EXEC: Tactical and Outdoor Rec Led Active Consumer M&A Activity Growth in 2025

Capstone Partners recently released its annual Middle Market Deal Activity & Outlook for 2026, indicating that the Mergers & Acquisitions (M&A) market rebound expected in 2025 was delayed by a variety of factors, not the least of which were tariff challenges and other headwinds. Still, gradual improvement is expected for 2026 as the sector absorbs the new normal and uncertainty subsides.

Ken Wasik, Capstone’s head of Investment Banking, pictured right, said in the latest report that Consumer Industry M&A deals fell 18.9 percent year-over-year (y/y) in 2025, a considerable drop given the contraction follows two years of declines in 2022 (-9.6 percent y/y) and 2023 (-29.6 percent y/y) and a year of only moderate growth in 2024 (+8.6 percent y/y). The Consumer Industry Sector comprises 14 sub-sectors.

“A large retreat in PE dealmaking (-22.9 percent y/y) linked to market unpredictability and a lack of asset monetization served as one of the largest drivers of this decline,” Wasik observed. “Moreover, a dramatic 33.8 percent y/y contraction in public strategic acquisitions also strained the Consumer industry M&A market. This weak appetite — particularly among public buyers — weighed on overall valuations, bringing the median EV/EBITDA multiple down to 9.2x in 2025, the lowest median multiple recorded since Capstone began tracking the data 10 years ago.”

Wasik noted that, despite dampened consumer M&A in 2025, his firm is seeing the initial signs of a rebounding market, driven in large part by buyers becoming comfortable with macroeconomic uncertainty. He said the firm sees four major contributors to a positive outlook for consumer M&A in 2026.

First, Wasik said the company expects the initial M&A rebound to come from larger-cap deals, as these companies often understand market dynamics and are well-equipped to take advantage of a changing market as both buyers and sellers.

“The number of companies acquired for an enterprise value of more than $250 million significantly expanded and reached a market high in 2025, representing 30.6 percent of all disclosed consumer M&A deals. Large deals are the precursor to an opening of broader M&A activity,” he noted. “In years marked by declining consumer M&A volume but a high share of large deals — more than 20 percent of disclosed deals above $250 million in enterprise value — the Consumer M&A market saw deal volume increase 19.6 percent on average the following year based on trends from 2016 to 2025.”

Second, he said that several Discretionary sectors, which are typically the first pocket of the market to see momentum return in a rebound, have been recovering, suggesting a broader industry rally in 2026. In 2025, Discretionary sectors with strong M&A growth included Tactical Products (+54.3 percent y/y), Outdoor Recreation & Enthusiasts (+47.7 percent y/y), Vitamins & Supplements (+30 percent y/y), and E-Commerce (+12.8 percent y/y).

“Discretionary sectors are more exposed to macroeconomic swings, more sensitive to deal volume volatility and margin compression, and more difficult to underwrite during uncertainty,” Wasik said. “Because of this, investors move towards defensive non-discretionary opportunities in a strained economy. By re-entering the Discretionary vertical, acquirers and investors have indicated that downside risk feels contained, demand has bottomed or stabilized, and operating outlooks have gained credibility again. This return of confidence in Discretionary sectors precedes a broader consumer M&A revival.”

Third, Wasik said the Consumer Industry PE (Private Equity) investment appetite increased in the past couple of months due to a greater willingness to buy and sell existing portfolio companies despite lingering market uncertainty. He noted that add-on activity climbed 29.4 percent month-over-month (m/m) in December 2025 while platforms jumped 75 percent m/m, a combined 48.3 percent rise in the final month of the year. Lastly, he highlighted that 39 percent of U.S. PE companies have been held for more than four years at year-end, indicating a critical juncture at which PE firms will need to return funds to limited partners (LPs).

If exits continue at the current pace (972 in 2025), he said it would take more than seven years for the backlog of portfolio companies aged four years or older to clear out, according to Capstone’s Q4 2025 Capital Markets Update. As a result, Wasik said exits are expected to accelerate as rate cuts have materialized and LPs are demanding distributions.

“PE firms will likely eagerly return as both buyers and sellers in 2026,” he surmised. “We are looking forward to the end of H1 2026 as we expect to see a significant uptick in consumer M&A.”

Majority of Consumer Market Registers M&A Volume Decline

M&A Valuations Retreat in 2025 Capstone said that M&A valuations in the Consumer Industry weakened to a median purchase multiple of 9.2x EV/EBITDA in 2025, almost half a turn lower than the 9.6x multiple in 2024.

“This marked the third consecutive year M&A pricing landed below the historical median of 10.5x between 2016 and 2025,” the firm observed. “The hurdles introduced by geopolitical uncertainty and shifting tariffs forced buyers to scrutinize targets thoroughly, created a more risk-averse posture, and made it difficult to justify premium multiples.”

Still, the investment banking firm noted that acquirers continued to award elevated valuations to businesses with “strong customer retention, clear competitive moats, pricing power, cash flow generation, and tariff-insulated supply chains,” with asset-light operators and businesses indexed toward non-discretionary purchases seeing prioritization.

