PitchBook’s US PE middle market report has provided a comprehensive, data-driven analysis of private equity (PE) activity in the U.S. middle market, defined as deals ranging from $25 million to $1 billion.
The research report from PitchBook highlights a robust recovery in 2024, with dealmaking rebounding to near-record levels, exits climbing, and fundraising showing resilience despite macroeconomic challenges.
The developments outlined in the PitchBook report reflect, for the most part, a dynamic year for the middle-market PE landscape.
The U.S. middle market saw a resurgence in deal activity in 2024, with an estimated $374.1 billion in deal value across approximately 2,900 transactions.
This figure positions 2024 as the second-highest year on record, trailing only the exceptional peak of 2021, once late-reported deals are accounted for.
The first half of the year was propelled by the middle market’s relative attractiveness—offering stable, less volatile opportunities compared to larger buyouts—while improving market conditions, including easing inflation and anticipated rate cuts, fueled a strong second half.
Notably, add-on acquisitions dominated, accounting for 66.4% of deal count, as PE firms leaned heavily on platform-building strategies to drive growth amid high valuations and financing costs.
After two years of decline, middle-market PE exits staged a significant recovery in 2024, with total exit value rising 15% year-over-year to an estimated $194.9 billion across roughly 800 transactions.
This uptick reflects improved market sentiment and a thawing of the IPO window, though exit volumes remain below the pre-pandemic average of 900 annually (2017-2019).
Secondary buyouts led the charge, comprising 47.1% of exits, as sponsors capitalized on strong buyer demand.
However, the report notes a persistent overhang of aging portfolio companies, with over 40% of PE-backed middle-market firms held for five years or more, signaling potential pressure for future exits as firms seek liquidity.
Middle-market PE fundraising remained robust, with 117 funds closing on $77.8 billion in 2024—down slightly from 2023’s $80.2 billion but still a solid performance given elevated interest rates and a cautious LP environment.
The median fund size dipped to $410 million from $513 million, reflecting a shift toward smaller, more agile vehicles.
First-time funds faced headwinds, raising just $3.7 billion across 22 vehicles, underscoring LPs’ preference for established managers.
The research report highlights that disciplined capital deployment and a focus on operational value creation helped middle-market funds maintain appeal, even as mega-funds ($5 billion+) captured a larger share of total PE capital.
Middle-market deal valuations softened slightly in 2024, with median purchase price multiples dropping to 10.9x EBITDA from 11.6x in 2023, aligning with broader market corrections.
Debt levels also moderated, with leverage ratios falling to 5.2x EBITDA from 5.5x, as higher borrowing costs prompted greater equity contributions (median equity jumped to 51.4% of deal value).
Private credit continued to play a pivotal role, filling gaps left by traditional lenders and supporting deal flow in a high-rate environment.
PitchBook’s report reveals an optimistic yet somewhat cautious environment for the middle market.
With deal and exit activity nearing historic highs and fundraising holding firm, the segment demonstrates resilience.
However, challenges like aging portfolios and economic uncertainty loom, suggesting that 2025 will test the adaptability of middle-market PE firms.
For now, the report from PitchBook concluded that the sector remains a high-potential segment in the private equity ecosystem, balancing growth and stability in an evolving ecosystem.