The small company discount just got bigger

2026 is set to be the biggest year for global M&A on record. For most UK founders, it will not feel like it.

According to the PitchBook Q3 2026 Global M&A Report, published on 8 October 2026, global deal value passed $4 trillion in the first nine months. At that pace, the full year would exceed $5 trillion for the first time. The headlines write themselves.

Look beneath them and a different picture emerges. The largest deals, those above $5 billion, were priced at a median of 13.7 times EBITDA over the twelve months to 30 September 2026. That is unchanged on 2025. Deals under $100 million slipped from 8.0x to 7.1x. Deals between $100 million and $250 million fell from 11.2x to 9.1x (page 8).

Our view at Consult EFC is simple. This year’s valuation reset has landed almost entirely on smaller businesses. The market is running at two speeds, and the UK’s owner-managed companies are in the slower lane.

Source: PitchBook Q3 2026 Global M&A Report, North America and Europe. An EV/EBITDA multiple compares the price paid for a whole business with its EBITDA (earnings before interest, tax, depreciation and amortisation, a common measure of operating profit).

A record year built on a handful of giants

The record totals owe a great deal to a small number of enormous transactions. Deals above $5 billion made up 52.3% of global deal value in Q1 and 42.9% in Q2, before falling to 21% in Q3. Meanwhile, Q3 deal count of more than 11,700 fell short of the 12,000 or more per quarter the market has often seen over the past three years.

We think founders should read headline records with care. A market can break records in value while becoming harder for a £10 million business to sell into. Both things are true in 2026.

Why the reset fell where it did

The report points to the cost of money. Two European Central Bank rate rises and a September rise from the US Federal Reserve pushed borrowing costs higher (pages 12 and 13). Private equity buyers, who fund deals with a large share of debt, saw the multiples they paid fall by a full turn to 11.5x (page 6).

Our reading goes a step further. When finance is cheap, buyers compete on growth and accept risk. When finance is expensive, they compete on certainty and price risk carefully. Smaller businesses tend to carry the risks buyers notice most: one customer making up a large slice of revenue, a founder holding every key relationship, a finance function that cannot produce reliable monthly numbers. In a cautious market, each of those becomes a reason to lower an offer.

The data has a blind spot

The smallest category in the report covers every deal under $100 million. A business worth £4 million and one worth £70 million sit side by side. The figures also come from deals where values were disclosed, which excludes many private sales, and most of the data is North American.

So we would not treat 7.1x as a price tag for any UK business. What the data does show clearly is direction. Buyers at the smaller end have become more selective, and the range of outcomes has widened. In our experience, where a business lands in that range depends far more on the quality of its earnings than on any market median.

The real contest is over maintainable earnings

Multiples dominate the conversation. The number they multiply decides just as much.

Buyers value maintainable earnings: the profit they believe will continue once they own the business and the founder has stepped back. We regularly see value lost in the gap between a company’s statutory profit and that figure. Founders paying themselves below market rate, which a buyer corrects by adding the cost of a replacement managing director. Personal costs run through the business with no evidence to support adding them back. One-off costs nobody documented. Rent paid to a related party at a non-market rate.

The arithmetic is unforgiving. Purely as an illustration, if a buyer removes £200,000 from your EBITDA and applies a 7x multiple, £1.4 million comes off your enterprise value. In a two-speed market, the founders who protect value are the ones who have already done that work themselves.

What we expect next

The report expects higher financing costs to weigh on deal volume in Q4, with at least one more US rate rise likely before year end. A sponsor contribution from Liberty GTS also points to signs that rates may rise into early 2027.

Our expectation is that buyers will stay selective well into 2027. We do not see that as a reason to delay planning. A selective market rewards preparation more than any other kind, because the gap between a well-evidenced business and an unprepared one becomes wider.

What this means for the next twelve months

For founders thinking about an exit in the next one to three years, we would focus on four things:

1. Know your maintainable earnings before a buyer tells you. An independent view now costs far less than a price reduction later.
2. Evidence every add-back. Invoices, contracts and board minutes turn a negotiation into a confirmation.
3. Reduce dependence on the founder. Customer relationships, supplier terms and key decisions should sit with a team, not one person.
4. Make quality the priority over size. Few businesses can move up a size bucket in a year. Most can make their earnings cleaner and more predictable.

Talk to us

At Consult EFC, we help founders understand what their business is worth today through independent business valuations, then close the gap to the value they want through structured exit planning.

If this has raised questions about your own numbers, we are always happy to talk them through. You can book a free 30-minute strategy call at www.consultEFC.com.

Kish Patel ACA, ICAEW · Founder, Consult EFC

Over 12 years across Big Four audit, Investment Banking, and corporate advisory. Kish works with SaaS founders, tech companies, and ambitious UK SMEs from £1M to £50M in revenue on fundraising, valuations, exit planning, and financial strategy. ICAEW regulated. Big Four trained. Based in London.