Capstone said that scaled businesses offering immediate accretive impacts to financials and smaller deals keeping debt servicing manageable both saw strong multiples, while those with assets unable to market as scale or digestible assets, or high-growth plays, saw softer valuations.

Tight credit spreads and Federal Reserve (Fed) interest rate cuts were cited as supporting factors for the acquisitions of scaled targets that mandate significant capital commitments.

“In 2025, upper middle market (between $250 million and $500 million) and large-scale (greater than $500 million) transactions accounted for a record 30.6 percent of total disclosed deals, with large-scale deals comprising 24.1 percent of this activity,” the firm wrote in its report.

Lastly, the spread between median EBITDA multiples paid by strategic buyers (8.6x) and PE firms (10.4x) expanded in 2025.

• PE buyers, who faced elevated LP pressure to meet capital deployment mandates, competed more aggressively for a narrower set of safe-growth assets in the Consumer space, driving multiples higher.
• Strategics largely split their focus between inorganic growth and optimizing internal operations amid the shifting macroeconomic environment. These buyers self-selected into lower multiple deals due to competing capital uses — such as artificial intelligence (AI) integration and internal cost-mitigation strategies — and sensitivity to synergy realization and integration success.

Volatility and Bifurcated Spending Set the Stage for Moderate 2026 Growth
It should come as no surprise that Capstone said in its report that the U.S. economy experienced a volatile year in 2025, characterized by “a new administration shifting governing priorities, a reimagined trade landscape, resilient consumer spending, and a surprisingly stable Labor market.”

Tariffs captured headlines throughout much of the year, even here at SGB Media, where tariff articles continue to be among the most widely read.

In April, multilayered tariffs targeting nearly all trading partners emerged, alongside new product-specific duties. Adjustments through trade deals, partial reversals, and refinements brought some clarity to the future operating environment as the year progressed—though many tariffs remain elevated pending negotiations and litigation.

Capstone said uncertainty in the market has partially eased, “with consumers and business owners alike remaining concerned but more comfortable continuing their day-to-day amid macroeconomic unpredictability — a dynamic that has been accepted as a new normal.” The uncertainty may continue for some time as the Trump Administration looks for ways to increase government revenue from trading partners, and the subject of refunds and rebates (and their associated lawsuits) may continue the “uncertainty” conversation around for some time. With company CFOs struggling to provide solid forward-looking views for investors, it has become commonplace to include a disclaimer that any forecasts or estimates are based on tariff levels as of a particular date, as the supply chain continues to chase a moving target.

2026 Consumer Industry Expectations
Consumers continued to spend in 2025, though competition for wallet share intensified as macroeconomic pressures, geopolitical uncertainty, and the cumulative impact of inflation forced households to scrutinize discretionary purchases. Of note, 54.3 percent of Consumer industry CEOs surveyed reported y/y revenue gains in 2025, according to Capstone’s 2025 Middle Market Business Owners Survey. Moreover, 69.5 percent of industry business owners anticipate additional revenue growth for 2026, a modest but material 3.5 percent y/y increase in outlook compared to the prior year. Inflation has remained top of mind for industry participants looking toward 2026, with almost all (91.5 percent) consumer CEOs reporting that this factor is somewhat or very concerning for their company’s growth. Notably, consumer business owners who have been contacted at least once by a PE firm looking to buy their company jumped 12.7 percent y/y to 42.4 percent. CEOs experiencing occasional (+16.5 percent y/y) or routine (+5.1 percent y/y) PE outreach saw growth in 2025, indicating mounting PE appetite for investments in the Consumer industry despite fewer announced deals.

2026 North America M&A Expectations
Transaction advisors in North America again reported strong expectations for a rebound in deal flow in 2026 after optimism for =an influx of deal flow in 2025 was stunted by tariff volatility.

Irrespective of industry focus, 86.9 percent of North American investment bankers surveyed anticipate a moderate or significant increase in M&A activity in 2026, according to Capstone Partners & IMAP Trends in Global M&A 2025-2026 Report. This near-unanimous expectation of an M&A market recovery is underpinned by the return of PE acquirers, the settling of macroeconomic volatility, the release of pent-up demand, and renewed interest in cross-border activity amid the shifting trade landscape. Succession, consolidation, founders seeking liquidity, and the prospect of a more difficult operating environment are anticipated to be the key drivers of company sales in 2026.

Nearly one-third of advisors expect M&A transaction multiples to rise in 2026, while the majority (65.2 percent) anticipate valuations to hold steady. Companies that plan for an exit proactively, maintain operational resilience, and stay flexible in exit timing will likely be best positioned for a successful liquidity event in 2026.

Check in with SGB Executive on Monday, April 20, for a deeper dive into the sectors that comprise the active lifestyle market, including Outdoor Recreation & Experiences, Tactical, and Apparel, Footwear and Accessories.

Feature image courtesy Kuiu and Mr. Wasik’s headshot, data and graphics courtesy Capstone Partners.