After a muted start to 2025, the Texas mergers and acquisitions (M&A) market is showing renewed vitality. Improved financing conditions, stronger buyer appetite, and stabilizing valuations are creating opportunities for both strategic acquirers and private equity (PE) investors. Yet global and domestic uncertainties—ranging from tariffs and policy shifts to inflation and rate volatility—underscore the need for disciplined preparation and sound deal structuring.

This article summarizes the key drivers of renewed M&A activity in Texas, outlines risks and protective strategies, and explains why entrepreneurs considering an exit should be preparing now.

1. Why Entrepreneurs Should Pay Attention
2. Why the Timing Looks Favorable

After several quarters of slow activity, indicators suggest an upswing. According to KPMG’s mid-year survey, corporate and PE executives expect deal volume in late 2025 to surpass 2024 levels. PitchBook’s Q3 US PE Breakdown reports that although exit value fell nearly 40% from Q1 levels, the number of completed exits rose by more than 22% quarter-over-quarter—evidence that deal activity is accelerating. Moreover, PitchBook has indicated that valuations have returned to pre-pandemic levels.

Meanwhile, private equity firms still hold significant “dry powder,” or uninvested capital, and are under pressure to deploy it. As borrowing costs ease and valuations normalize to pre-pandemic levels, well-positioned sellers can benefit from stronger competition among buyers.

For Texas-based businesses in energy services, industrials, logistics, and tech, the current market offers a compelling opportunity: financing is improving, buyers are active, and quality assets command premium attention.

1. Preparing for a Sale

Even in a favorable market, readiness is key. Sellers should:

• Begin early. Preparing financials, addressing operational issues, and managing tax planning can take months.
• Understand valuation dynamics. Improved credit markets and buyer appetite may support higher multiples or better terms (perhaps equity rollovers) or tax-efficient structures.
• Clarify exit objectives. Decide whether to pursue a full sale, partial rollover, or earn-out. This is both a personal decision (and may depend on whether you have your eye on retirement) as well as an investment decision (would you rather invest your post-closing dollars in the ongoing business or in Nvidia stock?)
• Anticipate macroeconomic risks. Interest rate volatility, erratic trade policy, and other regulatory uncertainty could delay or derail deals. Demonstrating resilience and flexibility can reassure buyers.

1. Market Drivers Supporting Texas M&A
2. Improving Financing Conditions

Lower rate expectations in late 2025 are boosting the feasibility of leveraged buyouts and strategic roll-ups. For sellers, this translates into:

• A larger pool of qualified buyers able to secure financing;
• Enhanced valuations as cost of capital declines; and
• Greater willingness from PE funds to deploy leverage-backed capital into high-quality assets.

2. Abundant Capital

Despite uneven fundraising cycles, PE firms remain well-funded, and corporate balance sheets are healthy. Investment banks such as Goldman Sachs and regional advisors are expanding deal teams, reflecting growing transaction pipelines.

For sellers, this indicates stronger demand and competitive bidding.

3. Acquisitions by Multinationals

Anecdotally, interest in acquisitions of US companies, or the construction of US plants, appears to be on the rise by multinational buyers. Some foreign buyers are showing interest in producing goods for the US market domestically to avoid tariffs and other trade costs and uncertainty. With its vast resources, port, rail, central location, and technical talent pool, Texas is drawing substantial attention from foreign investors. Again, this can only expand the pool of competitive bidders for a Texas seller.

