Deal Structures Closing the Gap With Multiples

In my January 2026 letter to clients, I wrote that the M&A engine had finally caught and we had a tailwind at our backs. I stand by that. But the SRS Acquiom 2026 M&A Deal Terms Study, released this month and analyzing more than 2,300 private-target transactions, makes something else clear: The tailwind is moving the boat, but the water underneath has gotten choppier.

For owners of MSPs, MSSPs, VARs, and Digital Marketing agencies thinking about an exit, the structural terms of how deals get done in 2026 deserve as much attention as the headline multiple.

According to the SRS Acquiom study, earnouts staged a comeback, appearing in roughly 24 percent of deals, up from approximately 22 percent in 2024. That number sits above the historic average of roughly 20 percent, and the median earnout potential as a share of the closing payment climbed to approximately 34 percent.

When buyers reach for performance-contingent structure, they are telling you they are not fully convinced of your forward projections. In our world of recurring-revenue IT Services firms, that means more of your purchase price gets parked on the far side of an ARR retention or growth hurdle. As I cautioned in January, treat earnouts an upside, not as the foundation of your retirement number.

According to the same study, escrow sizes increased from 2024 to 2025 across almost all deal categories. For deals without Reps and Warranties Insurance, average escrows climbed to roughly 14.7 percent of deal value. More money sitting in holdback after close means more of your proceeds remain at risk, and for a founder who has spent fifteen or twenty years building an IT Services practice, that delayed and conditional money carries weight.

According to the study, RWI was identified on approximately 46 percent of 2025 deals. This is a meaningful shift. In my January letter I noted lower middle market deals still leaned on traditional escrows and indemnities rather than RWI, and that remains broadly true for the smallest transactions. But the trend line is unmistakable, and as RWI works its way down market, sellers should understand how it reshapes everything around it. The study found RWI deals carried the lowest percentage in four years of surviving seller representations, at approximately 43 percent. The insurance changes the negotiation, and not always in the seller's favor.

According to SRS, post-closing purchase price adjustments have grown more complex, with the great majority of 2025 PPAs built on more than one metric. The study also documented the worksheet methodology surpassing GAAP in popularity, appearing in approximately 39 percent of deals. More moving parts in a working capital calculation means more surface area for a post-closing dispute. For a Digital Marketing agency with project-based revenue and uneven billing cycles, a poorly negotiated PPA can quietly claw back several points of enterprise value after the ink is dry.

According to the study, indemnification terms continued to shift toward buyers. In traditional indemnity deals, only about 11 percent of sellers had general representations that did not survive closing, a sharp drop from roughly 18 percent the prior year. Fewer walk-away deals means sellers are carrying post-closing exposure longer. I believe this is a direct consequence of the longer, more invasive due diligence environment I have flagged repeatedly. When buyers dig deeper, they find more, and what they find becomes leverage at the term sheet.

There is genuine good news in the data. According to the study, jumbo deals rebounded, with roughly 10 percent of 2024 transactions and approximately 9 percent of 2025 transactions exceeding 750 million dollars paid at closing, alongside growth across deal size categories. I want to be precise here, because the source figures show 2024 slightly ahead of 2025 rather than identical. Mega deals matter to our sellers because they create a domino effect. Large transactions in the channel partner space generate the bread-and-butter follow-on activity that drives strategic appetite for sub-scale MSPs and agencies.

So here is my prediction for the rest of 2026. The tailwind is real and deal volume will hold, but the terms environment will keep tightening in the buyer's direction. I expect earnout frequency in lower middle market IT Services deals to climb further as buyers price in AI-driven uncertainty around recurring revenue durability. I expect escrow and holdback pressure to persist, and I expect RWI to keep migrating down toward deals that would have been pure escrow-and-indemnity transactions just two years ago.

None of this takes away from the current positive market for seller. It just means the gap between a well-prepared seller and an unprepared one has never been wider.

The owners who win in this market are the ones who get their financial reporting clean, their recurring revenue documented, and their working capital normalized before they ever reach a data room. Structure is where value quietly leaks out. Anchor your deal to cash at close, scrutinize every PPA metric, and never let an earnout do the work your business case should be doing.

The wind is still at our backs. Just keep both hands on the rigging.

Happy Dealmaking, everyone.

Tim Mueller is a 4x founder specializing in the growth of technology and communications companies. With 30 years of experience in startup, high growth and Digital Marketing exits, he is best known for identifying next generation technologies, assembling teams to leverage these opportunities, and building cultures for success. Tim has founded and co-founded and sold four technology-based businesses prior to co-founding IT ExchangeNet.