Why right now might be the best time in a decade to acquire an industrial SMB and what most buyers are missing in diligence

I work in EY Parthenon's diligence practice covering industrials, and I keep seeing the same pattern: searchers and independent sponsors underwriting deals using assumptions that made sense 18 months ago but don't reflect what's actually happening in the market right now. Here's what the current landscape actually looks like, and what it means for your diligence process: 1. The macro setup is unusually favorable for small business buyers PE firms are sitting on long-held portfolio companies and untapped capital, strategic buyers are chasing growth, aging business owners are looking for exits, and domestic manufacturing is receiving renewed interest as supply chains get more complex. That's a lot of motivated sellers, and most of them are below the radar of institutional buyers. Deal activity accelerated through 2025 as inflation eased, financing conditions steadied, and buyers shifted from caution to action. But that acceleration is concentrated at the top end. The $1–5M EBITDA founder-owned business is still relatively uncrowded. 2. Tariffs are creating real asymmetry, but only if you underwrite them properly This is where I see the most diligence gaps. Tariffs aren't just a cost line item, they're reshaping customer behavior, supplier relationships, and competitive dynamics. The general trend toward higher tariffs is making US-based companies attractive acquisition targets for companies that want to sell products in the US market, which means certain industrial businesses have a tailwind that isn't yet priced into their valuations. The question to ask isn't "how exposed is this business to tariffs?" It's "does this business benefit from the onshoring trend, and are customers starting to consolidate toward domestic suppliers?" That's a commercial diligence question, not just a financial one. What most buyers get wrong on industrial commercial diligence Customer concentration gets flagged every time. What gets missed: Whether the relationships behind those customers are transferable to a new owner (hint: in industrials, they often aren't automatically) Whether end market demand is structurally growing or just cyclically recovering Whether the business's competitive position is based on genuine switching costs or just incumbent inertia AI and digital maturity are becoming key drivers of valuation even in traditional industrial businesses. Buyers who don't assess this risk leaving real upside on the table, or missing a red flag. 3. Who this is relevant for If you're evaluating a deal in specialty services, light manufacturing, distribution, or field services, particularly anything touching infrastructure, maintenance, or domestic supply chains, I'm happy to compare notes. I've been doing commercial diligence on industrial businesses and I'm building relationships in the search community. https://www.manufacturingdive.com/news/merger-acquisition-manufacturing-industrial-private-equity-tariff/804580/ https://www.pwc.com/us/en/industries/industrial-products/library/industrial-manufacturing-deals-outlook.html https://www.ey.com/en_us/insights/strategy/m-and-a-as-a-growth-engine-for-industrials https://www.pwc.com/us/en/industries/industrial-products/library/industrial-manufacturing-deals-outlook.html