4. Sector Strength in Texas

As we see more and more companies expand operations and corporate headquarters to the Lone Star State, it is clear that Texas retains its vibrant long-term economic outlook. This economic resilience is driving economic consolidation and innovation. Key sectors driving M&A include:

• Industrials, Logistics, Commercial Services, and Real Assets: Expansion of manufacturing, distribution, and e-commerce fulfillment hubs. Also certain commercial services, such as HVAC, remain attractive.
• Financial Services: Regional banking consolidation driven by deposit diversification and scale objectives. (Note the recently announced Texas Stock Exchange, along with expansion of operations of NASDAQ and NYSE into Dallas).
• Healthcare and Life Sciences: Fragmented provider networks and technology adoption attracting both strategic and PE buyers. (The recently announced $6.5 billion investment in the by Eli Lilly demonstrates the potential of the Houston-area biotech sector)
• Technology and SaaS: Recurring-revenue and cybersecurity models, especially those with Austin or Houston roots, continue to draw interest.
• Energy and Energy Services: Ongoing consolidation in midstream, transition infrastructure (although a potential oil glut will be a matter of concern in the oil and gas sector. Further, the recent announcement by Exxon Mobil to delay a $10 billion plastics plant due to current “economic conditions” are a cause of concern).

 

III. Legal and Structural Considerations

For entrepreneurs, success in a transaction depends as much on structure and compliance as on valuation. Buyers are increasingly risk-sensitive, and sellers who anticipate these concerns gain credibility and leverage.

1. Financing and Underwriting

Buyers are modeling variable rate scenarios and stress-testing assumptions. Sellers should be prepared to show resilience in margins, input costs, and growth forecasts. Understanding the buyer’s financing structure helps anticipate timing and closing conditions, especially when leveraged debt is involved.

1. Tax Structuring

Tax consequences often determine a seller’s ultimate proceeds. Engage tax counsel and CPAs early to model after-tax outcomes and compare deal structures—stock versus asset sales, equity rollovers, or installment arrangements. Sellers should avoid accepting a buyer’s proposed structure without professional tax review – a poor tax structure can take a big bite out of post-closing proceeds.

1. Risk Allocation and Disclosure

Recent deals show increased buyer scrutiny of trade exposure, regulatory compliance, and supply-chain stability. Purchase agreements commonly feature expanded representations and warranties addressing tariffs, export controls, and foreign investment review. Sellers should:

• Disclose known risks upfront; concealed issues discovered later can derail negotiations and erode trust. If a deal is likely to fail, it is better (and less expensive) for the deal to fail early, rather than dragging out needlessly for months.
• Prepare documentation demonstrating compliance and mitigation strategies, particularly for businesses with cross-border or regulated operations.

1. Key Risks and How to Manage Them

While the outlook is improving, certain risks could temper enthusiasm. Entrepreneurs should take steps to mitigate them before going to market.

1. Macroeconomic and Policy Volatility

Unexpected rate hikes or inflation spikes could compress valuations and stall financing. Sellers may wish to move while borrowing costs remain relatively low and liquidity is available, rather than waiting for “perfect” market conditions that may never materialize.

1. Trade and Supply-Chain Disruptions

Tariff changes or trade policy reversals can distort projections and trigger buyer caution. Some deals now include holdbacks or earn-outs tied to future policy outcomes. Businesses dependent on imports, exports, or cross-border supply chains—especially Texas-Mexico routes—should document alternative sourcing and cost-containment measures.

1. Sector-Specific Headwinds

Energy price volatility, healthcare reimbursement pressures, and regional banking stresses may weigh on valuations in certain industries. Sellers should address these risks directly in presentations and due diligence materials to demonstrate preparedness.

1. Conclusion

For Texas business owners, late 2025 may represent a strategic moment to explore a sale. Financing conditions are improving, private equity remains liquid, and strategic buyers are resuming acquisition programs.

But market timing alone does not guarantee success. The best-prepared sellers—those who understand their numbers, address tax and structural implications early, and manage risks transparently—tend to achieve stronger valuations and smoother closings.

Entrepreneurs should view this period as an opportunity to get “transaction-ready”: clean up financials, strengthen governance, articulate a growth narrative, and engage experienced advisers. While external conditions remain uncertain, disciplined preparation and timely execution can convert today’s market momentum into value.

By Doug McCullough, Partner