Middle-Market Firm

Businesses with revenues between $10 million and $1 billion per year.

Author: Patrick Curtis
Patrick Curtis
Patrick Curtis
Private Equity | Investment Banking

Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity Associate for Tailwind Capital in New York and two years as an Investment Banking Analyst at Rothschild.

Patrick has an MBA in Entrepreneurial Management from The Wharton School and a BA in Economics from Williams College.

Reviewed By: Osman Ahmed
Osman Ahmed
Osman Ahmed
Investment Banking | Private Equity

Osman started his career as an investment banking analyst at Thomas Weisel Partners where he spent just over two years before moving into a growth equity investing role at Scale Venture Partners, focused on technology. He's currently a VP at KCK Group, the private equity arm of a middle eastern family office. Osman has a generalist industry focus on lower middle market growth equity and buyout transactions.

Osman holds a Bachelor of Science in Computer Science from the University of Southern California and a Master of Business Administration with concentrations in Finance, Entrepreneurship, and Economics from the University of Chicago Booth School of Business.

Last Updated:September 12, 2022

Businesses fall into three categories: lower middle market, medium market, and higher middle market. Typically, the lower middle market generates $5 million to $50 million in revenue.

middle market firm

Revenue in the medium and upper middle markets is from $50 million to $500 million and $500 million to $1 billion, respectively.

The next category is Main Street businesses, defined as those with $2 million to $5 million in annual revenue. Restaurants, franchises, hair salons, dry cleaners, and small technology enterprises fall under this business category.

As mentioned above, Middle market businesses have revenues between $10 million and $1 billion per year. 

Companies in the middle market have grown past the small and medium business (SMB) stage but are still too small to qualify as a major enterprise (LE) and rank among the Fortune 500 or Forbes 2000.

Middle-market businesses typically pay higher interest rates on their loans since they have fewer borrowing options than larger businesses. In addition to demanding personal guarantees from business owners, many lenders impose higher interest rates.

Companies must continually develop unique ideas, perform market research, and be prepared to make adjustments at the moment if they want to approach the mid-market and conduct business there successfully.

The middle market is significant on a global scale as well. Middle market businesses are generating new jobs and boosting the economy in their areas and local communities at the national, state, and municipal levels across all industries and regions of the nation.

Middle market sales are more important than small enterprises and have bigger expenditures. They are also more approachable than businesses and have a less complicated purchase procedure, making closing a sale simpler.

Middle-market enterprises are the fastest-growing in the United States. Companies in the middle market that private equity firms control develop between 1-2% more quickly than in the middle market.

Characteristics for successful middle-market firms

In the current economy, where businesses seek growth prospects, addressing these traits and determining where the organization ranks, with one being the best, is a smart initial step.

1. Identify and Exploit Niche Marketing Opportunities

Choosing a specialty for the organization should go beyond knowing which category offers the greatest chance for growth.

Whether the alternatives are product, demographic, or distribution-based, this decision must be made in the context of the organization's current strengths and weaknesses and evaluated from the perspective of the needs of an appealing niche.

2. Invest strategically in technology

Understanding and establishing the business requirements is the first step, followed by only investing in technologies with characteristics that meet the defined business requirements.

The technological investments of successful businesses are focused on the actual needs. The requirements of the business must adequately design the technology.

3. Organizational Alignment

Successful companies are also sure that what they promise their customers will take place when those customers access the operations of the organization. 

They accomplish this by coordinating their organizational structure with their overall business goals. 

organizational alignment

Achieving sales and service targets is directly tied to the success of an organization; therefore, it makes sense that successful businesses would base their awards on these metrics as well.

4. Nimble and Quick to Act

Many companies previously dominated their field but were so entrenched in their methods that resistance to change grew over time.

Successful businesses reduce bureaucracy within their organizations. When new concepts are proposed, they are investigated, quantitatively assessed, and chosen. As a result, ideas are addressed and resolved promptly rather than lingering.

5. Leadership

Most businesses have good leadership. What makes a difference is how that leadership is targeted, though. 

Each management team member in successful businesses has a shared, distinct vision for the direction the business is taking and can communicate this vision to others.

In addition to having a distinct vision and quantifiable objectives, executives in successful businesses pay great attention to the details, fostering an atmosphere of consistent conduct and responding rapidly to problems that can cause the firm to stray from its mission.

Advantages & Challenges

Despite the diversity in businesses, industries, and life cycles, middle-market businesses as a whole may have benefits and drawbacks. 


The performance and success of middle-market businesses in today's competitive economy depend heavily on their ability to recognize these and develop/leverage or minimize them as appropriate.


  1. The nature of middle market investment provides unique opportunities for stakeholders to control asset performance. Individual buyers in small businesses typically don't have the capital backing to achieve what middle-market investors have.

  2. The organization's operations are more flexible than average. The solutions and services they need don't have to be as complicated because fewer people are involved and fewer processes to facilitate.

  3. Middle market companies have shorter and less complex sales cycles. Fewer people are needed to make decisions, and less time is spent on administrative tasks.

  4. Compared to their larger rivals, MM firms are typically more focused, less bureaucratic, and have a longer managerial tenure. As a result, it is simpler for clients and other stakeholders to communicate with businesses and receive a prompt response.

  5. MM enterprises have the resources and technological know-how to enable such modifications, and they are frequently more willing to do so than large firms, where scale economies may prevail.


MM firms have fewer resources than their larger contemporaries. As a result, the MM firm can fall short regarding resources, brand awareness, a dedicated supply chain, and a private distribution network. Some other disadvantages are mentioned below.


1. Middle-market businesses face challenges when it comes to talent planning. They receive fewer resumes across the transom since they are less well-known than large corporations.

