Private equity investors want more of the U.S. middle market.
Investors closed 1,358 deals in U.S. midsize companies during the first half of 2018, up 16 percent compared with the same period last year, according to a recent PitchBook report. The value of these deals reached $178.5 billion, up from $170 billion a year ago. Mid-market companies also represent an increasingly large portion of all U.S. private equity deals, accounting for 68 percent of investment activity during the second quarter of 2018, compared with 58 percent in 2017.
As investment activity in mid-market companies has grown, so too has the size of private equity funds targeting these businesses. The average mid-market fund size during the first half of 2018 stood at $847 million, compared with $669 million in 2017. With U.S. GDP growth estimated to have exceeded 4 percent during the second quarter of 2018, investment activity in mid-market companies is expected to remain healthy in the near future, according to the report.
"We're seeing very strong company performance and a tremendous amount of capital available, whether it be debt or equity," Dave Brackett, CEO and managing partner of Antares Capital, said in the report. Antares Capital specializes in providing financing for mid-market private equity deals.
Despite the healthy economic outlook, one area of concern noted in the report is a U.S. trade war that has already seen President Donald Trump impose tariffs on steel and aluminum. Any new tariffs on additional products could have a negative impact on dealmakers' confidence and economic momentum, the report said.