The announcement of new tariffs may have triggered concerns at the macro level, but beneath the headlines lies a compelling case for renewed momentum in the lower middle market. While global uncertainty tends to cast a long shadow over M&A, that shadow provides the opportunity to spotlight areas of resilient, high-performing business.
At Align, we work with clients in the trades and industrial services who are often insulated from the turbulence of global supply chains. In this moment, we see opportunity—not just for continuity, but for growth. Here’s why:
1. Global Complexity Drives Focus Downstream
Large, cross-border deals have always come with a degree of risk, but tariffs intensify those challenges, introducing unpredictability in sourcing, costs, and regulation. For private equity firms and corporate acquirers, the lower middle market offers something increasingly rare: simplicity and control.
Domestic businesses with regional customer bases, repeat revenue, and lower operational complexity become even more attractive as investors look for stability and margin protection.
2. Essential Services Stay Essential and Services Benefit Over Goods
In sectors like plumbing, HVAC, electrical, and asphalt, demand doesn’t hinge on global trade policy. These services are immediate, local, and non-discretionary. A broken furnace or burst pipe doesn’t wait for a favorable macro environment—and that’s what makes these businesses so appealing in uncertain times. Additionally, service businesses on the consumer level may benefit if inflation begins to impact goods and consumers adjust how they spend their disposable income.
Lower middle market companies in these industries continue to generate strong cash flows and remain in high demand among buyers seeking consistency and resilience.
3. Infrastructure Momentum Creates Demand for Trades
The current administration is actively fast-tracking federal permitting and environmental reviews in a push to build domestically. That means construction, materials, and infrastructure-adjacent businesses will likely see accelerated growth.
This shift plays to the strengths of lower middle market operators who already have the talent, experience, and local relationships needed to execute at scale.
4. Capital Wants In, and May Get Cheaper
Despite recent rate hikes, there remains significant dry powder in the market. If interest rates begin to ease, as many expect, capital will flow even more freely. Investors will be looking for strong operators in reliable sectors, and lower middle market businesses are well-positioned to deliver.
From strategic buyers to growth equity, the appetite is there. It’s just a matter of timing and positioning.
Summary: Tariffs or Tailwinds?
Yes, tariffs introduce volatility. But in the lower middle market, they may also shift attention and investment toward the types of businesses that thrive on local demand, operational efficiency, and executional grit.
At Align, we specialize in working with owners of lower middle market businesses including those in the trades and industrial sectors, helping companies like yours navigate change and unlock value at the right moment.
If you’re thinking about ways to grow or exit your company or want to better understand what today’s environment means for your business, please reach out.