What Draws High Profile Investors into the Lower Middle Market?


Lower middle market companies are some of the most sought-after assets. These businesses provide one of the best environments for M&A investors to create returns. With more companies to invest in, greater opportunities to improve companies, and lower valuations and barriers to entry, middle market companies are attractive to many private equity (PE) firms and strategic acquirers (strategics). However, that attractiveness comes with a cost – increased competition in an over-saturated middle market. As a result, the lower middle market is gaining popularity among PE firms and strategics. This market segment is gaining traction due to the increased number of opportunities provided by the lower end of the market, along with other factors that make it an investors’ gold mine.


Small business is very much the sweet spot for high profile investors looking to turn a profit. Lower middle market firms operate in highly fragmented and very profitable industries, making them prime targets for acquisition and consolidation. The lower middle market is classified as companies with annual revenues between $5 million and $100 million. Currently there are about 350,000 companies in this segment, compared to those above the level of lower-middle small business. The lower revenue valuations for the lower middle market are balanced against the exponentially higher volume of opportunities.


So what does this mean for lower middle-market companies? It means there is a lot of capital in the market ready to be put to work. It is reported that 70 percent of businesses in the lower middle market are projected to change hands in the next 10 years. PE firms are chasing large portfolio returns, and strategics are using M&A to buy new products and services to remain competitive in their industries. Both of these market dynamics mean that deal flow and valuations will remain strong.

Therefore, business owners considering an exit need to be ready to move and react to opportunities quickly. The financial rewards can be extremely high, but owners need to know what they’re getting into and be thoroughly prepared. It is important to understand the motivations of investors and the potential synergies gained through a transaction in addition to the enterprise value. As they say, the whole is greater than the sum of its parts.


Understanding the full lower middle market M&A equation comes with experience, and SA Capital Partners are experts at finding great partners for your small business. If you’re an investor looking to make a move towards a future return, SA Capital Partners has a network of small businesses in the lower middle market available, and with great relationships at the heart of every deal, nobody understands what their partners need like SA Capital Partners.


About SA Capital Partners: SA Capital Partners is an innovative financial services firm that specializes in mergers & acquisitions advisory and capital raising for lower middle market businesses. We aspire to give all the tools necessary to complete any transaction. SA Capital Partner’s financial services industry specialists provide comprehensive, integrated solutions to banking transactions. Our breadth of services and industry knowledge allow us to understand each client’s unique business needs. Our goal is to make all financial services available to every small business. Website: www.sacapitalpartnersllc.com Phone: (212)-235-2761 Email: info@sacapitalpartnersllc.com #sacapitalpartners #sacapital #sacapitalpartnersllc

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