Discover the Top Middle Market Private Equity Firms in the Industry

Middle market private equity firms are often overlooked, but they play a crucial role in driving growth and innovation in the US economy. They typically invest between $10 million and $500 million in companies, making them a vital source of capital for small to medium-sized businesses.

Some of the top middle market private equity firms include Ares Management, which has a proven track record of investing in companies with strong growth potential. Ares Management has made over 100 investments in the middle market since its inception.

Ares Management's success can be attributed to its experienced team of investment professionals, who have a deep understanding of the middle market and its unique challenges. Their expertise has enabled them to identify and capitalize on investment opportunities that others may have overlooked.

Ares Management's investment strategy focuses on partnering with management teams to drive growth and increase shareholder value. This approach has led to significant returns for investors and has established Ares Management as a leader in the middle market private equity industry.

Middle market private equity firms typically acquire companies for purchase prices between $50 and $500 million. This definition is based on average deal size, not fund size or total capital raised.

The average deal size for middle market private equity firms is around $300 million, funded with 50% debt and 50% equity. This results in average fund sizes of $1-3 billion, possibly up to $5 billion.

Most middle market private equity firms focus on relatively local deals, often in the Midwest of the U.S. for a firm based in Chicago.

Middle market private equity firms are less diversified than mega-funds, typically operating in 1-2 areas, such as private equity and credit.

These firms use leverage in deals, but also look for returns from bolt-on acquisitions, margin expansion, revenue growth from new markets and new products, and so on.

Middle market private equity firms tend to invest in more private and family-owned businesses, as there are more companies in these categories once you go below a deal size of $500 million.

Here are some key characteristics of middle market private equity firms:

In Europe, ~40% of capital raised by PE firms each year goes into the middle market. In the U.S., middle market PE deals often represent ~50-60% of all individual deals and over 50% of total fundraising.

Middle market private equity firms come in different flavors, and understanding these distinctions can be helpful when navigating the industry.

There are three main categories: the lower middle market (LMM), core middle market (CMM), and upper middle market (UMM). PitchBook defines these categories by deal size, with LMM ranging from $25 to $100 million, CMM from $100 to $500 million, and UMM from $500 million to $1 billion.

The distinctions between these categories matter mostly for recruiting and career purposes. For example, upper middle market firms may operate more like mega-funds when it comes to recruiting, with more on-cycle processes, timed modeling tests, and early start dates.

Here's a quick rundown of the deal size ranges for each category:

Upper vs lower middle market private equity firms can be distinguished based on deal size. PitchBook defines these categories as follows: CategoryDeal SizeLMM (Lower Middle Market)$25 to $100 millionCMM (Core Middle Market)$100 to $500 millionUMM (Upper Middle Market)$500 million to $1 billion However, deal size criteria can differ in different regions, such as in Europe where UMM is often defined as €250 – €500 million.

Recruitment processes can vary significantly between upper and lower middle market firms. UMM firms may operate more like mega-funds, with on-cycle processes, timed modeling tests, and early start dates.

If you're looking for firms to watch in the middle market private equity space, here are a few notable players.

Ares Management is a leading global alternative investment manager that has been actively investing in the middle market for over two decades.

Their dedicated middle market team has invested over $10 billion in over 100 companies, generating strong returns for their investors.

Another firm to watch is Blackstone, which has a significant presence in the middle market through its GSO Capital Partners and Blackstone Tactical Opportunities funds.

Blackstone's middle market team has invested over $5 billion in over 50 companies, with a focus on industries such as healthcare and consumer products.

KKR is also a major player in the middle market, with its KKR Capstone Partners fund investing over $2 billion in over 20 companies since its inception.

KKR's middle market team has a strong track record of generating returns through its focus on industries such as industrials and business services.

There are several types of private equity funds, each with its own characteristics and focus. Mega funds like Blackstone and KKR are among the largest and most well-known.

These funds tend to prefer investment banking candidates from bulge bracket banks. Large cap funds, on the other hand, are often similar in size and scope to mega funds.

Mid market funds, such as HIG and Abry, focus on smaller companies and tend to have a more entrepreneurial approach. Growth funds, like TA and Summit, focus on companies with high growth potential.

Late stage venture funds, such as Insight and Tiger, invest in companies that are further along in their development. Here's a breakdown of the different types of funds:

Audax Group is a leading middle market investment firm with over $39B in assets under management as of 2024.

They focus on leveraged buyouts, mezzanine debt, and senior debt, primarily in North America, and have a "buy and build" strategy that has helped portfolio companies execute over 1,000 add-on acquisitions since its inception.

Blackstone's Tactical Opportunities group focuses on middle market investments across asset classes and geographies, with $36B under management as of 2024 across 177 investments.

This team has the backing of Blackstone's vast resources, allowing them to pursue complex, time-sensitive opportunities that might be out of reach for smaller firms.

Warburg Pincus manages approximately $117B in assets as of August 2024 and has a strong presence in the mid-market space, known for its global reach and long-term investment horizon.

GTCR is a well-established player in the mid-market space, managing over $35B in assets and focusing on industries such as healthcare, financial services, and technology.

TA Associates operates a dedicated middle-market team that focuses on high-growth sectors such as technology, healthcare, and financial services, with over $47.5B in assets under management.

Their impact on the industry is profound, as they have consistently been able to scale mid-market companies into industry leaders, such as the investment in Nintex, a leading workflow automation software provider.