Private Equity & Middle Market

Why PE and the Middle Market Tied the Knot

Robert Teitelman at The Deal explains:

 . . . This is the first of six special issues The Deal magazine will dedicate to the middle market in 2012, with a particular emphasis on a participant that, over the past four decades, emerged from that vast and diverse pool of midmarket companies: private equity.

The current political debate tends to overlook the fact that private equity was gestated within the middle market for a very good reason: Midmarket companies, unlike large-cap corporates, have long been relatively starved for capital. Family-owned companies wanted to monetize their holdings as proprietors aged; growing companies required capital to expand, build new plants, buy new technology or attempt overseas forays; mature companies needed financing to refire growth engines.

Private equity offered the middle market an option beside the local bank, a sale to a large corporation, bankruptcy or slow obsolescence. For all the headlines generated by megabuyout shops, the great mass of PE firms still operate in the middle market and are regional, even local, in nature. That’s one reason we’ve long reported on regional economies and, more recently, tried to map the dense networks of middle-market private equity investors, lenders, advisers and entrepreneurs.

Private equity is increasingly active internationally, Teitelman adds:

We look at two aspects of this internationalization of private equity in this issue. David Carey examines France’s buyout industry as it copes with turmoil in the euro zone. And Matt Miller takes an eight-country tour of indigenous private equity shops and discovers just how deeply private equity has sunk its roots. It shouldn’t be a big surprise that, after the buyout boom of 2006 and 2007 — a period that now looks anomalous — the middle market again appears as the most fertile field for private equity. The marriage, despite its ups and downs, survives.

Read the full article here.