American Houlihan Lokey provides independent financial advisory services in M&A, restructuring, valuations, and capital markets and just released their Q1 2025 Circular Tech Market Insight report. While Houlihan Lokey’s report points to renewed momentum in the circular technology sector during Q1 2025, with rising M&A activity and pockets of outperformance against the S&P 500, SecondaryMarket.news takes a more cautious view. We believe the uptick in dealmaking reflects not market strength but underlying structural weaknesses. Many companies in the sector operate with high fixed costs, particularly due to the labor-intensive nature of device processing and grading. Adjusting these cost structures remains difficult without significant investment in automation, which itself requires substantial capital.
Margins across the industry are under pressure, and a growing number of companies are operating at a loss. As a result, we anticipate a wave of consolidation and a major shakeout continuing through 2025 and into the first half of 2026. Only in the second half of 2026 do we expect a meaningful recovery, with improved fundamentals and the potential for sustainable growth returning to the sector.
Back to Houlihan Lokey’s report.
Lifecycle services gain importance
Lifecycle-focused services, refurbished IT infrastructure, and scalable IT management solutions are gaining traction amid ongoing macroeconomic pressure. Companies increasingly view circular tech as a strategic tool for cost efficiency, compliance, and sustainability.
Defining circular technology
Circular tech refers to services managing the entire IT lifecycle, integrating circular economy principles. It includes sourcing, use, decommissioning, and IT asset disposition (ITAD), where devices are securely wiped, recovered for value, and resold or responsibly recycled.
Key market trends identified
Trends driving growth include new tariffs increasing costs of imports, prompting a shift toward local sourcing. Lifecycle platforms are evolving into full-service ecosystems, and Device-as-a-Service (DaaS) models are growing due to flexibility, sustainability, and cost benefits. ESG reporting is becoming simpler under Europe’s CSRD, and consolidation is accelerating in ITAD, favoring large, compliant players.
Mixed market performance in Q1
The Houlihan Lokey Circular Tech Index rose just 0.6% in Q1 but remains down 21.3% over 12 months. Standouts included ASBISC (+42.0%), AB S.A. (+14.3%) and Kontron (+10.8%), while companies like TD SYNNEX and Ingram Micro posted declines. ITAM/ITAD showed early signs of recovery, rising 0.9% in Q1 despite a 25.4% LTM drop.
Tariffs reshape the sector landscape
Expected new tariffs under the second Trump administration could raise costs of new devices and parts, increasing demand for refurbished alternatives. Companies with strong local networks may benefit, while margin pressure could rise for refurbishers reliant on imported components.
Notable Q1 2025 transactions
The quarter saw major deals including Basatne acquiring Cartlow, ELKO buying into Renewed AB, and Sage Sustainable Electronics merging with Cascade. Other deals involved Econocom, 3stepIT, and investment firm Recognize.
Houlihan Lokey’s growing sector role
Houlihan Lokey, as a US-based investment bank, is actively advising in the sector through its Circular Tech team. The bank supported deals involving TKD, The Rent Company, Foxway, and TXO. Their team brings deep experience in recommerce, value recovery, and circular business models.
DaaS emerges as a growth engine
Device-as-a-Service continues to attract both businesses and consumers. UK-based Raylo, for instance, combines financing, analytics, lifecycle management and insurance to power its platform. CEO Karl Gilbert emphasizes the role of AI and automation in scaling, along with growing OEM collaboration.
Valuations show clear sector split
ITAM/ITAD players trade at higher EV/EBITDA multiples (median 8.4x) than IT distributors (median 7.0x), reflecting the greater value-add in services like secure data deletion, asset recovery, and lifecycle tracking.
Conclusion: sector gaining strategic value
While the circular tech sector continues to lag broader markets, rising deal activity and innovations like Device-as-a-Service (DaaS) are seen by some—such as Houlihan Lokey—as signals of growing investor confidence. They point to structural tailwinds, regulatory developments, and evolving supply chains as positioning the sector for long-term growth. However, SecondaryMarket.news remains skeptical.
Read the full report here.
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