2025 Year in Review
Nature Stock photos by Vecteezy
2025 marked a year of real progress at Willow Creek Partners, as we broadened our platform and deepened our partnerships with founders and management teams. As we step into 2026, we do so with momentum, conviction, and a clear sense of optimism.
Over the past year, we continued to move Willow Creek beyond its origins in multifamily real estate and further into a diversified portfolio of operating businesses. Our focus has been intentional: building a portfolio of durable, cash‑flowing companies across business services, government contracting, technology, and professional services, each led by operators we respect and are excited to partner with. In 2025 alone, we added five new companies to the portfolio, all aligned with that strategy.
We began the year with the acquisition of CMG, a construction management platform with deep roots in restaurant and retail development and a growing footprint in healthcare. We expanded The One23 Group through the acquisition of Integrated Computer Solutions, adding critical mission focused capabilities that strengthen One23’s position in supporting national security and the modern warfighter. Within our architecture platform, Fusion AE, we welcomed ACI and Reztark Design, extending both technical depth and geographic reach. We also invested in Merge, a tech‑enabled business brokerage focused on helping founder‑led companies navigate M&A. That investment stands on its own and also strengthens our sourcing capabilities and market insight across the lower middle market.
By any standard, 2025 was an active year. More importantly, it was a deliberate one. Each investment added not just scale, but quality, resilience, and long‑term flexibility to the portfolio.
Demographics, Not Cycles, Are Driving the Next Wave of M&A
One of the most powerful forces shaping the lower middle market today is not cyclical. It is demographic.
Across the country, a large and growing share of businesses earning under $10 million of EBITDA are owned by Baby Boomers reaching retirement age. In 2025, retirement emerged as the most consistent driver of transactions in this segment, surpassing sales driven purely by valuation or market timing. That distinction matters because demographics are persistent. Owners can delay decisions, but they cannot avoid them indefinitely.
Surveys of small business owners increasingly show that many intend to exit within the next one to three years, with retirement cited as the primary reason. At the same time, most of these owners do not have formal succession or exit plans in place. The result is a growing backlog of high‑quality, founder‑owned businesses that are operationally sound but not yet fully prepared for a transaction or leadership transition.
Valuation dynamics over the past several years have reinforced this backlog. After the post‑2021 compression in multiples and the rapid rise in interest rates, many owners chose to pause sale processes in hopes of better pricing, more stable capital markets, or clearer economic signals. Transaction activity in the sub‑$10 million EBITDA segment has increased, but not nearly to the level implied by owner intent. We view this as deferred supply, not weak demand.
On the buyer side, interest has remained durable. Independent sponsors, family offices, lower middle market private equity firms, and entrepreneurial buyers continue to pursue retirement‑driven transactions, especially where founders remain central to the business and value continuity. That alignment between aging ownership on the sell side and motivated, long‑term capital on the buy side creates a structurally attractive environment for sustained deal activity.
We believe this demographic transition represents one of the most durable tailwinds in the lower middle market. Unlike economic cycles, retirement is not discretionary. As valuations stabilize and capital markets normalize, we expect a meaningful portion of this pent‑up supply to come to market, supporting elevated transaction activity for years to come.
A Partnership‑Oriented Approach to Ownership
Our strategy is not to buy businesses and immediately replace the people who built them. We view founder knowledge, relationships, and culture as among the most valuable assets a business has.
In most cases, we pursue long‑term partnerships where management remains actively involved for several years after the transaction. Our role is to provide capital, strategic support, and infrastructure so founders can focus on what they do best: serving customers, building teams, and growing the business. When sellers commit to this shared path, value creation becomes a collaborative effort rather than a handoff. Their second chapter is directly tied to the success we create together for our investors.
This approach continues to resonate with founders who want liquidity and continuity and who value a trusted partner over a transactional exit.
Real Estate: Navigating the Cycle with Discipline
Multifamily real estate continues to work through a cyclical adjustment following one of the fastest interest rate increases in modern history. While policy rates have moderated from recent highs, the speed of the shift reshaped pricing, underwriting, and development economics. Projects launched during the 2021 and 2022 construction peak are delivering into the market, adding near‑term supply. At the same time, affordability challenges in single‑family housing continue to support long‑term rental demand.
We remain constructive on the asset class over time and disciplined in the near term, recognizing that cycles ultimately resolve as new supply moderates and core demand fundamentals reassert themselves.
Looking Ahead
We enter 2026 encouraged by the progress we have made and energized by the opportunity ahead. Our portfolio is more diversified, our pipeline is deeper, and the structural forces supporting our strategy, particularly in the lower middle market, remain firmly in place.
We are grateful for the trust you place in Willow Creek Partners and for the founders and management teams who choose to build alongside us. We look forward to continuing this work together and to delivering long‑term, compounding value in the years ahead.
Thank you for your partnership. We wish you a happy, healthy, and prosperous New Year.
-The Willow Creek Partners Team
