What the newest lower-middle-market data says about the widening gap between interest in your company and money in your account.

Buyers are active. Capital is available for good companies. And closing a transaction is harder than it was a year ago. All three are true at the same time, and the owners who get hurt this year will be the ones who hear only the first two.

I read the lower-middle-market survey data the way I read a seller’s financial statements before diligence starts… looking for the number that contradicts the story everyone is telling. This quarter that number is 57%.

Fifty-seven percent of the lower-middle-market dealmakers Axial surveyed in July named valuation expectations as the single biggest reason deals failed to close in the first half of 2026. A year earlier the figure was 28%. It more than doubled in twelve months. Over the same period, diligence findings fell from 25% to 10% as a stated cause of failure.

Read that pairing slowly, because it rearranges the advice most owners have been given. Fewer deals are reported as dying in the data room. More of them are dying at the price conversation, which happens earlier, and which most owners walk into having done no preparation at all.

My regular conversations with sellers are confirming this trend. Sellers have rising expectations about what their companies are worth, and in too many cases the numbers do not support them. Buyers pay for forward momentum… if you do not have it, your multiple gets lowered… if the business is too dependent on you, your multiple gets lowered… if your customer concentration is too high, your multiple gets lowered. Sellers who want to transact in this market will have to bring their expectations back to what the evidence supports.

What the Midyear Data Actually Says

In July 2026, Axial surveyed 79 members of its lower-middle-market network: 40 buyers and investors, and 39 sell-side M&A advisors. Two-thirds of the respondents work at firms with fewer than 10 people. Axial says plainly that the results reflect its own members and should be treated as directional rather than representative of the whole market. I would hold them the same way. Directional data from practitioners who close deals for a living is still worth more than most of what gets published about this market.

Among the 39 advisors:

• 97% expect to win at least as many client engagements in the second half of 2026 as in the first, including 63% who expect more.
• The share describing owners as eager to sell rose from 19% at the start of the year to 24% at midyear. Most owners are still described as opportunistic and cautious.
• 41% report a widening gap between what owners expect and what buyers will pay, up from 24% at the start of the year. Only 18% see the gap shrinking, which means 82% believe it has held steady or grown.

More owners are raising their hands. Fewer of them agree with buyers about what their companies are worth. Those two trends running at the same time create a specific risk, and it is not the one most owners worry about.

An unsolicited inquiry, an optimistic online valuation, or a hallway conversation about market multiples is not confirmation of what your business is worth. It is an invitation to find out. Those are different things, and the distance between them is where a year of your life can disappear.

Deals are stalling more often than they are collapsing

Among transactions that did not close as intended, 51% of advisors said more deals are going on hold and 10% said more are dying outright. Those figures are nearly unchanged from the prior survey. Delay, not death, is the dominant failure mode.

The causes advisors named cluster into a recognizable set: valuation disagreements, weaker recent performance, deeper diligence, financing difficulty, shifting buyer priorities, owner hesitation, deal fatigue, and the slow erosion of trust between the parties. Vipin Singh of Murphy Business Sales put the last one well, describing deals that succumb to a mismatch between early expectations and the realities of diligence.

The picture is uneven rather than uniformly worse. In the first half of 2026, 64% of advisors said a majority of their deals with target close dates closed as scheduled, up from 58% for 2025 deals. That is the encouraging half of the finding. The other half deserves equal weight: the share of advisors reporting that one-quarter or fewer of their deals closed on schedule rose from 21% to 33%.

Both numbers moved outward. Prepared companies are closing on time more reliably, and unprepared ones are stalling more badly. The market is not getting uniformly harder. It is getting more discriminating, which is a different problem and a more solvable one.

Clean history is not the same as a defensible run rate

Kyle Bobinski of Structured Partners described a situation worth sitting with. A company can pass its quality-of-earnings review on the strength of its historical numbers and still face a retrade, because current-year comparisons have softened against the prior year. The books are clean. The trend is not. The buyer reprices.

