Share of U.S. PE-backed middle market exit value by type
Source: Pitchbook. Data as of December 31, 2024.
- Despite merger and acquisition (M&A) activity falling short of expectations heading into this year, middle market private equity (PE) managers benefit from more diversified exit options than large-cap peers.
- While corporate buyers remain the primary source of exit value across the broader U.S. PE market, sponsor-to-sponsor transactions continue to dominate in the middle market. These deals accounted for approximately 56% of exit value in 2024, in line with historical levels over the past decade.1
- Sponsor-to-sponsor transactions typically involve selling up-market to larger sponsors, who have historically paid premiums of approximately 30% compared to corporate buyers.1
- Said another way, a middle market PE manager’s exit is often a large-cap sponsor’s entry. These sales have typically resulted in a meaningfully higher exit valuation than a strategic corporate acquisition.
- Middle market firms not only benefit from more attractive exit optionality than large cap PE managers, they’re also relatively insulated from today’s uncertain trade environment, as their supply chains are generally less global and complex.
