The Positive Impact of Private Equity on the Lower Middle Market Economy

Private equity (PE) has long been a driving force in the financial world, but its influence on the lower middle market economy in the United States is particularly noteworthy.

This segment — often defined as businesses with annual revenues between $10 million and $100 million — plays a crucial role in the broader economy.

Discover how private equity is making a positive impact:

Access to capital

One of the most significant benefits of private equity for lower middle market companies is access to capital. These businesses often struggle to secure funding through traditional means such as bank loans. Private equity firms provide the necessary capital for growth, acquisitions, and operational improvements, enabling these companies to scale and compete more effectively.

Operational experience

Private equity firms bring more than just money to the table — they offer valuable operational experience and strategic guidance. By leveraging their industry knowledge, PE firms help lower middle market companies enhance operations, improve efficiencies, and implement leading practices. This support can lead to significant improvements in profitability and long-term sustainability.

Job creation

Investment in lower middle market companies often leads to job creation. As these businesses grow and expand, they require more employees to support their operations. This not only benefits the companies themselves but also contributes to local economies by providing employment opportunities and stimulating economic activity.

Innovation and competitiveness

Private equity investment can drive innovation within lower middle market companies. With the financial backing and strategic support of PE firms, these businesses can invest in research and development, adopt new technologies, and bring innovative products and services to market. This fosters a competitive environment benefitting consumers and the economy.

Economic resilience

Lower middle market companies are often nimbler and more adaptable than their larger counterparts. Private equity investment helps these businesses build resilience by strengthening their financial positions and operational capabilities. This resilience is crucial during economic downturns, as it enables companies to weather challenges and emerge stronger.

Community impact

Many lower middle market companies are deeply rooted in their local communities. Private equity investment can enhance their ability to give back to these communities through corporate social responsibility initiatives, charitable contributions, and local collaboration. This creates a positive feedback loop, where thriving businesses contribute to the well-being of their communities, which in turn supports the businesses.

How CLA can help with private equity investment in the lower middle market economy

At CLA, we work with private equity and their portfolio companies to help them create value, which plays a vital role in the growth and development of the lower middle market economy. By providing access to capital, operational knowledge, and strategic support, PE firms can help these businesses thrive. The resulting job creation, innovation, and community impact underscore the importance of private equity in fostering a dynamic and resilient economy.