and logistics sectors, reflecting a diversified, opportunity-rich market landscape.

Services

The services sector continues to see meaningful M&A activity, particularly among companies providing essential or specialized offerings. Buyers remain focused on recurring revenue, regional scale, and regulatory expertise.

Services businesses comprise the largest share of KSM’s deal flow. Home and technology services are especially notable, comprising nearly half of KSM’s activity in this space. Select  engagements include the following:

• Overhead door manufacturer and installation company
• Roofing and gutter contractor
• Garage door specialist
• Commercial landscaping company
• Legal services company
• Traffic control company
• Machine and automated packaging solutions provider
• Energy and retail gas services company
• Residential and commercial distributor
• Utility services provider
• Automotive services company
• Environmental and engineering services firm
• Labor and service outsourcing provider
• Commercial and residential construction contractor
• Electronics asset management and services company

Industrials

The industrials sector remained a consistent driver of M&A activity in the third quarter, attracting steady interest from both strategic and financial buyers. Tech-enabled industrial businesses have been strong contributors to KSM’s pipeline, reflecting how innovation and automation continue to drive market growth.

Select engagements include the following:

• Electrical contracting services provider
• Industrial automation company
• Electrical and utility infrastructure materials provider
• Industrial mechanical contracting company
• Agricultural products manufacturer
• Industrial control systems manufacturer
• Specialty chemical manufacturer
• Precision machining and manufacturer
• Electrical supply distributor
• Building products manufacturer

Technology

Technology remains a key sector as buyers pursue growth opportunities. Deal activity in the sector gained traction in the third quarter, with expectations for continued acceleration in the fourth quarter and into 2026.

Select projects include the following:

• Real estate technology platform
• Cloud communications software provider
• Digital solutions for the design and real estate industries
• Technology advisory and consulting firm
• Custom software development firm

Outlook for the Fourth Quarter: M&A Activity and Emerging Trends

What can we expect from M&A activity heading into Q4 2025? Historically, the fourth quarter is the busiest time of year, and this year is no exception. Market activity has accelerated, particularly in business-to-business and business-to-consumer services, as well as the industrial, technology, and consumer sectors. We also are seeing increased interest in niche strategies, such as a buy-and-build thesis centered on the sports industry.

While extended timelines remain the new reality, KSM continues to deliver results in a softer market. Our team helps clients navigate complex deal dynamics and uncover insights that inform sound decisions.

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