That is one practitioner’s observation rather than a quantified finding, and it names something I see constantly. Buyers are not paying for what you earned two or three years ago. They are paying for what they believe you will earn after you are gone. Historical cleanliness is the price of admission to that conversation. It does not win it.

Why Buyers Look Selective Rather Than Absent

The 40 buyers and investors in the same survey reported:

• 73% still expect to meet the acquisition targets they set at the beginning of 2026.
• 53% found getting deals done harder than anticipated, against just 18% who expected a harder environment at the start of the year.
• 42% named valuation as the leading constraint on deploying capital, double the 21% recorded in the first-quarter survey. Limited quality deal flow followed at 40%.
• 45% are very or somewhat willing to stretch on valuation for a high-quality company, essentially unchanged from 48% at the start of the year.

That last figure invites a lazy reading, and the lazy reading is wrong. It would be easy to write that only 45% of buyers will stretch, and easier still for an owner to conclude that the market has turned against him. Look underneath the number. The share of buyers who are somewhat reluctant or unwilling to stretch fell from 41% to 23%. The neutral responses nearly tripled, from 11% to 32%.

Buyers did not retreat. They moved from a standing position to a case-by-case one. Fewer of them will tell you in advance whether they will pay a premium, because they have stopped deciding that in advance. They decide it after they see the evidence.

The result is a market that has split. Companies with durable earnings, credible management, and limited owner dependency still draw genuine competition. Average companies, or good ones carrying unresolved risk, get interest, harder diligence, more structure, and less certainty of closing. Carson Bomar of Exit Game Plan named this separation between high-quality and average businesses as the trend he is watching most closely, and the survey data supports him.

So the useful question for a founder-owner is no longer what multiple companies in my industry are getting. It is this:

What evidence will give a buyer confidence that this company keeps performing after I am no longer running it?

Everything else in this briefing is downstream of that question.

The Multiple Is Only Part of the Offer

Sixty-four percent of surveyed dealmakers expect valuation multiples to remain stable through the second half of 2026. Twenty-one percent expect a slight decrease and 15% expect an increase. On the surface, that reads as a calm market.

Several respondents added the qualification that matters. Stable headline multiples can mask meaningful changes in deal structure, specifically greater use of seller financing, earnouts, and holdbacks. Carson Bomar described buyers who remain willing to pay reasonable multiples and have grown more conservative about cash at closing, using contingent structures to shift risk back toward the seller.

This does not establish that every seller is getting worse terms. It does mean you cannot evaluate an offer by multiplying EBITDA by a multiple and calling that your number. A stable headline price can arrive with less cash at closing and more consideration riding on events you will not control.

What the earnout data actually shows

SRS Acquiom’s 2026 lower-middle-market report draws on more than 4,400 private-target transactions that closed through 2025. One definitional point before the numbers, because getting this wrong would mislead you.

SRS defines a lower-middle-market transaction as one with closing payments of $50 million or less. That is a deal-size definition, not a company-revenue definition. It is not the same population as the $5 million to $50 million revenue companies I work with, though the two overlap substantially. Treat the figures as strongly indicative for our purposes rather than as a measurement of exactly our segment.

With that said, SRS found earnouts in:

• 29% of transactions with closing payments of $50 million or less.
• 35% of the smallest transactions, those with closing payments of $25 million or less.

Smaller deals carry earnouts more often. If your company sits at the lower end of the range, the odds that contingent consideration shows up in your offer are better than one in three.

Separate SRS research into non-life-sciences private-target transactions found that just over half of deals containing earnouts produced any payout at all. Among deals that paid something, sellers collected roughly 50 cents for every potential earnout dollar. Include the deals that paid nothing and achievement falls to roughly 21 cents on the potential dollar.

Those last figures come from the broader non-life-sciences dataset, not from a lower-middle-market cut, and I am not going to present them as though they were. The direction is clear enough without overstating the source.

The lesson is not that you should refuse every earnout. An earnout can bridge a real valuation gap and let you participate in upside you helped create. I have watched them work.

