This valuation gap, which emerged sharply after the market correction of 2022, has proven far more persistent than many anticipated. Even as financing conditions stabilize and visibility improves, closing deals still requires bridging differences that are not merely technical, but deeply rooted in how each party interprets the current environment.

On the sell-side, expectations are still influenced by the high-multiple environment of the late 2010s and early 2020s. Many business owners — and even some financial sponsors — remain anchored to peak valuations, especially when their companies have continued to perform operationally. From their perspective, a solid EBITDA trajectory should justify maintaining relatively high pricing levels.

Buyers, however, approach the same assets with a different framework. Higher interest rates, reinforced since the tightening cycle led by the European Central Bank, have fundamentally altered return expectations. Financing costs are no longer negligible, and leverage contributes less to value creation than it once did. As a result, buyers are applying more conservative multiples, placing greater emphasis on downside protection and cash flow resilience.

This divergence is not simply a negotiation issue; it reflects a broader shift in financial logic. In a low-rate environment, valuation could be supported by abundant liquidity and aggressive capital structures. In today’s context, pricing must be justified by intrinsic performance rather than financial conditions alone.

The consequences are visible in deal dynamics. Processes take longer, exclusivity periods are extended, and a higher proportion of transactions fail to reach completion. In many cases, the gap is not wide enough to justify walking away entirely, but it remains significant enough to prevent straightforward agreements.

To address this, structuring mechanisms have become central to negotiations. Earn-outs are increasingly used to link part of the purchase price to future performance, allowing buyers to protect against uncertainty while giving sellers the possibility to achieve their valuation targets. Similarly, vendor loans have regained traction, not only as a financing tool but also as a signal of confidence from the seller.

These mechanisms are not new, but their role has evolved. They are no longer marginal adjustments — they are often essential to making deals feasible. In that sense, they illustrate a broader trend: financial engineering is shifting from value optimization to value reconciliation.

This dynamic can also be interpreted through the lens of information asymmetry. As highlighted by Joseph Stiglitz, uncertainty about future performance leads market participants to adopt more cautious positions. In the current environment, this translates into buyers demanding safeguards, while sellers resist downward revisions of valuation unless compensated by contingent upside.

At the same time, financing constraints reinforce the gap. Banks remain selective, and debt packages are structured with more conservative assumptions. Even when both parties agree on a price, securing the necessary financing under acceptable terms can be challenging, adding another layer of complexity to the negotiation.

As of April 2026, there are signs that the gap is gradually narrowing. Some sellers are adjusting expectations, particularly in sectors more exposed to macroeconomic pressures. Buyers, on the other hand, are showing increased flexibility for high-quality assets with strong visibility on cash flows. However, this convergence remains slow and uneven across sectors.

Ultimately, the persistence of the valuation gap reflects a transition phase. Markets are moving from one equilibrium to another, and such transitions rarely occur smoothly. Until a new pricing consensus is established, M&A activity is likely to remain selective, with execution relying heavily on structuring creativity and disciplined underwriting.

In this environment, closing a deal is no longer just about agreeing on a number. It is about aligning expectations, sharing risk, and building structures that can accommodate uncertainty — a process that is, by nature, more complex, but also more revealing of underlying value.

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