Your Guide to Middle Market Private Equity

U.S. middle market (MM) private equity (PE) companies are gaining popularity with investors because the MM is highly fragmented and offers a significant number of high-quality targets. 

According to recent studies, private equity deal values saw a record-breaking year in 2021, with an average deal size of $1 billion. There is much to be gained from middle market private equity, and investors looking to diversify their portfolios should consider these types of firms. 

Let’s explore what you need to know about middle market private equity.

What Is The Private Equity Middle Market? 

The private equity middle market refers to the segment of the private equity industry that focuses on middle market private equity size deals ranging from $5 million to $1 billion. This market can be further divided into three sub-segments: lower middle market, mid-market, and upper middle market. 

Lower middle market 

Lower middle market companies are the smallest companies within the middle market spectrum, typically with annual revenues ranging from $5 million to $50 million. They often have limited access to capital markets, fewer resources, and less mature operations compared to larger middle market firms. 

Private equity investments in this segment generally involve smaller deal sizes, and the firms focusing on this segment may have more hands-on involvement in the day-to-day operations of their portfolio companies.


These companies fall in the middle of the middle market range, with annual revenues generally between $50 million and $100 million. Mid-market companies are more established than lower middle market companies and usually have more stable operations, a more substantial market presence, and more significant growth potential. 

Private equity firms targeting mid-market companies typically provide strategic guidance and capital to fuel growth, improve operational efficiency, or facilitate acquisitions.

Upper middle market 

Upper middle market companies are the largest in the middle market segment, with annual revenues typically between $500 million and $1 billion. These companies are well-established, have proven business models, and occupy strong positions within their respective industries. 

Upper middle market private equity firms often have more extensive resources, industry expertise, and operational experience to drive growth and value creation in their portfolio companies.

All of these classes of mid-market deals provide an essential source of capital for growing businesses. MM PE firms can provide much-needed funding to facilitate growth as well as offer strategic advice and operational support to companies in this segment.

Types of Middle Market Private Equity Firms

Middle market private equity firms can be classified into different categories based on their investment strategies, sector focus, and operational approach. 

Growth equity firms

These firms invest in companies with strong growth potential, providing capital and support to help them expand their operations, enter new markets, or launch new products. Growth equity investments sometimes involve minority stakes, allowing company founders or management to maintain control while benefiting from the expertise and resources of the private equity firm.

Buyout firms

Buyout firms acquire controlling stakes in middle market companies, working closely with management to implement operational improvements, cost-saving measures, and growth strategies. This type of investment often involves significant financial leverage, with the PE firm using debt to finance a portion of the acquisition.

Industry-focused firms

Some middle market private equity firms specialize in specific industries or sectors, leveraging their deep knowledge and expertise to identify and capitalize on attractive investment opportunities. These firms may focus on areas such as healthcare, technology, consumer goods, or manufacturing.

Regional-focused firms

Certain MM PE firms concentrate on specific geographic regions, allowing them to develop a deep understanding of local market dynamics, regulations, and investment opportunities. These firms may target middle market companies in emerging markets, specific countries, or even specific states or cities within a country.

Turnaround specialists

Turnaround specialists invest in underperforming or distressed middle market companies, implementing significant operational and strategic changes to restore profitability and growth. They often have expertise in areas such as operational efficiency, cost reduction, and balance sheet restructuring.

Consolidation or “roll-up” firms

These firms focus on acquiring multiple companies in the same industry to create a larger, more competitive entity that can benefit from economies of scale, increased market share, and synergies. Consolidation strategies can be particularly effective in fragmented industries where there are many small, family-owned businesses.

These different types of MM PE firms offer a range of investment strategies and approaches, allowing institutional investors to choose the one that best aligns with their own risk tolerance, return objectives, and industry preferences.

Become a Top Middle Market Private Equity Firm By Using udu

If your up-and-coming private equity firm is going to stay ahead of the competition, you’ll need to ensure that you have an effective deal sourcing strategy in place. One of the best ways a middle market private equity firm can create more opportunities is through a platform like udu. 

udu is an AI-driven deal sourcing tool that employs the latest advancements in data harvesting, natural language processing (NLP), and machine learning (ML). With udu’s intelligent filters, investors can identify attractive middle market investments faster and more accurately than ever. Want to learn more about its capabilities? Schedule a demo to learn how the best middle market PE firms are gaining a competitive edge using udu.

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