Five Consecutive Weekly Declines: What the Market Correction Means for Deal Pricing

The S&P 500 closed the week of March 27 at 6,368.85, marking its fifth straight weekly decline and hitting a seven-month low. The Nasdaq has entered correction territory, the Dow fell nearly 800 points on Friday alone, and oil prices have pushed past $110 per barrel as the Iran conflict continues to disrupt global energy markets. For business owners and investors in the middle of transactions, or contemplating them, the question is no longer whether the correction will affect deal pricing. It already has.

How We Got Here

The convergence of several forces has driven markets lower since mid-February. The most immediate catalyst is the ongoing conflict with Iran and the effective closure of the Strait of Hormuz, which has removed roughly 20 million barrels per day of oil from global shipping lanes. Brent crude surged past $120 before settling around $110, and the energy shock has rippled through supply chains, transportation costs, and consumer prices.

The Federal Reserve held rates steady at 3.50% to 3.75% at its March meeting, citing uncertainty from the conflict and persistent inflation. More notably, futures markets pushed the probability of a rate increase by year-end past 50% for the first time in this cycle. Consumer sentiment fell to 53.3 in March, down 5.8% from February, reflecting growing anxiety about the economic outlook.

For equity markets, the result has been a sustained repricing. The S&P 500 is down over 10% from its recent highs. The Nasdaq has fallen further, with bellwether names like Nvidia down more than 10% year-to-date and Micron dropping 22% since mid-March despite reporting strong earnings.

What This Means for Transaction Valuations

Public market declines do not translate instantly into private market pricing, but they create a gravitational pull that affects how buyers and sellers negotiate. When public comparable companies trade at lower multiples, the benchmarks used in private company valuations shift downward. Buyers point to the correction as evidence that risk has increased, and they adjust their offers accordingly.

The effect is particularly pronounced in sectors tied to consumer spending, energy costs, and global supply chains. Manufacturing businesses with significant input cost exposure, consumer-facing companies sensitive to discretionary spending, and logistics operators facing higher fuel costs are all seeing more conservative buyer underwriting.

For technology and healthcare services, where valuations have been supported by strong growth narratives, the correction introduces a different kind of pressure. Growth assumptions that seemed reasonable in January may require revision if the macroeconomic environment continues to deteriorate. Buyers are stress-testing projections more aggressively and widening the discount rates applied to future cash flows.

The Earnout Question

One of the clearest signals of valuation uncertainty is the increased prevalence of earnout structures in deal terms. When buyers and sellers cannot agree on price, earnouts offer a bridge: the seller receives a portion of the purchase price contingent on the business hitting specified performance targets post-close.

Data from both Capstone Partners and middle market M&A surveys show that the share of deals containing earnout provisions has been rising since late 2025. In the current environment, this trend is likely to accelerate. Sellers who are confident in their business's trajectory may view earnouts as an acceptable compromise, particularly if the alternative is accepting a lower guaranteed price or delaying the transaction entirely.

The risk, of course, is that earnout targets become harder to hit if the economic slowdown deepens. Sellers should negotiate earnout terms carefully, paying close attention to how EBITDA or revenue targets are defined, what adjustments are permitted, and who controls the business decisions that affect performance during the earnout period.

What Buyers Are Thinking

It is worth understanding the buyer's perspective. Private equity firms with committed capital are not retreating from the market. Many view corrections as buying opportunities, provided they can acquire quality businesses at more favorable entry multiples. The pressure to deploy capital has not diminished; if anything, limited partners expect their fund managers to be active precisely when valuations are more attractive.

Strategic buyers, by contrast, tend to be more cautious during corrections. Corporate boards and CFOs focus on preserving balance sheet flexibility and may defer acquisitions until the economic outlook clarifies. This divergence, with PE remaining active while strategics pull back, can benefit sellers who run competitive processes, as PE bidders may face less competition for attractive targets.