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What Differentiates the Best Middle Market PE Firms?

Forbes estimates that nearly 350,000 companies fall under the definition of “lower middle market.” If you’re looking for an investment, how do you know which low to mid-market private equity firm to choose? The answer lies in understanding what each middle market PE firm looks for in investment opportunities. 

If you’re considering a capital investment, we’ll give you tips on choosing the right mid to lower middle market PE firms. And if you’re one of the best middle market PE firms, we’ll introduce you to a tool that will expedite and differentiate your deal sourcing process.

First, let’s talk about some points that set PE firms apart.

How to Evaluate a Mid-size Private Equity Firm Before Accepting an Investment

The best lower middle market private equity firms perform thorough due diligence on every company they consider investing in. Unfortunately, companies don’t tend to follow suit by evaluating potential investment partners. 

The low to mid market private equity firm you choose to bring on as an investor will significantly impact your business operations, so it’s best to do your research before moving forward. There are a few key differentiators when it comes to choosing the right mid-size private equity firm. 

Here are five considerations to help you determine the best middle market PE firm for your company:

1. Investment size. A major consideration is the middle market private equity firm’s size of investment. Mid-market private equity funds are investment vehicles holding $100 million to $5 billion in capital commitments. It’s a wide range, but it helps you understand what size deals these firms are interested in.

2. Industry focus. Some private equity firms focus on specific industries while others take a more generalist approach. For instance, if you’re a manufacturing company, you’d want to partner with one of the best lower middle market private equity firms for niche manufacturing. Knowing a firm’s niche can help you determine if they’re a good fit.

3. Geography. Many mid-market private equity firms have a geographic focus. Some firms might only invest in businesses in the United States, while others invest globally. That said, consider the future of your organization and where you plan to expand before exploring middle market investments.

4. Stage of investment. Some mid to lower middle market PE firms only invest in companies that are in a certain investment stage. For instance, one PE firm may singularly invest in mature companies, while another targets companies in a growth stage.

5. Exit strategy. Certain mid-market private equity firms focus on selling the business to another firm, while others aim to take the business public. Understanding a firm’s typical exit strategy can help you determine whether they would be a good partner.

Now that you know some key differentiators of the best middle market PE firms, let’s discuss a tool that the best lower middle market private equity firms for niche manufacturing and other sectors use to source opportunities.

The Best Deal Sourcing Tool for Low to Mid Market Private Equity Firms

When mid-size private equity firms are looking for niche investment opportunities, it can be difficult to find good fits. For instance, if you’re one of the best lower middle market private equity firms for niche manufacturing, you have a limited pool of prospects to choose from. 

So, how do you find investment opportunities in niches like manufacturing, let alone desirable ones? Firms spend hours manually searching for and evaluating company profiles and websites. On average, an analyst can vet one company per minute. What if we told you there’s a way to vet 195 companies in the same timeframe?

Meet udu

Traditionally, firms used manual processes to source deals that were database-driven. However, with the advent of artificial intelligence (AI), udu takes deal sourcing to the next level by using real-time, non-database-oriented technology.

udu was designed to solve complex business challenges by leveraging the latest technological advancements. This modern deal sourcing platform systematically scans web-connected data sources, creating proprietary data resources to inform decision-making at all levels of your organization—and it doesn’t need a break.

Uncover early stage, overlooked, and out-of-market opportunities using udu’s comprehensive company search. An advanced deal sourcing tool like udu enables the best lower middle market private equity firms for niche manufacturing and other sectors to:

  • Search for opportunities using numerous specifications 
  • Avoid competitive, proprietary deal candidates
  • Set up alerts for new companies that match certain criteria
  • Use machine learning to improve the results
  • Grow portfolio companies faster and more efficiently
  • Find more qualified deals faster

AI unlocks a new world of opportunities for private equity firms of all sizes. Deal sourcing using udu helps investors identify companies they never would have found using traditional, manual methods. Interested in learning more about how udu can differentiate your PE firm by harnessing the power of advanced technology to source better deals faster? Schedule a demo today.