And an earnout is not cash. Its value depends on how performance is measured, who controls the company after closing, which expenses can be charged against the calculation, whether the buyer can change strategy or staffing or investment, what reporting rights you keep, how disputes get resolved, and whether you must remain employed to collect.

A $20 million headline offer can be economically worse than an $18 million one when most of the difference depends on performance the buyer controls. That sentence has cost real money for owners who did not believe it until it was their money.

EVALUATING THE REAL ECONOMICS OF AN OFFER

Every serious offer should be translated into a risk-adjusted proceeds schedule before you respond to it. Work through each component and answer the question next to it honestly.

This exercise regularly shows that the highest headline price is not the best transaction. It is also the single most useful thing an integrative advisor does at the table, because your attorney is optimizing the legal terms and your banker is optimizing the price, and somebody has to be optimizing your actual outcome.

What Has to Be True Before You Go to Market

Reading this data together, founder readiness has to be evaluated across four dimensions rather than the two or three most owners consider.

1. Business readiness
Can the company sustain revenue, customer relationships, operational performance, and leadership continuity without depending on your daily involvement?

2. Evidence readiness
Can your management team prove the quality and durability of earnings quickly, consistently, and with documentation that survives buyer and lender scrutiny? This is the dimension the 2026 data has elevated most. When valuation is the constraint, evidence is what moves it.

3. Decision readiness
Do you understand your minimum acceptable outcome, including cash at closing, contingent consideration, retained equity, post-closing employment, and continuing personal risk? Not your hoped-for outcome. Your floor.

4. Identity readiness
Do you have a meaningful next chapter that does not require you to remain indispensable to the company?

That fourth dimension gets filed as a personal matter, or a lifestyle question, or something to sort out after the wire clears. It is also a transaction risk. An owner who has prepared the company and not prepared himself will hesitate at the wrong moment, revisit a settled valuation, resist reasonable buyer requirements, or discover late in a process that the exit he negotiated no longer looks like success.

I have seen a prepared company lose its buyer because the owner was not prepared. The business was ready. The founder was not, and everyone in the room could tell.

Which brings me to the principle that this quarter’s data keeps pointing at:

A founder has to become decision-ready before becoming market-ready.

Before you enter a process, you should already know what an acceptable outcome looks like, which terms are unacceptable, how long you are willing to stay involved, how much consideration you can reasonably leave at risk, and what role, relationships, and purpose will replace the business afterward. Working those out during a live negotiation is how owners talk themselves into deals they later regret, and out of deals they should have taken.

A Monthly Buyer’s Dashboard

For owners contemplating a sale or succession inside the next three years, I recommend keeping a monthly Buyer’s Dashboard. Track:

• Monthly and trailing-twelve-month performance
• Customer and vendor concentration
• Recurring versus nonrecurring revenue
• Backlog quality and cancellation rates
• Gross-margin trends
• Owner-generated sales
• Management-team decision authority
• Employee and leadership retention risk
• Proposed EBITDA adjustments, with the documentation that supports them

The purpose is not a cleaner data room, though you will get one. The purpose is to make yourself look at your company the way a skeptical buyer will, months before that buyer gets access to it. Most owners have never done this. The first month is uncomfortable. That discomfort is the point… it is Positive KITA applied to your own financial reality, and it is far cheaper to feel it now than during a retrade.

Seven questions worth sitting with

• What evidence would convince a skeptical buyer that your earnings continue without you?/li>
• Which result from the past six months is most likely to trigger a price reduction?/li>
• What percentage of your expected proceeds are you willing to leave contingent on future performance?/li>
• If a buyer offered your target price and required three more years of operating involvement, would that meet your definition of an exit?/li>
• What would a buyer find in diligence that you have been tolerating rather than resolving?/li>
• If the transaction closed on Friday, what role, community, and structure would replace the business on Monday?/li>
• Are you pursuing an exit, or pursuing recognition of what you believe the business should be worth?/li>

That last one is the question I would put in front of a room of founder-CEOs, and I would follow it with this: which is the greater threat to your eventual exit, a weakness in the business that a buyer will uncover, or an unresolved issue in you that surfaces only when the decision becomes real?

