Quite a few middle-market business owners are still under the mistaken belief that private equity firms (PE firms) only invest in mega-deals in the billion-dollar range. Because these larger deals tend to get all the press, it is understandable why middle-market business owners have this common misconception. However, when you really look at the numbers, it is quite evident that middle-market companies are quite attractive to PE firms.
This can be clearly seen in the following chart from Pitchbook News, who tracks PE acquisition activity. As you can see, in the first quarter of 2011, deals valued below $50 million comprised over 40% of all announced transactions and nearly 80% of all deals below $250 million. The vast majority of middle-market businesses fall into these categories.
Percent of Private Equity Transactions (Count) By Deal Size (Through First Quarter, 2011)
Source: Pitchbook (through first quarter, 2011)
The actual numbers are even more revealing. As you will see in the following table, deals in the middle market are the lion share of PE investment activity. And keep in mind that these are only announced transactions being counted here. Lots of middle-market transactions fly “under the radar” due to their size. So the actual number of closed deals below $250 million in value is much higher than shown.
Private Equity Deal Count (Through First Quarter, 2011)
Source: Pitchbook (through first quarter, 2011)
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