Thank you, RCP Advisors, for new in-depth research reaffirming why the Lower Middle Markets will continue to be very attractive for M&A and business owner liquidity. Click here for full report
Here’s a great summary:
- Greater opportunity, less capital pressure: More than 90% of all private equity target companies are in the LMM, but over 80% of available capital is invested by large funds ($1B+), creating a clear capital imbalance
- Attractive Entry Valuations: Valuation multiples are lower for smaller companies, providing room for value expansion when scaled
- Low leverage, lower risk: Median debt-to-EBITDA for <$100M EV deals is 2.9x vs. 4.7x for >$250M, enabling such types of transactions to be less levered
- Potential for High Value Creation: Smaller companies don’t necessarily have institutional processes, thus making them excellent targets for operational and strategic improvements post-acquisition
- Higher growth potential: Revenue CAGR for <$100M EV deals is 14.3% median and 31.8% top quartile—versus just 8.9% and 19.9% for >$250M. EBITDA growth similarly reflects this pattern
- Increased Alignment with Investors: Managers of smaller funds often earn less in fees and are more incentivized by performance, driving alignment with investor outcomes
If you are a founder or business owner with a business in the PNW and want to have a confidential conversation, please reach out to Ed Kirk or John O’Dore.
