Top Middle Market Private Equity Firms
Top Middle Market Private Equity Firms
Welcome to our Top Middle Market Private Equity Firms Guide.
Top Middle Market Private Equity Firms: Unveiling the Industry Leaders in 2023
Middle market private equity firms play a crucial role in the finance industry, as they focus on investing in companies with a mid-range valuation. These firms typically target companies that are scaling up, offering operational expertise and financial resources to boost their growth trajectory.
While they may not have the same name recognition as larger private equity firms, middle market firms are often more agile, which allows them to pursue unique investment opportunities and cater to the specific needs of their portfolio companies.
The world of middle market private equity is diverse, with a range of firms specialising in various sectors. Some firms concentrate on particular industries such as manufacturing, technology, or healthcare while others focus on regional markets with strong growth potential.
This sector-focused approach enables these private equity firms to develop in-depth understanding and expertise in the industries they invest in, which in turn, makes them more effective investors.
Key Takeaways
Middle market private equity firms target companies with mid-range valuations, providing financial resources and operational support.
These firms often have a sector-specific focus, allowing them to develop in-depth expertise in their chosen industries.
Agility and adaptability are key traits of middle market private equity firms, enabling them to capitalise on unique investment opportunities.
Overview of Middle Market Private Equity
Middle market private equity (MMPE) focuses on investing in established businesses with potential for growth and value enhancement.
These firms typically target companies within the mid-market segment, which are smaller than large-cap firms but larger than small-cap ones. Specifically, MMPE firms invest in businesses with annual revenue ranging from £10 million to £1 billion, making them essential players in the broader private equity landscape.
The attractiveness of mid-market private equity lies in the opportunities presented for investors and firms alike. Since mid-market companies often have a proven business model and a sizeable customer base, they offer an appealing balance between risk and reward.
Additionally, these companies are usually in need of financial and strategic support to scale their operations, making them well-suited for private equity investment.
Mid-market private equity has experienced significant growth in recent years, as demonstrated by the 2022 UK Mid-market PE review conducted by KPMG. This growth can be attributed to several factors, including the increased appetite for acquisitions and an influx of capital from investors seeking growth opportunities.
There are a few key players who have been recognised as top firms in the MMPE: Grady Campbell Announces The 2023 TOP 50 PE Firms in the Middle Market™. These firms have established a strong track record in identifying, acquiring, and growing middle market businesses across various industries.
In summary, middle market private equity is a vibrant and rapidly growing segment within the larger private equity sector. By investing in well-positioned, mid-market companies, MMPE firms play a crucial role in driving economic growth and fostering innovation across various industries.
Top Middle Market Private Equity Firms
Leading Private Equity Firms in the Middle Market
The middle market is a thriving segment for private equity investments, attracting a plethora of reputable PE firms that focus on delivering value and growth to their portfolio companies. This section highlights a few leading private equity firms in the middle market, based on their track record, reputation, and market presence.
Advent International is a global private equity firm with a strong presence in the middle market. Founded in 1984, the firm's industry expertise spans across sectors such as consumer goods, healthcare, industrial, and technology.
Advent's dedication to value creation and operational improvements has helped it remain a top choice for middle-market companies seeking PE investment.
Carlyle Group is another esteemed private equity firm, widely recognised for its middle-market investments. With a diverse range of investment strategies ranging from buyouts to growth capital, Carlyle Group boasts a vast portfolio, including many successful middle-market companies.
The firm's sector focus includes aerospace, defence, consumer, retail, and technology.
Among the top middle market private equity firms, Riverside Company stands out as a global investment firm with expertise in the lower middle market. Riverside Company primarily invests in growth-oriented companies valued at up to £150 million, providing financial and operational support to drive success in their target sectors, which encompass healthcare, technology, and consumer goods.
H.I.G. Capital is another prominent private equity firm focused on the middle market. With a flexible investment approach, the firm caters to a wide range of companies, including family-owned businesses and corporate divestitures.
An experienced team drives H.I.G. Capital's investment strategy, allowing it to target various sectors such as healthcare, industrial, and technology.
In conclusion, the middle market offers vast opportunities for private equity firms to create value and drive growth. Each of the firms mentioned above has demonstrated a successful track record and industry expertise, making them reputable players in the middle market private equity landscape.
Sector Specialisation of Leading Firms
Within the middle market private equity landscape, leading firms have developed specialisations across various sectors, focusing on industry-specific opportunities to generate growth for their portfolio companies. Some of the prominent specialisations include Media and TMT, Healthcare, Business Services, and other sectors.
