Private Equity & Main Street: New Report Highlights Middle Market Investment
Maloney: “Private equity is a steadfast partner for middle market companies, helping them navigate the complexities of today’s economic landscape.”
Washington, D.C. – The American Investment Council (AIC) released a new report spotlighting private equity’s essential role on Main Streets across America – specifically investments in the U.S. middle market, despite a challenging economic environment marked by sustained inflation and high interest rates. Throughout these challenges, private equity firms have partnered with small and midsize companies, driving growth through strategic investments and operational improvements and serving as an experienced partner that helps companies navigate any difficulties. The middle market is defined as small and medium-sized businesses with revenues ranging from $11 million to $500 million.
” Private equity is a steadfast partner for middle market companies, helping them navigate the complexities of today’s economic landscape,” said Drew Maloney, President & CEO of the American Investment Council. “With a wealth of capital ready to deploy, private equity firms are uniquely positioned to drive innovation and long-term growth in the middle market, ensuring these businesses not only survive but thrive in the face of ongoing challenges.”
The report also features two case studies that illustrate the positive impact of private equity partnerships on middle market companies on Main Streets. When businesses sometimes discover that public markets are not their ideal operating domain or struggle due to macroeconomic and industry pressures, private equity firms have stepped up and engaged in take-private partnerships. These take-private partnerships allow private equity firms to deploy specific industry expertise to support these middle market companies.
- ZeroFox is a cybersecurity company that engaged in a public-to-private buyout with Haveli Investments in May 2024, empowering the company to stay in business while navigating a challenging economic environment. ZeroFox’s take-private partnership with private equity will position the company to grow in the coming years as the market for cybersecurity quickly grows.
- L.S. Starrett is a maker of industrial, professional, and consumer measuring and cutting tools founded in 1880 and currently employs more than 1,500 workers. The company initially went public in 1973 but was recently taken private in a transaction by AIC member MiddleGround Capital that has allowed the company to focus on core markets, especially as a wide-ranging push to revitalize domestic manufacturing in the U.S. gets further underway.
Key Insights from the Q3 2024 Report Include:
- Resilient Dealmaking: By count, 64% of U.S. buyouts are happening in the middle market, largely driven by the fact that leverage has become more costly and PE firms are focusing on value creation at founder-owned companies. The prevalence of add-ons and the healthy volume of deals worth $100 million or less demonstrate how private equity dealmakers gravitate towards partnerships with small and mid-sized companies.
- Strong Performance: Middle market private equity funds focused on medium-sized businesses are delivering high returns, performing well at 12.7% since Q2 2022. These robust returns benefit public pension funds and their beneficiaries, including the millions of schoolteachers, public servants, and first responders who rely on them to strengthen their retirements.
- Optimistic Outlook: Middle market executives are optimistic about future economic conditions, anticipating higher earnings and revenue growth in the coming quarters.
Read the full report here.
