The Business Services industry closed the third quarter with its underlying businesses in stronger shape than its share prices suggest. Many leading companies reported growth and raised their outlooks, while staffing extended its recovery for a second straight quarter.
Rising interest rates weighed on valuations late in the quarter, but bank deal pipelines remained strong heading into year-end. The outlook now hinges on whether rates settle enough for public markets to reflect that underlying strength.
Sector Performance
All five Business Services segments finished the year below their starting point, while the S&P 500 gained 15.2%. The quarter turned late. Every segment was ahead for the quarter at the end of August, and all five fell in September. That month, the Federal Reserve raised its benchmark rate. The 10-year Treasury yield reached its highest level since 2007.1
Human Capital & Staffing rose 9.0%, its second straight quarterly gain and the only advance in the industry. The rally extended into the summer after ManpowerGroup and Robert Half beat second-quarter revenue forecasts and reported improving demand. Part of the gain faded in September, when temporary help employment fell by 10,900 jobs.2
Consulting & IT Services ended the quarter close to where it began, down 3.9%, but still carries the industry's steepest annual loss at 24.7% amid persistent AI concerns. In July, IBM shares fell about 25% in a single day after a warning on its second-quarter results. Risk & Insurance declined 6.8%. Commercial insurance prices kept falling, and Marsh reported an eighth straight quarterly drop in global rates through June.3
Real Estate Services gave back its second-quarter gains, falling 10.8% for the industry's largest decline. The segment rose through August, then dropped sharply in September despite strong second-quarter results and a raised outlook from CBRE. It coincided with the September rise in rates. Environmental & Facility Services stayed close to flat for the year, down 1.6%. Waste Management trimmed its revenue outlook on lower volumes, while Cintas raised its full-year guidance.4
Valuations followed share prices lower. Real Estate Services' EV/EBITDA multiple fell to 12.7x during the September rise in rates, the lowest point on the chart. Consulting & IT Services and Risk & Insurance trade near 10x, consistent with the AI and pricing concerns above. Human Capital & Staffing was the only segment whose multiple rose, reaching 13.5x with its share-price recovery. Environmental & Facility Services still holds the highest multiple at 14.6x, in line with its steadier share price.
Middle-Market M&A Perspective
The Dinan Business Services Index† provides a closer look at publicly traded middle-market companies and the valuation environment relevant to private-market transactions. The index fell 3.8% in the quarter, less than Risk & Insurance or Real Estate Services. Over the year it is down 11.1%, against a 15.2% gain for the S&P 500. For middle-market owners, the public benchmark for businesses like theirs eased, but by less than the industry's weakest segments.
The index trades at 11.4x EBITDA, near the low end of its five-year range, compared with 18.1x for the S&P 500. It also sits below three of the five segment multiples, which suggests investors price smaller service companies more conservatively than larger peers. While public-company multiples do not translate directly into private-company transaction values, they provide a benchmark that can influence buyer expectations.
Private deal activity sent a steadier signal. Across all industries, the U.S. private equity deal count rose 5.8% from the second quarter, and PitchBook noted that most deals came from middle-market activity.5 For middle-market M&A, the distinction matters: public valuations and private deals moved apart this quarter.
M&A Activity & Transaction Environment
Capital IQ recorded 384 Business Services transactions in the third quarter, down from 540 in the second quarter. That count may be incomplete, since the data was pulled on the quarter's last day and late-reported deals are not yet included. LSEG reported that global M&A value fell 41% from the second quarter as borrowing costs rose.6 Bank executives described the September slowdown as a pause. JPMorgan's chief financial officer said he leaned toward deals being "delayed rather than canceled."6
Technology and data services drew the quarter's largest deals. A group including BlackRock's Global Infrastructure Partners and the Microsoft-backed AI Infrastructure Partnership completed its $40 billion acquisition of Aligned Data Centers. CDW agreed to buy Lovelytics, a data and AI services firm, for about $525 million to expand its data and analytics practice. In Risk & Insurance, Old Republic completed its $207 million acquisition of Everett Cash Mutual, a farm insurer.7
Outlook & What to Watch
Interest rates remain the main variable, though the Fed held steady in October. Markets still expect a December increase, which would keep financing costs high for buyers. Results released in October were encouraging: JLL raised its outlook again, Johnson Controls reported a record backlog, and Accenture eased concerns about AI's effect on IT services.83
† The Dinan Business Services Index is a proprietary index of publicly traded middle-market Business Services companies maintained by Dinan Capital Advisors. Index composition is available upon request.