Media and TMT
In the Media and TMT (Technology, Media, and Telecommunications) sectors, top middle market private equity firms have driven M&A activity through engaging with companies that show strong growth potential and optimising their operations to stay competitive in the constantly evolving digital landscape.
As reported by KPMG, Business Services and TMT have consistently taken the top spots for M&A activity in the past few years, accounting for a significant portion of the deals.
Key players in this space include:
Firm A: Focused on digital media, software, and technology-enabled services
Firm B: Specialising in telecom networks, data centres, and cloud services industries
Healthcare
Healthcare is another sector in which middle market private equity firms have showcased their expertise. With an emphasis on improving patient outcomes and operational efficiencies, these firms invest in innovative healthcare companies, ranging from biotechnology to medical devices and healthcare services.
Notable private equity firms in healthcare include:
Firm C: Invests in pharmaceuticals, medical technology, and diagnostics
Firm D: Targets companies in clinical research, healthcare IT, and specialised therapeutic areas
Business Services
Leading middle market private equity firms have also demonstrated a strong focus on the Business Services sector. By investing in companies that provide essential services to other businesses, these firms capitalise on growth trends across various industries and economies.
Examples of firms investing in Business Services are:
Firm E: Engaged in B2B services, including financial, human resources, and logistics management
Firm F: Backs companies offering consultancy, marketing, and analytics services
Others
In addition to the sectors mentioned above, top middle market private equity firms have diversified their investments across a wide range of industries, such as consumer goods, manufacturing, and energy. While the focus and portfolio may differ from firm to firm, these entities continue to seek out opportunities that offer strong growth and value generation.
To illustrate:
Firm G: Concentrates on investments in the food and beverage, personal care, and household goods industries
Firm H: Targets manufacturing, industrial goods, and logistics sectors
Top Middle Market Private Equity Firms
Investment Approach and Strategy
Middle market private equity firms typically focus on businesses with purchase prices between £50 and £500 million, and adopt a variety of investment strategies to drive growth and enhance value.
They leverage their extensive experience, resources, and networks to support their portfolio companies by providing strategic guidance, operational improvements, and expansion opportunities.
A common approach among middle market private equity firms is to engage closely with the management teams of their portfolio companies, ensuring the alignment of interests and drawing on combined expertise.
This partnership promotes a collaborative environment in which businesses benefit from the investors' experience in market analysis, growth strategy development, and execution.
Several noteworthy private equity investment strategies employed by middle market firms include:
Venture capital: Focusing on early-stage, high-potential companies, usually in the technology or life sciences sectors.
Growth capital: Providing expansion capital for more established companies with proven business models and market positioning.
Real estate: Investing in a diverse range of commercial, residential, and industrial properties for capital appreciation or rental income.
Mezzanine financing: Offering subordinated debt, often with attached equity options, to businesses seeking additional financing for growth or acquisitions.
Leveraged buyout (LBO): Acquiring a controlling interest in mature companies using a significant amount of borrowed funds, aiming to improve their operational efficiency and profitability.
Fund of funds (FoF): Investing in a collection of funds, each of which invests in a diversified set of private equity transactions, to mitigate risk and gain exposure to a broader range of opportunities.
In the lower middle market, specifically, private equity firms often seek opportunities in niche sectors and companies with strong growth potential. These investors may provide more hands-on support for business development and may be more willing to invest in companies that are in less mature industries.
Recent years have seen fluctuations in deal and fundraising activity across the middle market private equity landscape. While the pandemic led to reduced deal activity in 20201, there was a subsequent surge in transaction volume during the first half of 20212 as businesses and investors adapted to the new normal.
In summary, middle market private equity firms adopt a diverse range of strategies and approaches to maximise portfolio company growth and value creation. With a focus on everything from venture capital to leveraged buyouts, these firms play a significant role in supporting enterprises across a multitude of sectors.
Footnotes
Private Equity in the UK Market
In recent years, the UK has experienced a surge in mid-market private equity (PE) activity. Despite facing ongoing economic and geopolitical uncertainties, the market has remained resilient with a notable increase in both deal volumes and values.
KPMG's report on the UK Mid-market PE review 2022 showcases this growth, as the total value of deals reached £170 billion in 2022, and the number of deals increased by 16.5%.
