The Middle Market Is in a Period of Transition. What Does This Mean for PE Investors?
Throughout the past year, rising prices and growing bifurcation have shifted the middle market in a number of ways that could have serious implications for dealmakers and executives alike.
In a recent conversation with Carta, Michael St. Peter discussed why middle-market firms are growing more selective in their investments, which sectors are generating the most interest, and why investors are pursuing new strategies to achieve the valuation growth they need across their portfolios. Key topics include:
- How buyers have become more selective and disciplined in recent months, focusing on the quality of the general investment execution probabilities of the businesses they are considering.
- How and why bidding processes have become more competitive.
- Why today’s returns are increasingly driven by operational improvement and strategic execution rather than the steady expansion of multiples.
- How higher prices and more competition for the assets at the top of the PE market trickles down to the middle market.
- The industries seeing particular interest among middle-market investors.
- The impact of higher interest rates on the middle market, particularly in terms of finding financing for deals.
- How the prices companies are asking for and what buyers are willing to pay has changed in recent years, and the metrics and thresholds that determine the earnout in today’s market.
Read the full interview here.
Questions about your PE investments? Reach out to Michael St. Peter or another member of LP’s Corporate Group.