What We Are Seeing in Middle-Market PE Deal Flow — Connecticut Insurance and Advanced Manufacturing, 2024 into 2025

Middle-market private equity activity in Connecticut held up better than the 2024 headline numbers suggest. National deal counts were down meaningfully from the 2021 peak, and purchase-price multiples compressed across most sectors. But the composition of the deal flow we saw in Hartford tells a more interesting story than the aggregate count, and two sectors — specialty insurance and advanced manufacturing — accounted for a disproportionate share of the closings we worked on.

Specialty insurance continues to punch above its weight

Connecticut's insurance concentration is structural. Hartford remains the operating home for a large share of the specialty and reinsurance market, and that concentration shows up consistently in middle-market M&A. Nine of the twenty-four private-company acquisitions we closed for sponsor clients in 2024 were in insurance-adjacent verticals: two in specialty MGA platforms, three in brokerage rollups, two in claims-adjusting services, and two in insurance-technology (pricing analytics and policy administration).

A few observations from that deck of transactions:

• Rollup structures have shifted. The "hold for five, sell the platform at a step-up multiple" model remains the majority approach, but we saw more continuation-vehicle transactions in 2024 than in any prior year. Two of the brokerage rollups closed last year moved from a 2019-vintage fund to a continuation vehicle with the same sponsor, a structure that a decade ago would have raised LPA-level objections and now frequently does not.

• Reps and warranties insurance pricing stabilized. After the 2022-2023 market tightening, R&W premiums in the Connecticut middle market settled into a band that most sponsors can plan around — roughly 2.5% to 4.0% of limits, depending on deal complexity and the quality of the target's historical financials. That is still above pre-2020 pricing but no longer the budget-breaker it was eighteen months ago.

• Earnouts have returned in a more disciplined form. For insurance-services targets with revenue concentration or retention risk, earnouts tied to specific KPI thresholds (client retention, renewal rates, production benchmarks) were back in roughly 40% of our deals. The 2021-era multi-year, stretched-target earnouts that resulted in so many post-closing disputes have largely disappeared in favor of shorter, narrower, more calculable triggers.

Advanced manufacturing: the quieter story

Manufacturing is the other concentration. Connecticut has a dense and aging base of specialty manufacturers — aerospace suppliers, precision machining, advanced materials, medical devices — and a meaningful percentage are owned by founders who are either at or past retirement age and whose children have not taken over the business. The succession math is arithmetic: if the founder is 68, the financial planner is telling them to liquidate the concentrated position now, and the sponsor universe knows that. The result is a steady flow of founder-sale transactions, many of which are first-time M&A engagements for the seller.

Two features distinguish these deals from the insurance rollups:

First, rollover equity has become close to a standard feature rather than a negotiating lever. On founder sales where the founder intends to stay on through an earnout, we saw meaningful rollover (typically 15% to 30% of post-closing equity) on eleven of twelve 2024 closings. The founders want exposure to the second-bite outcome, and sponsors want the operational continuity — the structures line up.

Second, environmental diligence is a much heavier workstream on CT manufacturing deals than it was even five years ago. The Connecticut Transfer Act (Conn. Gen. Stat. § 22a-134 et seq.) continues to structure much of the closing calendar for any target with a manufacturing site, and the 2020 Release-Based Cleanup Program implementation is still working through its rollout. On a sponsor-side deal with three Connecticut operating sites last summer, the Transfer Act compliance workstream added four weeks to the timeline and a specific representation regime to the SPA.

Looking into 2025

Two things we are watching. First, the cost-of-capital picture has begun to soften in a way that should modestly increase deal volume across the middle market; whether that shows up in Connecticut before it shows up in Boston or New York is a question of timing more than direction. Second, the estate-tax sunset scheduled for January 1, 2026 is likely to pull founder transactions forward — clients who would have sold in 2027 are now closing in 2025 to fix the tax basis ahead of the exemption reduction. We flagged this in a separate piece from the T&E group; for deal counsel, the near-term practical effect is a compressed timeline on any transaction that a founder wants to close before year-end 2025.

For sponsor-side or target-side counsel on Connecticut middle-market deals, the Corporate group's M&A practice is available. Most of our work this year has been in the insurance and advanced-manufacturing sectors described above; we also handle food-and-beverage, specialty chemicals, and a small amount of business-services work.