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Over the past decade, the lower middle-market has been a more stable component within the larger deal flow picture. While larger deals experienced a great spike in growth and then an equally dramatic drop, deals under $250 million haven’t been quite as tumultuous.

Between 2001 and 2004, the number of deals closed rose from just over 200 to over 600, the sharpest period of growth during the decade. The amount of capital invested during this time kept pace, jumping from $12 billion to $36 billion per year.

The next three years, between 2005 and 2007 experienced a leveling and a slower rate of growth. After 705 closed deals in 2005, and 741 in 2006, the lower middle-market reached its peak in 2007 with a total of 760 deals.

While this climb from 2001 to 2007 was not nearly as dramatic as the rest of the private equity market, the subsequent dip was also much softer. The decline in 2008 reduced the number of deals to just fewer than 600. By 2009, deals had dropped to 402, still more than 2001 and 2002.

In 2010, lower middle-market deals were back up to 434 and another steady increase is playing out in 2011. Over the past 10 years, the lower middle-market has made up 81% of total private equity deal flow, remaining the focus of private equity investors.

Source: PitchBook

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