Key characteristics of Mid-Market Private Equity

Newsletter Review | February 2025

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Mid-market companies exhibit lower debt levels

Mid-market companies tend to have lower leverage multiples than larger firms because they have limited access to public bond and stock markets. Instead, they rely on smaller loans from regional lenders, as they often don't have the brand recognition to attract a wider range of investors. As a result, mid-market Private Equity funds tend to be more resilient during economic downturns, as their portfolio companies maintain more conservative capital structures.

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Entry multiples are lower for mid-market buyout transactions

Mid-market firms often trade at lower purchase multiples than larger companies, allowing investors to acquire strong businesses at attractive prices. This valuation discount presents an opportunity for higher returns, as investors can capitalize on multiple arbitrage by buying at a low multiple, enhancing performance, and exiting at a higher multiple.

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Mid-market investments have delivered superior operational value creation

Mid-market companies often hold significant growth potential that Private Equity firms can unlock by improving operations, streamlining processes, and supporting management in scaling the business effectively. A key driver of this operational value creation comes from the buy-and-build strategy.

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