Small and mid-market buyout funds continue to grow in popularity with investors, driven by strong performance, diversity, defensive nature and lower leverages, according to a research.
According to an analysis by alternatives data research firm Preqin, 49% of private equity investors expressed intentions to target small and mid-market buyout strategies in 2024, second only to secondaries strategies.
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Last year, 78 mid-market funds collectively raised $65.6 billion, marking the second-highest fundraising amount recorded by mid-market funds in a single calendar year since 2000. Only 2021 surpassed this figure in terms of aggregate capital raised by mid-market funds.
The researchers also highlighted the stability of mid-market buyout exits in 2023 despite a marginal decline compared to the previous year. The analysts observed a resurgence in activity during Q4 2023, with trade sales exhibiting strength, although private equity-backed IPOs remained subdued.
Regional dynamics also play a significant role, the research highlighted, with North America emerging as a dominant force in mid-market fundraising. Mid-market funds targeting North America raised approximately three times the capital compared to those focusing on Europe in 2023. Specifically, North America-focused mid-market funds amassed an aggregate of $44 billion, while their European counterparts secured $15 billion in the same period.
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Victoria Chernykh, AVP, research insights at Preqin, said: “We expect ongoing investor interest in mid-market buyouts, as they continue to be an important, yet often overlooked, segment of the global private equity buyout market. Mega deals attract most of the attention, but many investors target mid-market buyout strategies, as mid-market funds continue to outperform their larger counterparts.”