References
1 Federal Reserve. "Federal Reserve issues FOMC statement." September 16, 2026. https://federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm
Yahoo Finance. "10-year Treasury yield hits highest level since 2007." September 15, 2026. https://finance.yahoo.com/markets/article/10-year-treasury-yield-hits-highest-level-since-2007-121942773.html
2 Staffing Industry Analysts (Bloomberg News). "Staffing stocks defy gravity despite AI concerns." August 18, 2026. https://www.staffingindustry.com/news/global-daily-news/staffing-stocks-defy-gravity-despite-ai-concerns
U.S. Bureau of Labor Statistics. "The Employment Situation: September 2026." October 2, 2026. https://www.bls.gov/news.release/archives/empsit_10022026.htm
3 Reuters. "Accenture's forecast eases AI disruption fears, lifts battered IT services stocks." October 1, 2026. https://www.aol.com/articles/accenture-forecasts-annual-revenue-growth-104422000.html
SiliconANGLE. "IBM cuts outlook as software and mainframe weakness weighs on results." July 22, 2026. https://siliconangle.com/2026/07/22/ibm-cuts-outlook-software-mainframe-weakness-weighs-results/
Marsh. "Global commercial insurance rates fall 6% in Q2 2026; marks eighth consecutive quarterly decline." July 23, 2026. https://www.marsh.com/en/about/media/global-commercial-insurance-falls-6-percent-q2-2026.html
4 CBRE Group. "CBRE Group, Inc. Reports Financial Results for Q2 2026." July 29, 2026. https://ir.cbre.com/press-releases/detail/268
WM. "WM Announces Second Quarter 2026 Earnings." July 28, 2026. https://www.sec.gov/Archives/edgar/data/0000823768/000110465926087575/tm2621414d1_ex99-1.htm
Cintas Corporation. "Cintas Corporation Announces Fiscal 2027 First Quarter Results." September 23, 2026. https://www.sec.gov/Archives/edgar/data/0000723254/000072325426000044/ex992026-8x31.htm
5 Foley & Lardner. "An Early Look at Q3 2026 PE Activity." October 2, 2026. https://www.foley.com/insights/publications/2026/10/an-early-look-at-q3-2026-pe-activity/
PitchBook. "Q3 2026 US PE Breakdown." October 6, 2026. https://pitchbook.com/news/reports/q3-2026-us-pe-breakdown
6 Reuters. "Global M&A deal rush fades in third quarter as rising borrowing costs bite." October 1, 2026. https://live.euronext.com/en/financial-news/global-ma-deal-rush-fades-third-quarter-rising-borrowing-costs-bite
Reuters. "Wall Street banks see robust deal pipeline despite market volatility." October 14, 2026. https://www.aol.com/articles/wall-street-banks-see-robust-160657000.html
7 ESG Dive. "BlackRock's GIP, Microsoft-backed AI group buy Aligned Data Centers for $40B." July 22, 2026. https://www.esgdive.com/news/blackrocks-gip-microsoft-backed-ai-group-buy-aligned-data-centers-for-40/825920/
RTTNews (Nasdaq). "CDW To Acquire Lovelytics To Expand Data And AI Services." September 3, 2026. https://www.nasdaq.com/articles/cdw-acquire-lovelytics-expand-data-and-ai-services
Insurance Business. "Old Republic reports higher second-quarter net income as title insurance rebounds." July 24, 2026. https://www.insurancebusinessmag.com/us/news/breaking-news/old-republic-reports-higher-secondquarter-net-income-as-title-insurance-rebounds-583568.aspx
8 Federal Reserve. "Federal Reserve issues FOMC statement." October 28, 2026. https://www.federalreserve.gov/newsevents/pressreleases/monetary20261028a.htm
Fox Business. "Federal Reserve makes interest rate decision ahead of midterms." October 28, 2026. https://www.foxbusiness.com/economy/federal-reserve-interest-rate-decision-october-28-2026
JLL. "JLL Reports Financial Results for Third-Quarter 2026." October 28, 2026. https://s202.q4cdn.com/536608393/files/doc_financials/2026/q3/Q3-2026-Earnings-Release.pdf
Johnson Controls. "Johnson Controls Reports Q4 and FY26 Results; Initiates FY27 Guidance." October 27, 2026. https://www.sec.gov/Archives/edgar/data/0000833444/000083344426000101/q4exh991xq4fy26earningsrel.htm
