The M&A Mastermind Podcast - Episode 14 - US Private Equity Lower Middle Market Breakdown

Welcome to The M&A Mastermind Podcast, where we delve into the dynamic world of lower middle market M&A. In this episode, our host Nick Olsen engages in a thought-provoking conversation with Tim Clarke, an expert in the field and a key player at PitchBook.

The discussion kicks off with insights into the opaque realm of lower middle market the invaluable role platforms like PitchBook play in providing comprehensive data for deal-making. Tim Clarke sheds light on the shifting landscape, emphasizing the importance of holistic solutions and the diverse functionalities that PitchBook offers, from prospecting new startups to providing key contacts in the industry.

As the conversation unfolds, the focus shifts to the evolving playbook of private equity and the changing dynamics in valuation work. Tim Clarke delves into the challenges of triangulating data for private companies and how PitchBook addresses these issues, becoming a crucial tool for professionals seeking a deep understanding of deal pricing.

The episode further explores Tim Clarke's role at PitchBook, covering the data platform, news coverage, and robust research efforts, offering listeners a glimpse into the comprehensive resources available in the private equity space.

Nick Olsen guides the conversation towards the heart of the matter – the current landscape of US-based private equity firms. Tim defines the lower middle market and middle market based on deal size, providing clarity for listeners to understand the space being discussed.

The podcast takes a deep dive into the transitions happening in the private equity market, emphasizing the impact of interest rate hikes on the leverage buyout playbook. Tim Clarke explores the survival of the industry despite funding challenges and the emergence of private credit funds as a critical player in financing deals.

Listeners gain insights into the changing strategies of private equity firms, moving away from the traditional leverage buyout model and adapting to a landscape where organic growth and smaller deals take center stage. Tim Clarke sheds light on the resilience of middle market funds, outperforming their mega fund counterparts in recent quarters.

The conversation turns to the influence of inflation, interest rates, and the role of dry powder in the current market scenario. Tim Clarke provides a nuanced analysis of fund performance, the narrowing gap between small and mega funds, and the implications for borrowing costs.

Nick Olsen steers the discussion towards deal types, uncovering emerging trends such as divestitures, add-ons, and growth equity deals. Tim Clarke explains the surge in these deal types and how they align with the evolving strategies of private equity players. The episode concludes with valuable advice for advisors navigating the changing landscape. Tim Clarke emphasizes the importance of due diligence, focusing on companies with net positive cash positions and organic growth potential.

The episode wraps up with a glimpse into the future as Tim Clarke shares his predictions for 2024, anticipating a recovery in deal volumes and a muddle-through scenario for the industry.

Join us in The M&A Mastermind Podcast as we unravel the intricacies of lower middle market M&A, featuring insightful conversations with industry experts and thought leaders. Subscribe now for a front-row seat to the ever-evolving world of mergers and acquisitions.