Is value creation more abundant in the middle market?

Is value creation more abundant in the middle market?
The private equity middle market (companies with enterprise values of between $100 million and $2 billion) is, says Titanbay, offering a fertile hunting ground for investors to create value.

Leverage is becoming a smaller part of value creation for private equity investors, while interest rate increases are making multiple expansion more difficult. This means the best general partners (GPs) are increasingly focused on operational improvements as they aim to boost returns and performance. The private equity (PE) middle market is, says Titanbay, offering a fertile hunting ground for investors to create value.


The middle market (companies with enterprise values of between $100 million and $2 billion) can offer greater opportunity for value creation, as it consists mainly of businesses that are innovative and growing. Often, they are more agile than larger private or public companies. While they are usually relatively well-established, stable and profitable compared to smaller companies, mid-market firms are often relatively early in their corporate lifecycle, so may still be operationally less sophisticated. They may also be led by smaller, less-experienced management teams that lack the expertise to make changes that could take their companies to the next level.

TitanbayFor mid-market GPs, such characteristics can be attractive. Using their own skills and deep industry knowledge, they may be able to put in place strategic initiatives and make efficiencies in businesses that have greater scope for operational improvements. For example, an experienced GP can provide management guidance and mentorship to help firms hone their business offerings. Particularly for mid-market companies with already established products or services, PE investment can finance quicker growth and expansion than companies might achieve by waiting for it to happen organically. For businesses operating in competitive markets, this can be especially helpful, as agility and speed can provide an advantage.


With more managers spotting opportunities in the middle market, the number of teams devoted to operational value creation has risen in recent years.

Usually, these comprise professionals with deep strategic and operational expertise. They are solely focused on operational value creation, during both the due diligence and investment hold periods. The companies that emerge from this high-touch operating approach are often professionalised and well-structured business-category leaders with higher multiple expansion. In combination with value creation that has already taken place, this can make them attractive targets for larger buyout managers.


As mentioned, GPs can use several levers to professionalise businesses. For example, they can drive organic growth by:

  • Enhancing a firm’s sales and marketing

  • Optimising product pricing

  • Refocusing a company’s research and development

  • Enhancing its management

  • And controlling costs.

TitanbayOf course, GPs can employ all these strategies in larger companies, but mid-market businesses are typically more agile and less complex. As such, they can make these types of strategic shifts more rapidly.

Mergers and acquisitions (M&A) is another common way for GPs to drive growth and improve margins in portfolio companies and, again, they can undertake this type of activity more quickly and easily in mid-market companies. Transformational M&A is much easier to execute in this area, while the fragmented nature of the middle market provides a broader universe of smaller target companies for add-on M&A.


As part of a well-balanced private market portfolio, exposure to mid-market private equity can bring many benefits, some of which derive from GPs’ potential  to create value more quickly and easily than in other spheres. 

To find out more, read the full report.




Important disclosures
This material has been prepared by Titanbay Ltd and its affiliates (together, “Titanbay”) and is provided for information purposes only. This document is directed at professional investors and qualified investors who have sufficient knowledge and experience to understand the risks of investing in private market investments.

This material should not be construed as legal, tax, investment advice or an invitation, general solicitation, recommendation, an opinion regarding the appropriateness or suitability of any investment strategy, or offer to buy, sell, or hold any investments or securities offered on or off the Titanbay investment platform. The views, opinions and estimates expressed herein constitute personal judgments of certain members of the Titanbay team based on current market conditions and are subject to change without notice. This information in no way constitutes Titanbay research and should not be treated as such. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice.

All information presented herein is considered to be accurate at the time of production unless otherwise stated and has been prepared from sources Titanbay believes to be reliable. No representation or warranty or guarantee, express or implied, is given as to the truth, accuracy or completeness of the information or opinions contained herein and material aspects of descriptions contained in this material are subject to change without notice. No reliance may be placed for any purposes on the information or opinions contained in this material. Titanbay is not responsible for any error or omission in this material, nor do we accept liability for any losses arising from its use. Non-affiliated entities mentioned are for informational purposes only and should not be construed as an endorsement or sponsorship of Titanbay.

Investments in private placements and private equity investments via feeder funds in particular, are complex, highly illiquid and speculative in nature and involve a high degree of risk. The value of an investment may go down as well as up, and investors may not get back their money originally invested. Investors who cannot afford to lose their entire investment should not invest. Past performance, including simulated performance, is not a reliable indicator of future performance. For private equity investments via feeder funds, investors will typically receive illiquid and/or restricted membership interests that may be subject to holding period requirements and/or liquidity concerns. Investors who cannot hold an investment for the long term (at least 10 years) should not invest.

Titanbay Ltd is an Appointed Representative of Brooklands Fund Management Limited which is authorised and regulated by the Financial Conduct Authority with firm reference number 757575. Copyright Titanbay 2023.

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