Large institutional investors are increasingly turning their attention to middle-market and lower-middle market private equity opportunities as reported today in PitchBook.
From the article: “While PE fundraising has been in a dry spell, buyout funds focused on the middle market are gaining more traction among LPs than their larger counterparts. Middle-market buyout funds — vehicles with between $100 million and $5 billion — were able to bring in more money than their larger peers during Q1, PitchBook data shows.”
It is not too difficult to understand why. Aggressive Fed interest rates hikes have significantly changed the economics of large buyout deals. Middle- and lower-middle market deals tend to require less debt (if any at all).
Therefore, Private Equity Sponsors focusing on that segment of the market continue to see an abundance of opportunity.
However, the trick is that these smaller companies tend to need a lot more help professionalizing their finance, tech, and operational capabilities.
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