Why Acquirers in 2025 Are Focusing on Deal Structure in Professional Services M&A

By Ramone Param, Managing Director, Kennedy Consult and M&A I Advisor to Consulting Leaders, Buyers/Investors I M&A, Strategic Advisory and Benchmarking

Valuation tables still grab headlines, but in 2025 they explain far less of the real economics of the acquisition of a professional services firm than they did during the pandemic. Three forces—influx of private-equity capital, performance wobbles after the Covid boom and higher cost of capital — have made how a deal is paid for after closing of increasingly critical focus.

1. 2025 Valuations Look Resilient—But There’s More Under the Surface

Median valuation multiples for consulting and digital services transactions that we track are trending modestly down in 2025. At the same time, overall deal volumes are trending down while total values rose, signaling that fewer—but larger and more strategic —transactions are potentially clearing the market. Buyers appear to be paying to win the right assets, yet that sticker price masks a more considered mix of cash, equity and contingencies compared with the pandemic boom.

2. Private Equity’s Rollover Playbook Presses the Competition

Private-equity funds, flush with dry powder, now bid head-to-head with strategics for midsize consulting platforms and add-on acquisitions for existing portcos. My team estimates that current PE participation (including via add-ons) is around half of all professional services M&A, as compared with being 25% of all such deals a decade ago. Moreover, valuation metrics paid by PE and PE-backed companies have been increasingly more competitive.

PE routinely require founders to roll a significant proportion of proceeds into a new hold-co, giving sellers a “second bite of the apple” upon its future exit, while reducing the buyer’s day-one cash outlay. For buyers, rollover equity keeps key partners locked in and aligns incentives for the hold period; for sellers it pushes them to focus on future growth opportunities, not just immediate deal consideration.

3. High Rates Make Up-Front Cash Expensive

The pricing on borrowing is now around double of what it was in 2021. The rises in the cost of capital impacted equity markets and listed buyers, as well as the confidence of other strategic and financial buyer groups in the professional services M&A market. Each extra turn of leverage dents a buyer’s investment power by increasing its opportunity cost. This has increased the focus on rollover equity, as well as cash deferred through seller notes or earn-outs in today’s valuation models.

4. Earn-Outs Police Post-Covid Forecast Hangovers

Many consulting firms bulk-hired during the pandemic and set bullish 2023/24 budgets on the back of the pandemic-era demand. Reality bit: growth quickly slowed for both global consulting firms and many previously high performing boutiques. Against that backdrop, buyers have increasingly insisted on performance-based consideration—that often shift dollars from earn-out or retention pools to cash at close:

·       Earn-outs with performance hurdles or retention milestones more carefully structured.

·       Targets that can present robust retention architecture—clear incentives for key people and locked-in talent pools.

Practical Take-Aways for Sellers (and Their Bankers)

• Model multiple deal structures, not just focusing on multiples. Stress-test cash-heavy vs. rollover vs. earn-out scenarios against interest-rate and performance sensitivities. 

  
  

• Build a retention architecture early. Equity pools, phantom units, and stay bonuses help convert contingent value into day-one cash. 

  
  

• Prepare for due diligence depth. In today’s market, expect rigorous QoE and forecast reviews—PE is underwriting to its hold-period projections and not your budget. 

  
  

• Align your board on risk-sharing. Decide upfront how much of the upside the founders are willing to keep at risk; mixed internal messages in negotiations erode credibility and impact deal outcomes. 

The Bottom Line

Headline multiples still sets the tone of market discussions we’re having, but in 2025 careful consideration of the deal structure appears to dictate who successfully completes deals and potentially who is better set for success in the future. Buyers that master the structuring toolkit can out-compete; whilst sellers that appreciate the shift can trade certainty for upside on the right terms.

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The bottom line: Why acquirers in 2025 are focusing on deal structure in professional services M&A is clear. Those who master structuring can out-compete, while sellers who adapt can strike deals that balance certainty with upside.

This article is written for educational and informational purposes only and does not constitute investment, tax, or legal advice. The intelligence has been gathered from a variety of public and non-publicly available sources, including analysis from AI tools - which have not all been verified, reviewed or approved. The views and opinions expressed are those of the author and do not represent the views of any affiliate organization. Any opinions or views expressed are as of the date written and are subject to change without notice, and may be updated or modified at any time.

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