A key driver of this growth has been the business services sector, which accounted for 39% of all mid-market PE deals in the UK. Other significant sectors include technology, media and telecommunications (TMT) which contributed 24% of the deals, and consumer goods and retail (CG&R) with 10%.
This indicates a diverse range of industries and opportunities for private equity firms operating in the UK market.
To further understand the geographical distribution, it's worth noting that London dominated the UK mid-market PE landscape, with 45% of all deals taking place in the capital. Other regions such as Midlands and the North West also made notable contributions, representing 11% of the deals for both areas.
The substantial presence of financial services and the availability of skilled professionals in these regions may play a vital role in bolstering private equity investments.
The performance of leading PE firms emphasises the overall growth in the UK market. For instance, London-based company Hg successfully raised over 51 billion U.S. dollars in funds between 2018 and 2023, demonstrating the strength and capabilities of prominent PE firms operating in the UK.
In conclusion, the UK mid-market private equity landscape showcases a promising outlook for investors and businesses alike. Diversified sectors such as business services, TMT, and CG&R, coupled with the geographical distribution of deals across various regions, create a vibrant ecosystem ripe for investment opportunities.
As leading PE firms continue to raise significant funds, it's evident that the UK market offers a robust, and stable environment for growth within the private equity sector.
Top Middle Market Private Equity Firms
M&A and Deal Activities
In recent years, the M&A landscape within the middle market private equity sector has experienced considerable growth and transformation. UK mid-market private equity investment in 2022 demonstrated an upward trend, despite ongoing economic and geopolitical uncertainty.
This resilience suggests that middle market private equity firms play a vital role in the broader economy.
A boost of activity was observed in H1 2021, as 377 deals were completed in the UK mid-market PE arena, with a combined value of £20.7 billion. These levels had not been reached since H1 2017, indicating a resurgence in the sector.
Deal activity across the global M&A landscape has also shifted, according to PwC's Global M&A Industry Trends 2023 Mid-Year Update. Although megadeals have waned since their peak in 2021, the focus has shifted towards a healthier level of mid-market deals, enabling companies to pursue strategic growth opportunities.
For business owners, this uptick in M&A and deal activity presents lucrative opportunities to grow their enterprises through strategic partnerships, acquisitions, or divestments. Middle market private equity firms can offer capital, expertise, and industry connections that improve operational performance and accelerate growth.
Key factors driving this increased activity include market confidence, industry consolidation, and the pursuit of cross-border opportunities, as businesses look to expand their market presence or acquire new capabilities.
This heightened activity is a testament to the immense potential and value of middle market private equity, which will continue to form a cornerstone of the global M&A landscape.
Fundraising Activities and Limited Partners
In recent years, fundraising activities by middle market private equity firms have experienced strong growth. According to a Fortune article, notable companies such as GiveCampus raised significant funds, with a $50 million investment led by Silversmith Capital. This demonstrates investor confidence in the potential of middle market firms.
It is important to highlight the role of limited partners (LPs) in these fundraising activities. LPs, usually consisting of institutional investors and high-net-worth individuals, provide the necessary capital for private equity firms to pursue investments. In turn, LPs expect profitable returns on their investments.
A McKinsey report noticed that despite a global decline in private markets fundraising, private credit showed resilience, increasing by 2 percent. This fact underscores the importance of engaging with LPs and optimizing investment strategies to maintain growth even during challenging macroeconomic situations.
In the UK, an interesting trend has emerged, as demonstrated by a KPMG study. The mid-market private equity sector recorded a surge of activity, with 377 completed deals valuing at £20.7 billion in H1 2021 - a significant increase from the previous year.
This suggests a positive outlook for the British middle market private equity landscape, supported by eager LPs seeking investment opportunities.
Efficient due diligence has become more important than ever for private equity firms, as noted by a PitchBook article. As LPs continue to invest capital, emerging and first-time fund managers must be more thorough when assessing potential investments. This ensures that they build strong relationships with LPs by consistently delivering favourable returns on their investments.
In summary, middle market private equity firms and their fundraising activities play a crucial role in the investment landscape. They depend on the support of limited partners who, in turn, seek profitable returns.
To remain successful, these firms must adapt to evolving market conditions while prioritising effective due diligence to maintain strong relationships with their investors.
Top Middle Market Private Equity Firms
Track Records and Awards
In the world of private equity, accolades and strong track records speak volumes about a firm's capabilities and success. One noteworthy recognition for middle market private equity firms is the TOP 50 PE Firms in the Middle Market™ list, curated annually by Grady Campbell, a leading private equity branding and marketing firm.
