Outlook 2025: Business Services

As we head into 2025, we're seeing many reasons for continued strengthening in the M&A and private capital markets. Over the past year, there has been steady improvement in the rate environment, the GDP outlook, consumer spending and financial health, and corporate earnings.

Against this backdrop, we believe 2025 will see ongoing growth across several areas of business services, and we're excited for the opportunities to come. See our perspectives on the overall M&A and private capital markets.

Business Services: Outsourcing Expertise and Innovation

The business services ecosystem is dynamic and diverse, supporting an array of growing end markets. Innovative business services providers continue to garner investor attention in several appealing sectors, including commercial and industrial services, professional and tech-enabled services, IT services, and specialty distribution.

Across these areas, buyers remain interested in companies featuring healthy cash flow, recurring revenue, stable markets, and visible, predictable demand driven by ongoing, non-discretionary needs. Looking ahead, the businesses prioritized by investors will offer specialized capabilities in their areas of expertise, innovation via advanced technology and AI adoption, and a wider range of value-added capabilities.

Our senior professionals are excited to see the business services industry gain further M&A momentum in 2025. Below, our senior professionals share the trends behind this activity, key categories particularly well positioned for success, and recent clients that exemplify the industry's investment potential.

Commercial & Industrial Services: Fragmentation, Low Deferability, and Diversification

Across commercial and industrial services, many subsectors are large and fragmented, providing ample opportunities for growth via M&A. The long-term fundamentals of the sector are in place: low deferability of services, diverse end markets, and favorable tailwinds creating growth runway.

For example, our client Guardian Fire Protection offers an array of non-discretionary services such as inspection, maintenance, and repair work, underpinning predictable, above-market organic growth. Similarly, GeoStabilization International, another Harris Williams client, is a leading provider of geohazard mitigation solutions and roadway safety services to private and public customers across geographies and end markets. Such businesses that provide essential services to the function and safety of infrastructure and communities remain incredibly attractive to investors. GSI combines those high-value, critical services with world-class leadership and organizational structure, creating a one-of-a-kind platform.

Specialty Distribution: Essential Partners in a Dynamic Environment

In recent years, specialty distributors have established themselves as key partners to a vast array of businesses across categories and geographies, enjoying steady demand for the items and expertise they provide. The criticality of sophisticated specialty distributors was highlighted during the pandemic, and their value proposition has continued to gain relevance in today's uncertain macroeconomic and geopolitical environment. As rising supply chain costs impact a wide swath of businesses and sectors, the growth opportunity for innovative distributors that combine economies of scale with technologies like AI and automation continues to attract investor attention.

For example, we worked with alphabroder, a leading supply chain partner for blank and decorated apparel and hard goods in North America for a variety of purposes including uniforms, corporate apparel, promotional products, and athletics. Acquirer S&S Activewear and alphabroder serve as a link between apparel and product manufacturers and a diverse set of customers in a rapidly evolving market, including apparel decorators, promotional product distributors, online retailers, team dealers, and lifestyle brands.

In a very fragmented market with mostly small or regional distributors, the company has a significant opportunity to expand geographically while taking on additional product categories to capture a greater share of customer purchases.

Professional & Tech-Enabled Services: Meeting Demand for Expertise

The professional and tech-enabled services sector continues to see steady demand from millions of small and medium-sized enterprises (SMEs) around the globe. As specialists in their respective fields, these businesses are increasingly outsourcing non-core activities and business processes, from accounting and legal to a range of strategic advisory services.

Travel is a great example: It's a non-core activity yet essential to the performance and growth of many businesses across geographies and industries. Recent client Direct Travel meets this need by combining national reach with local presence via 67 locations in North America, earning its position as a leading provider of outsourced travel management services to the SME market.

Likewise, in the data and information services sector a wide range of businesses are seeking actionable insights to guide their strategies from rapidly expanding volumes of public and proprietary data. Three Harris Williams engagements—featuring PEI Group, Chambers and Partners, and aosphere—exemplify this opportunity, each using data to help clients drive better and faster outcomes, improve productivity, and lower costs.

Meanwhile, C-suite decision makers are seeking more outside expertise to solve an expanding range of challenges. This is particularly true in areas with complex financial, operational, and regulatory dynamics. Healthcare is a prime example, with our client VMG Health providing compliance-driven valuation and advisory services to help healthcare organizations navigate a complicated and evolving landscape.

The insurance sector is another expanding market seeking help from outside experts. In the property and casualty insurance segment, businesses specializing in technical consulting, forensic services, and specialty engineering are in higher demand to efficiently resolve an increasing number of complex claims and disputes.

"In all these categories, fragmented landscapes of specialized providers create the potential to build wide-reaching, multi-service platforms that can do more for clients," says Derek Lewis, a group head and managing director.

IT Services: Managing a Dynamic Environment

Rapid technology evolution and adoption, constant regulatory changes, and increasingly sophisticated security threats make it challenging for companies to manage their IT operations in-house. These factors underpin the sustained growth of a robust IT services sector, with multiple segments seeing elevated investor interest.

Several recent Harris Williams clients demonstrate this opportunity. The Purple Guys, for example, solves difficult IT problems through a comprehensive suite of mission-critical outsourced technology, cloud, security, and consulting services. NWN Carousel, on the other hand, is a best-in-class cloud communications service provider that gives customers clear visibility and control of their cloud communications infrastructure, network, and endpoints.

And as cyber threats and regulatory requirements increase, companies are placing greater focus on partnering with IT services providers with demonstrated vertical experience and specialized capabilities. Nuspire is a prime example, delivering managed security, managed detection and response, endpoint detection and response, and cybersecurity consulting services. Another is CyberSheath, a managed services provider that helps its customers in the U.S. defense industrial base adhere to Cybersecurity Maturity Model Certification compliance standards.

Across IT services, digital transformation is a common theme and GrayMatter exemplifies the opportunity to invest behind it. The company is a leading systems integrator within the industrial automation space, working with operators and managers in food and beverage, life sciences, critical infrastructure, process, and diversified industrials.

Looking Forward

With an appealing mix of predictable, recurring revenue, non-deferrable demand, and large and diverse end markets, a range of business services companies will be on investors' radar in 2025. For example, companies that offer specialized capabilities, technical expertise, and strategic advisory services will remain in demand and attract investor interest. In addition, the verticalization of insights and advancements in machine learning are also creating opportunities for expansion. Generative AI, in particular, stands to significantly impact the business services industry, offering opportunities for innovative providers to drive efficiency, differentiation, and added value.

"Overall, the unique combination of established business services subsectors with disruptive technology is creating exciting opportunities for a variety of investor types," says Brian Lucas, a group head and managing director. "The future is bright for more advanced providers that bring deep subject matter expertise and a broader array of solutions to their customers."

In 2025, we look forward to partnering with business services investors and company leaders worldwide to help them navigate the M&A and private capital markets and unlock value in their businesses.

Learn more about the Harris Williams Business Services Group.