In February 2026, a family-owned industrial business in Columbus, Ohio ran a competitive sale process, drew seven indications of interest, and signed with the fourth-highest bidder.
The winning offer was roughly 9% below the top number on the table. It also let the founder keep 30% of the recapitalized business, took a board seat rather than the keys, and paid him a second time in three years if the company hit a revenue target he had already budgeted for. The advisor who ran that process, Regent Bridge, a New York based firm with several international offices, did not present it to the client as a compromise. It presented the top bid as the compromise.
That inversion is now measurable across the U.S. private market. According to the 2026 SRS Acquiom M&A Deal Terms Study, which analyzed more than 2,300 private-target acquisitions closed between 2020 and 2025, earnouts appeared in 24% of deals in 2025, up from 22% in 2024 and well above the roughly 20% historic average, while the median earnout potential as a share of the closing payment climbed from 31% to 34%.
puts the longer arc plainly: earnout use in non-life-sciences private-target deals has risen from 19% in 2014 to 24% in 2025. A third of a closing payment, contingent, is no longer an exotic term. It is a Tuesday.
The market got smaller while the paperwork got longer
The backdrop is a contraction that has not yet reversed.
that collects transaction data from private equity firms in the $10 million to $500 million enterprise value range, reported 297 completed sponsored transactions for full-year 2025, a 23% decline from 2024 and a 41% drop from the 2021 peak. Average purchase price multiples held flat year over year at 7.2x trailing twelve-month adjusted EBITDA, with activity concentrated in larger, better-capitalized deals while smaller ones absorbed the financing pressure.
The financing details are what reshape seller outcomes. GF Data’s leverage report found that debt availability improved modestly late in 2025, but year-end leverage remained below historical norms as sponsors leaned more heavily on equity and deployed debt selectively. A sponsor writing a bigger equity check has a direct incentive to shrink it, and rollover from the seller is the cheapest way to do that. What a founder is described as alignment is, on the buyer’s side, also a funding decision.
Meanwhile, the capital keeps stacking up. Aged dry powder, money committed to funds and left undeployed for more than two years, rose from $290 billion in 2021 to $530 billion in 2024, an 82% increase, according to GF Data figures compiled by Forvis Mazars. That is a large amount of money under pressure to transact in a market completing fewer deals.
A shrinking buyer market meets a generational seller market
The supply side is demographic and it is not slowing. The IBBA and M&A Source Market Pulse survey for Q3 2025 found baby boomers account for nearly 60% of business owners bringing companies to market, with Gen X at 27% and millennial and Gen Z sellers combined at just 7%. The buy side skews the other way: millennials and Gen Z make up 45% of search funders and 58% of serial entrepreneurs, and nearly a third of corporate C-suite buyers are under 45.
That is a market where a 68-year-old owner with most of his net worth in one company is negotiating against a 39-year-old buyer who intends to hold for seven years. The structures being written into those agreements, rollover stakes, seller notes, staged buyouts, are the seam where two very different time horizons get reconciled. Firms like Regent Bridge argue that the reconciliation, not the auction, is the actual advisory work.
What the structure does not pay for
The thesis has real problems, and the same data sets that support it also cut against it.
The IBBA and M&A Source Q4 2025 survey, completed by 350 brokers and advisors, found that in Main Street and lower-middle-market deals up to $50 million, seller financing remains the common tool for bridging valuation gaps while earnouts and retained equity are used sparingly. The structural revolution, in other words, is concentrated well above the smallest end of the market that most owners actually occupy.
Nor is the conventional auction failing. In the Q1 2026 Market Pulse survey, 83% of deals above $5 million attracted at least three offers and 18% drew ten or more bids. Competitive tension is doing exactly what it is supposed to do. An advisor arguing that price discovery matters less than structure should be asked whether that argument is easier to make when the process only produced two bidders.
And contingent money is not money. SRS Acquiom’s claims data shows earnouts pay roughly 21 cents on the dollar across all deals that include one, excluding life sciences, with about half the maximum earned in deals that hit any level of achievement at all. Applied to the Akron transaction, an earnout sized at a third of the closing payment is worth something closer to 7% of it in expectation. The founder who accepted 9% less on the headline may simply have accepted 9% less.
Intermediaries are going into this optimistic: 72% expect 2026 conditions to match or beat the 2021 peak. If they are right, the auctions will get competitive enough that structure becomes a preference rather than a necessity. The firms that built a practice on selling founders a second bite will then have to answer a harder question: whether the second bite was ever worth the first.