Making it onto this list is a testament to a firm's strong track record, excellent leadership, and respected reputation within the industry.
The selection of firms for the TOP 50 list is based on various criteria, including investment strategies, financial performance and fund manager experience. Other important factors include customer satisfaction, industry impact, and scalability.
This comprehensive evaluation ensures that only the most deserving firms earn a spot on this prestigious list.
Some of the leading firms recognised in the 2023 TOP 50 PE Firms in the Middle Market include:
Firm A
Firm B
Firm C
Firm D
Firm E
On a global scale, the PEI 300 list showcases the largest private equity firms in the world, measured by capital raised over a five-year period. While this list features giants in the industry, middle market firms often dominate in their respective niches.
Strong track records in the middle market are attributed to factors like:
Specialised industry expertise
Deep understanding of regional markets
Value-creation strategies
In conclusion, being recognised in renowned awards programmes like the TOP 50 PE Firms in the Middle Market and the PEI 300 is a strong indicator of a firm's abilities, track record, and market presence.
These accolades provide valuable insight for investors and businesses seeking to partner with top-performing private equity firms in this competitive landscape.
Spotlight: Mid-market Private Equity Firms
Grady Campbell
Grady Campbell is a leading private equity branding and marketing firm. They are known for announcing the Top 50 PE Firms in the Middle Market™, which showcases the most successful firms in the mid-market sector.
Marketing Firm
As a marketing firm, Grady Campbell assists private equity firms in building strong brands and creating effective marketing strategies. Their expertise in this area enables them to provide valuable insights into the mid-market PE landscape and identify key trends and opportunities.
Gridiron Capital
Gridiron Capital is a prominent private equity firm that focuses on investing in middle-market companies. They work closely with founders and management teams to build long-lasting value. Their investment strategy targets sectors such as business services, consumer products, and niche industrial markets.
Parthenon Capital
Parthenon Capital is a leading mid-market private equity firm with offices in Boston and San Francisco. They primarily invest in companies within the financial services, healthcare, and business services sectors. Their partnership approach focuses on working alongside management teams to drive growth and value creation.
Novacap
Novacap is a Canadian-based private equity firm that operates within the middle-market segment. They invest in technology, media, telecommunications, and industrial sectors. With their long-term investment philosophy, they emphasise strategic guidance and operational expertise to support their portfolio companies' growth.
In summary, these mid-market private equity firms, such as Grady Campbell, Gridiron Capital, Parthenon Capital, and Novacap, are known for their strategic investments, strong partnerships, and industry expertise. They contribute significantly to the growth and success of middle-market companies, making them vital players in the private equity landscape.
Frequently Asked Questions
What are the leading middle market private equity firms in the UK?
Some of the leading middle market private equity firms in the UK include firms like KPMG UK and BGF. However, it is essential to research and consider various local and international firms to find the best match for your needs.
Which factors define a mid-market private equity firm?
Mid-market private equity firms typically operate within a specific range of investment sizes and target companies with particular revenue and enterprise value. This middle section of the market, called the "mid-market," consists of deals smaller than those executed by large-cap firms but larger than those carried out by venture capital or angel investors.
What is the investment focus of top middle market private equity firms?
The investment focus of top middle market private equity firms varies depending on their strategy, sector expertise, and target returns. Generally, they tend to invest in established companies with growth potential, seeking to add value through operational improvements, acquisitions, and market expansion.
These firms may also target specific industries or geographies to capitalise on their specialised knowledge.
How do mid-market private equity firms differ from large-cap firms?
Mid-market private equity firms typically focus on smaller, more targeted investments than large-cap firms, providing support and resources to the management teams of their portfolio companies. Large-cap firms, on the other hand, tend to have a broader investment focus, often pursuing large-scale transactions and global expansion.
What is the performance of top middle market private equity firms?
The performance of middle market private equity firms often depends on various factors, such as the firm's investment strategy, industry knowledge, and the overall market conditions. It is essential to evaluate a firm's historical performance by considering its track record, including exits and returns, to gauge its potential future success.
How can I find the best middle market private equity firm for my business?
Finding the best middle market private equity firm for your business depends on your specific needs, industry, and growth objectives. It is essential to research and evaluate several firms to find the right partner for your business, considering aspects such as their investment strategy, sector expertise, and portfolio.
Networking and speaking with fellow business owners who have worked with private equity firms can also provide valuable insights.
Top Middle Market Private Equity Firms
