According to Pitchbook, the U.S. middle market is on pace to break previous records set for deal value of $352 billion in closed transactions during 2014 and $374 billion of closed transactions in 2017. Pitchbook estimates that in 2018, and for the first time ever, middle-market private equity will complete over $400 billion in deals for a given year. In fact, middle-market PE closings have never reached $300 billion through the first three quarters of a single year; however, through Q3 of 2018, deal value reached $311 billion.
In the third quarter of 2018, middle-market private equity groups closed more than 700 transactions with over $100 billion in value. Year to date, over 2,000 deals have been completed (a historical first) and private equity funds have raised $15 billion more in 2018 than at this point in 2017. With 2018 fundraising outpacing the over $100 billion per annum record-setting fundraising in 2016 and 2017, as well as very high multiples driven by the liquidity in the marketplace, the middle market continues to generate record-setting deal flow.
Roughly 50 percent of the deals shown in the chart for Northeast Ohio during October involved acquisitions or exits by private equity groups. One of those groups, The Riverside Co., continues to remain active in the middle market with six acquisitions and exits from October to early November. After easily closing its Micro-Cap Fund V in August at its hard cap of $1.2 billion and demand exceeding the hard cap by 50 percent, Riverside has already raised $900 million for its newest fund with a target of $1.5 billion. Riverside’s fundraising and deal activity is indicative of the overall middle market that continues to set records in fundraising, transactions and value. This does not appear to be slowing down.
Marc Fleagle is a vice president with MelCap Partners LLC. MelCap Partners is a middle-market investment banking advisory firm. For more information, email [email protected].