For a public compounder with a diverse portfolio, investors can't analyze each small deal. Therefore, stock performance isn't tied to individual acquisition multiples but to the long-term track record of growing earnings per share (EPS). This incentivizes a relentless focus on profitability over exit-driven strategies.

Progress's M&A model focuses on acquiring companies at a price that, after executing on cost synergies, results in an effective EBITDA multiple lower than their own public market multiple. This creates immediate value for shareholders through arbitrage.

While competitors retrench during recessions, Amphenol leverages its strong balance sheet to accelerate M&A. This counter-cyclical strategy allows it to acquire strategic assets at attractive valuations, ensuring it emerges from downturns with increased market share and strength.

After a large, debt-funded acquisition, deleveraging should be the top priority over share buybacks. Choosing buybacks sends a mixed signal, disappoints investors expecting a return to the growth playbook, and leaves the company too financially constrained to pursue future strategic M&A opportunities.

Acquiring smaller companies at a 5-6x EBITDA multiple and integrating them to reach a larger scale allows you to sell the combined entity at a 10-12x multiple. This multiple expansion is a powerful, often overlooked financial driver of M&A strategies, creating value almost overnight.

Despite geopolitical risk and economic uncertainty, M&A is surging because companies are executing on long-term (20-30 year) strategic repositioning plans conceived post-COVID. When capital markets open, even briefly, companies are quick to act on these dormant, high-conviction plans, ignoring near-term volatility.

Instead of massive share buybacks, Salesforce has a rare opportunity to acquire category-leading companies with double-digit growth (like Braze or Zeta) at low cash flow multiples. This M&A strategy would be immediately accretive and could restart stalled growth—a stark reversal of its past habit of buying companies at peak revenue multiples.

Inspired by baseball's 'Wins Above Replacement' (WAR) metric, M&A should be evaluated not against doing nothing, but against a 'replacement-level' use of capital, such as a share buyback. A buyback is a readily available, low-risk alternative that most acquisitions fail to clear as a comparable benchmark.

The current M&A landscape is defined by a valuation disparity where smaller companies trade at a discount to larger ones. This creates a clear strategic incentive for large corporations to drive growth by acquiring smaller, more affordable competitors.