Private Equity Dominance: The Rise of PE Transactions in Middle Market M&A

Private equity firms are more prominent and profitable than ever before. With federal rate cuts and lower interest rates, PE transactions are only expected to continue increasing further in middle market M&A, especially since the Fed has hinted at even more rate cuts to come. As a result, the industry will see a surge in PE transactions as the year comes to an end. One major opportunity for private equity growth is in the technology industry, especially with the consolidation of cloud-based software companies and the evolution of AI technology. Here, we’ll define the goals of various PE transactions and why they have begun to dominate the M&A market.

After 25 years in business, we are experts in private equity deals. Learn how MelCap Partners can help your PE firm reach its growth goals. 

A Closer Look at PE Transactions

PE firms have specific goals in mind when buying a business — namely, to ultimately profit from exiting that investment, typically by selling the business to another corporate buyer or taking the business public. These businesses are sold about five to 10 years into the future, when PE firms can realize a higher value than the price they paid for the business.

An established timeframe means that PE transactions are highly focused on business development and growth.

This can lead to other types of M&A transactions, like add-ons and bolt-ons.  Add-on acquisitions are executed with the goal of supporting and growing a platform acquisition. PE firms are also utilizing bolt-on acquisitions, where a company maintains its own identity and operations after being acquired, but enhances the platform acquisition by offering cross-selling opportunities, such as through technology. Other transactions, like a tuck-in, where a smaller company is acquired to help expand the platform company’s capabilities or customer base, or a roll-up, where a company is integrated into a platform company, are also becoming more prominent in PE transactions.

It’s important to note that private equity transactions have also shifted strategically in recent years. Previously, PE firms bought similar companies to create value from economies of scale. Now, however, many private equity firms are focusing on distinct businesses they wish to take advantage of that complement each other. For example, they may acquire a software business and a technology consulting business, therefore putting together a more complete suite of products and services to target a specific customer segment. We’ve seen a marked uptick in PE transactions in the M&A market. For instance, in the payments sector, in the second quarter of 2024 through April 1, PE transactions totaled $5.86 billion, compared to $3.45 billion in the entire second quarter of 2023.

Let the Experts at MelCap Achieve Your Private Equity Growth Goals

At MelCap, we have extensive experience helping private equity firms meet their growth goals. We support PE firms across a wide range of industries, such as healthcare, industrials, consumer goods, and more. With our capabilities, like conducting due diligence on a target company, or helping you determine exit strategies, we can help you grow your portfolio and ensure your success in your PE transaction.

Our partnership with Globalscope will also help maximize the value of your deal. A leading group of financial and business advisors from all around the world, our partnership with Globalscope gives us access to even more expert guidance than enables us to provide our customers with greater opportunities.

Trust MelCap Partners for your next PE transaction. We have an extensive record of successful transactions, like our award-winning work facilitating the acquisition of Kids Works Creative Learning Centers by Busy Bees, the largest childcare service provider in Ireland, Malaysia, Singapore, and the United Kingdom. We’ve helped countless PE firms grow their portfolios and we’re eager to help you. If you’re ready to get started on your next PE transaction, contact the experts at MelCap today.