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How Do Economic Conditions Affect The Lower Middle Market?

Posted on May 19, 2023 By

How do Economic Conditions affect the Lower Middle Market? 

The lower middle market is typically defined as companies with an enterprise value (EV) between $5 million and $100 million. A range of factors, including economic conditions, interest rates, and availability of financing, influences M&A activity in this market segment. In recent years, lower middle market M&A has been driven by several factors, including a strong economy, low-interest rates, and the availability of financing. Here are a few ways that current economic conditions can affect M&A activity in these key industries:

Interest rates

Interest rates can significantly impact M&A activity, as they influence the cost of borrowing and the availability of capital. When interest rates are low, it can be easier for companies to access money to finance M&A deals, and this can drive increased activity. Conversely, when interest rates are high, it can be more difficult and expensive for companies to access capital, leading to a slowdown in M&A activity.

Market conditions

The overall state of the economy and financial markets can also impact M&A activity. Companies may be more willing to invest in acquisitions and expand their businesses in stable economic conditions with a growing GDP. Conversely, in weak economic conditions or during a recession, companies may be more cautious and focus on cost-cutting measures rather than expansion through M&A.

Regulatory environment

Changes in the regulatory environment can also impact M&A activity in specific industries. For example, if regulations become more stringent in the healthcare industry, this may lead to a slowdown in M&A activity as companies adjust to the new requirements. Similarly, changes in tax laws or other regulatory factors may impact the attractiveness of certain deals or make specific industries more or less appealing to investors.

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Technological advancements

Technological advancements can also play a role in driving M&A activity in specific industries. For example, the growth of the internet and mobile technology has led to increased activity in the technology sector as companies look to acquire new capabilities and stay ahead of the curve. Similarly, advancements in healthcare technology may lead to increased M&A activity in the healthcare industry as companies look to acquire new products or capabilities.

Overall, economic conditions can play a significant role in driving M&A activity in the lower middle market across a wide range of industries. Nonetheless, the more inadequate middle market M&A space in 2023 will likely remain an active and dynamic environment. With the global economy rebounding from the effects of the COVID-19 pandemic, there is estimated to have increased interest in M&A activity as businesses look to expand their reach and gain access to new markets.


  Nicolas Monteleone
  Senior Associate
  Benchmark International

  T: +1 813 898 2387


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Benchmark International is a global M&A firm that provides business owners with creative, value-maximizing solutions for growing and exiting their businesses. Benchmark International has handled over $10 billion in transaction value across various industries from offices across the world. With decades of M&A experience, Benchmark International’s transaction teams have assisted business owners with achieving their objectives and ensuring the continued growth of their businesses. The firm has also been named the Investment Banking Firm of the Year by The M&A Advisor and the Global M&A Network as well as the #1 Sell-side Exclusive M&A Advisor in the World by Pitchbook’s Global League Tables.






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