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Middle-market deals hit 6-year low

Following a period of resilience, US PE middle-market deals finally succumbed to interest rate pressures and repricing.

US PE middle-market deal activity hit a six-year low last quarter.

Following a period of resilience to headwinds in the wider PE ecosystem, deals valued at less than $1 billion have succumbed to interest rate pressures and repricing. In Q3, US PE middle-market buyout deal value fell 13.4% from the previous quarter and declined 54.9% from its peak in Q4 2021.

The plummet marks a six-year low for deal activity, with $293.6 billion in deal value registered during the first three quarters of the year, a 13.9% decline from the same period in 2022.


A dwindling supply of buyers and sellers on middle-market deals is driving the downturn. For the 12 months ending in Q3 2023, middle-market buyouts saw deal multiples slide.

While middle-market transactions are less dependent on the price of debt, the additional interest rate shock in Q3 led to a shift in discounted cash flow calculations—a calculation of the value of their investments.

The shift in valuations of prospective investments triggered a pause in deal negotiations during the quarter, contributing to the record low.


Featured image by Tanja Ivanova/Getty Images

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