The Fed's September rate hike to 3.75-4% makes debt more expensive, so buyers are shifting deal payments toward seller notes and earnouts instead. Debt on platform deals dropped from 3.4x to 2.9x EBITDA in Q2, and only 48% of sellers feel prepared for the tighter financing environment.
Here's the practical effect: a great growth story still helps the buyer believe in the business. It won't carry the loan. And money got more expensive at the same time. On September 16th, the Fed raised rates a quarter point to a range of 3.75% to 4%, its first hike since 2023. When buyers can borrow less, more of your price tends to move into structure—seller notes, earnouts, rollover equity. Private equity buyers feel it too. GF data showed average debt on new platform deals falling to 2.9 times EBITDA in the second quarter from 3.4. Meanwhile, a BNY Wealth survey of 354 deal advisors found only 48% say sellers are well prepared when the buyer's review begins. The bar went up and about half of sellers weren't ready for the old one.
