Despite Market Volatility, Middle-Market M&A Transactions Remain Steady

Private equity activity in the middle market has remained steady despite the ongoing market volatility. This week, M&A transactions were seen across a variety of sectors, including B2B, B2C, and D2C business models.

Aurora Capital invested in a recycling business, while Fulcrum Capital made a similar move with a baking ingredients company. Bertram Capital acquired a direct-to-consumer fencing business, and Comvest Credit backed the acquisition of a Garnett Station restaurant. Berkshire Partners invested in a fire safety company, and Petra Capital and Canopy Capital recapitalized American Vascular Associates.

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According to new data from SRS Acquiom, leverage has shifted to the buyer in 2022, with buyers demanding stronger indemnification provisions and other protections. Despite this shift, returns on investment have risen, with median returns reaching 27.5% in 2022.

The variety of sectors represented in this week's M&A activity highlights the continued interest in middle-market deals despite the volatility in the market. Middle-market companies have proven to be resilient during the pandemic, with many experiencing growth in 2021 and beyond.

PE firms are drawn to middle-market companies for a variety of reasons, including the potential for strong returns on investment, the opportunity to work with management teams to drive growth, and the ability to acquire quality assets at attractive valuations.

Despite the current market volatility, middle-market M&A activity is expected to remain steady in the coming months. Companies that have weathered the pandemic and continue to demonstrate strong growth potential are likely to attract interest from PE firms looking to deploy capital and drive returns.

Middle-market M&A activity demonstrates the continued interest in deals despite market volatility. With strong returns on investment and a variety of sectors seeing transaction flow, middle-market companies are proving to be a valuable asset for PE firms looking to deploy capital and drive growth. As the market continues to fluctuate, it is likely that middle-market companies will remain a key focus for PE firms in the coming months.