2025 was expected to mark a strong comeback for M&A, but instead, it’s shaping up to be one of the most cautious years in recent memory with global M&A decline is -4–5%, though Q1.The challenges are layered: interest rates are higher than anticipated, inflation remains sticky, credit is tight, and geopolitical uncertainty is adding further hesitation.

But it’s not just the volume of deals that’s changed; it’s the entire approach to how deals are sourced, structured, and closed.

The New Rules of Engagement

A clear divergence has emerged in the capital landscape. Institutional investors, especially those with committed funds are still active and seeking deals with the right structure and downside protection. Family offices and UHNW investors, on the other hand, have largely hit pause. Their priority right now? Liquidity, not deployment.

Financing has become a major hurdle. LBO debt is pricing at 12–13%, and credit markets are risk-averse. Traditional capital stacks are under pressure, pushing sponsors toward creative solutions like earnouts, seller notes, and joint ventures to close valuation gaps without overleveraging.

At the same time, buyers are becoming more selective. Sponsors and PE firms are moving away from opportunistic buying and refocusing on strategic acquisitions that align tightly with their long-term thesis. Risk-sharing between buyer and seller is more important than ever and deal terms are being engineered to reflect that.

Due diligence has also evolved. Technology, particularly AI and automation is being used to accelerate evaluations, reduce costs, and surface red flags earlier in the process. In a market where one misstep can tank returns, diligence is no longer a phase, it’s a strategy.

And while deal volume is down, some sectors are showing resilience. Infrastructure services, utilities, and tech-enabled businesses continue to command interest and premium valuations.

How Independent Sponsors Can Stay Ahead

Winning in this environment requires more than hustle it requires adaptation. The sponsors making progress right now are:

• Structuring deals to share risk through alternative mechanisms like earnouts and seller financing.
  
  
• Being intentional with targets  pursuing fewer but higher-quality opportunities that align with a defined value creation strategy.
  
  
• Communicating credibility with institutional investors who are still deploying, but with sharper expectations.
  
  
• Using technology not just to optimize diligence but to demonstrate operational sophistication from the outset.
  
  

And most importantly, they’re staying plugged in to where capital is still moving.

That’s where the 19th Independent Sponsors Summit comes in. It’s a chance to connect directly with the industry's top independent sponsors and capital providers who are still deploying and understand firsthand what’s getting funded, what’s not, and how to position yourself for the next 12 months. Join us on September 29-30 in New York.

This analysis is based on research conducted by iGlobal Forum and insights from industry stakeholders.