Lower middle market is the band between businesses that sell on listing sites and companies large enough for a bank's full process. What makes it a distinct market is the buyers: private equity platforms and strategic acquirers who will not find you on a marketplace and will not come unless someone calls them. That decides how to sell a middle market company here: a run process with named buyers approached directly.
Get quotes to sell my business
Who is buying
Private equity firms making platform investments or bolting your company onto one they already own, family offices, and strategic acquirers in your sector. Independent sponsors, who raise the money deal by deal, are also active here and are worth diligencing on their funding rather than their enthusiasm.
What they price
Earnings that survive your departure, the quality of the revenue, and the risk that the business needs you. Concentration in one customer, one supplier or one salesperson is where the discount comes from. Buyers in this band are professional and will construct their own adjusted earnings figure, which is why your add backs need documents behind them.
How the adviser is paid
A retainer plus a declining success fee, with a minimum. The Lehman scale and its doubled variant are the usual shapes. Very few firms publish, so a seller comparing three should compare the minimum, the tail and who staffs the file, not the headline rate.
Questions people ask about lower middle market M&A
Where does the lower middle market start?
Definitions differ and no line is official. In practice it starts where institutional buyers become interested, which is usually where adjusted earnings support a professional management structure.
Will I have to stay on?
Frequently, and often with part of your equity rolled into the new company. Fund buyers want continuity and want your incentives aligned for the next few years.
Is a listing site any use here?
Rarely as the main route. It may catch an unexpected buyer, but the price in this band comes from a run process with named buyers approached directly.