Name one business-readiness risk, one transaction-readiness risk, and one personal-readiness risk. Then answer the harder question. Which of those are you actively addressing, and which are you hoping will resolve themselves before you need to exit?

Key Takeaways

• Valuation expectations have become the leading stated cause of failed lower-middle-market deals, cited by 57% of surveyed dealmakers for the first half of 2026 against 28% a year earlier. The friction has moved earlier in the process, from the data room to the price conversation.
• Delay is the dominant failure mode rather than collapse. Advisors report more deals going on hold (51%) than dying outright (10%), and the spread between on-schedule and badly stalled processes widened in both directions.
• Buyers have not withdrawn. They have moved from standing positions to case-by-case judgments, with neutral responses on stretching for quality nearly tripling from 11% to 32%. They decide after they see the evidence, which makes evidence readiness the dimension that has gained the most value this year.
• Stable headline multiples can conceal a shift in structure toward seller financing, earnouts, and holdbacks. Evaluate every offer as a risk-adjusted proceeds schedule rather than as EBITDA times a multiple.
• Earnouts appear in 29% of lower-middle-market transactions and 35% of the smallest ones. Across the broader non-life-sciences dataset they pay roughly 21 cents on the potential dollar once deals that paid nothing are included. An earnout is a negotiated instrument, not deferred cash.
• A founder has to become decision-ready before becoming market-ready. Knowing your floor, your unacceptable terms, and your life after closing is preparation, and working it out mid-negotiation is not.

Where to Start

Something new is coming, and this briefing is a reasonable place to say so for the first time.

In January 2027 I am opening a new peer advisory and executive coaching experience built for business owners in transition. Not exit planning in the narrow sense. Transition in whatever form it is actually taking for you… preparing a company for sale, working through succession inside a family, pulling yourself out of daily operations, restarting after a process stalled, or sitting with the question of what comes next and not yet having an answer.

Twenty-five years of facilitating CEO peer groups taught me something this quarter’s data keeps confirming. What owners in transition need most is a room of peers far enough along to tell them the truth, and a structure that makes them act on what they hear. Information alone has never moved anyone through this.

The nucleus is already in place. Several members of my current CEO peer advisory group are moving into the new experience, so the room opens in January with people who already know how this work is done.

Membership is limited and it starts with a conversation. If you want more information, or you want to be considered for a seat, email me directly at [email protected] with the subject line “January 2027.” Tell me something about where you are. I will tell you honestly whether this is the right room for you.

No pitch. Just a conversation between two people who take this seriously.

Buyers have not left the market, and they are not overlooking uncertainty either. Founders who want real control over when and how they leave have to build more than EBITDA. They have to build transferable value, reliable evidence, management depth, and personal clarity.

The best exit planning does not start when an owner decides to sell. It starts when an owner decides to build a company, and a life, that offers more than one acceptable next move…. Ben

Research and editorial note. This briefing was developed by Ben Griffin and CEOIQ® Renaissance. Research and initial drafting assistance came from ChatGPT; every cited statistic was independently verified against the original Axial and SRS Acquiom source materials before publication. Market interpretations, coaching implications, and recommendations are the author’s own. Nothing here replaces legal, tax, valuation, or transaction advice.

Sources. Axial, “Lower Middle Market 2H Outlook: Valuations, Deal Activity & Market Trends (Part 1),” August 11, 2026; “Buyer Acquisition Targets, Deal Execution & Valuations (Part 2),” August 18, 2026; “M&A Advisors on Owner Sentiment, Deal Execution & Valuation Gaps (Part 3),” August 25, 2026. SRS Acquiom, 2026 Lower Middle-Market M&A Deals Report; “2025 Update: M&A Undisclosed Liability Claims and Earnout Achievement.”

Author: Ben Griffin

Facilitator - CEO Peer Advisory Group; Executive Coach; Photographer