They appear to underinvest in training, succession planning, and other forward-looking initiatives, and they are less likely to use outside resources such as community colleges due to leaner HR staff.

2. Few financial sources are available to private businesses that do not wish to sell equity. This could limit their strategic alternatives, possibly positively, by requiring them to choose assets with tangible cash returns.

It might also deter equity-diluting acquisitions. However, it can also restrict their capacity to state their desire for expansion.

3. Other difficulties middle market companies face include scaling operational processes, finding, keeping, and developing top talent, executing a strategy to achieve goals, and choosing, communicating, and aligning top priorities.

Investment in Middle-Market Firms

Nearly 3% of all U.S. enterprises are in the middle market, accounting for around one-third of the private sector's GDP and employment and for close to 3% of the economy overall.


According to the study, financial decision-makers in the middle market are upbeat about the current state of the economy and have ambitious expansion plans for their companies.

The pandemic presented new difficulties for the middle market, including adopting cutting-edge technologies and upholding COVID-19 safety regulations.

But a closer look at their investment strategies reveals recurring elements in how they intend to approach these problems: a human-centered approach, an emphasis on tech-forward solutions like eCommerce, analytics, and AI, and the expectation of robust cybersecurity solutions.

Larger businesses often carry lesser investment risk but have less room for expansion. As a result, mid-cap stocks have more room to develop than large-cap stocks while also carrying a lesser investment risk than small-cap stocks.

Investors find mid-cap companies to be appealing because of this feature. ETFs or direct share purchases of middle-market companies' stock are also options for investors. There are several different options for mid-cap ETFs.

Middle-Market Investment Banks

Middle-market investment banks can be broadly defined as investment banks that advise on medium-sized projects. These banks can be considered to exist in the middle ground between bulge bracket investment banks and boutique investment banks.


They are financial service organizations that offer businesses various services, such as finance, asset management, research, and mergers and acquisitions (M&A).

Target clients for middle market banks are frequently relatively modest businesses with yearly revenue of less than $500 million (usually privately owned). 

Given the intense competition with significant competitors in the industry, midsize banks occasionally also do deals worth billions of dollars.

Several well-known middle market investment banks are listed below: William Blair & Co., Robert W.Baird & Co., Houlihan Lokey, Lincoln International, Stifel, Harris William & Co., and KPMG Corporate Finance.

Middle-market company sales and acquisitions

Mid-market company mergers and acquisitions are comparable to those of small businesses and large-cap companies. Still, they frequently have unique challenges because of the company's development stage.

Understandably, the purchase price is the main topic of discussion in most mid-market company sales negotiations. Every year, about 10,000 middle-market businesses are sold. 

The buyer wants to reduce the chance of paying for a company that might later perform poorly. On the other hand, the seller wants to monetize a valuable asset at the highest price possible. Usually, a deal can be reached somewhere between these two possibilities.

According to middle-market executives, one of the trickiest parts of M&A is identifying the best target to purchase or the ideal buyer for their business. An investment banker is only used by one in every five sellers.

These smaller deals don't generally pique the curiosity of bankers. And to make matters worse, according to their clients, the bankers that work with middle-market companies demand absurdly excessive fees.

Mergers and acquisitions are singled out in a report from the National Center for the Middle Market as a potent and predictable force behind industry success.

According to NCMM research, 1 in 5 middle market companies buy another each year, compared to 1 in 20 that either sell their entire business or divest a portion of it.

Middle Market Lending

To explore business expansion prospects, refinance their debt, pursue a merger or acquisition, or pursue several other significant business milestones, middle market companies turn to Business Development Companies and other lenders.

Mezzanine finance, a combination of equity and debt financing that gives the lender the ability to convert equity interest in a loan failure, is one common type of middle market loan. 

A mezzanine loan is very flexible, requires little collateral, and finances a business according to its capital flow.

Another common type of lending in the middle market is senior debt loans. Senior debt is a type of corporate debt that, in terms of interest, is given precedence above other debt and stock offerings from the issuer.

Broadly syndicated loans are available to middle-market enterprises with an EBITDA of more than $50 million (BSLs). BSLs are often administered by a broad and numerous investor group.

BSLs are more liquid than middle market loans; however, because of the difficulty in effectively coordinating the investors, restructuring operations in the BSL market are frequently less successful.

Middle market lending is not only essential, but it also provides a framework that is extremely beneficial for managing wealth for both the borrowers and the lenders.

Middle market vs. Main street firms

M&A advisors typically categorize main Street and Middle-Market businesses based on their business valuations. While all brokerage firms may not share particular values, advisors look for other characteristics to distinguish between the two organizational models.

The distinction between the two organizational models
  Main Street Business Middle-Market Firms
Revenue Main Street businesses are those with revenue between $2 million and $5 million. Middle market businesses as those companies with revenues between $10 million and $1 billion per year.
Buyers The buyer for Main street is most likely an individual who will plan to work at the business full time. The buyer, in general, is more likely to be a private equity group or even a competitor.
Level of Risk Involved Higher level of risk due to lack of expertise as the business is handled mostly by an individual. Prospective buyers tend to see a lower level of risk in the middle market as they have lawyers in management and a unionized workforce.
Marketing Approach Main street companies are advertised to a large audience of buyers on websites that offer businesses for sale, at a set price. A larger customer base may be qualified to operate the business as it may not require any specialized skills to do so. It's necessary for mid-market businesses to use a targeted approach, which entails making a list of potential acquirers and getting in touch with them directly. There are middle market-specific business-for-sale portals, but most M&A advisors do not solely rely on these portals.


Researched and authored by Shriya ChapagainLinkedIn

Reviewed and Edited by Aditya Salunke I LinkedIn

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