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Mid-Market Deal Flow an Overlooked Key Driver of the Global M&A Rebound

Published by Gbaf News

Posted on August 21, 2014

5 min read

Last updated: January 22, 2026

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There can be no doubt that M&A is back. Just surpassing US$1 trillion, the second quarter of 2014 was the highest in deal value since 2007. Fuelled by cash rich corporations and increasing global confidence, this re-emergence has brought with it the return of the megadeal; Pfizer, Abbvie, and Comcast have all hit the headlines with recent offerings ranging from US$45bn to US$118 bn. Yet though it’s the multi-billion dollar deals that catch the eye an overlooked key driver of the global M&A boom is mid-market deal flow.

Below, Joe Stelzer, managing partner of London-based Cavendish Corporate Finance, the UK’s leading sell-side corporate finance adviser and a key member of global network M&A International, reviews the principal forces and factors driving mid-market mergers and acquisitions.

Joe Stelzer

Joe Stelzer

Mid-market M&A deals rarely dominate the media but they are an increasingly vital factor in driving overall global M&A. The latest annual figures, for last year, from Mergermarket, show that they accounted for over 27% of global M&A and was this was the third highest percentage for any year on record (since 2001). Total value for Q4 (US$186.2bn) represented the second highest share in any quarter on record (since 2001) up from 24.5% in Q3 (US$ 160.4bn), accounting for 32.6% of global M&A deal flow.

So far this year, mid-market deal flow has accounted for roughly the same proportion, with momentum driven by a number of factors. Certainly mid-market deals have benefited, as have larger deals, from historically low global interest rates, which have globally have restrained the cost of debt and helped to boost deal flow and enabled higher leverage levels.

More specifically with regard to the mid-market, increased cash on large corporate balance sheets have given them well healthy war-chests with which to fund acquisitions. US corporates alone are estimated to have over US$1.5 trillion of cash on their balance sheets.

US multi-nationals have been using these cash piles to make big ticket acquisitions, but they have also been buying up mid-market firms, in a search for new technology, innovation, and products, as nimbler SMEs are often at the forefront of new developments. For instance, last month we advised on the sale of Sterling, a well-regarded moving and relocation business to one of the giants in the sector, UniGroup, a US$1.7 bn US-based global leader in transportation and relocation services.

Financial buyers too are back, in particular in the mid-market. Overall, the private equity industry had its most successful fundraising year in 2013 since 2008, with 873 funds reaching a final close and raising US$740bn. Close to half of those funds were under US$1.5bn and most Limited Partners indicated that their preference was for mid-market buy-out funds where they estimated there was better value.

For example, earlier this year Cavendish advised on the MBO of the Avantia Group, the award winning financial services technology and analytics business that provides property insurance, which was backed by mid-market PE leader ECI Partners.

It’s not just PE buying power that is driving mid-market deal flow, it’s their large inventories and desire for exits. US-based industry body the Private Equity Growth Capital Council recently estimated that private equity firms had some 18,000 businesses in their portfolios and many PE firms are looking for buyers, particularly for businesses they have had to hold on to for longer due to the recent recession.

The recent uptick in cross-border M&A, which is powering overall deal flow, is also having an impact on mid-market M&A too. For the first quarter of this year, according to Mergermarket, cross-border M&A reached a post-crisis high, with over 1,000 international deals worth some $270bn. We can see just from our own deal flow, with some 50% of buyers over the past 12 months or so being from overseas, the evidence of the impact of cross-border M&A.

All this has been feeding through to mid-market valuations. In the US, probably the best tracked market, EBITDA multiples ticked up to just over nine times last year compared to under eight times in 2012. For 2014, the outlook is for multiples to steady globally, in the US and the UK.

In terms of driving mid-market M&A deal flow for the rest of this year, four sectors probably stand out. TMT is an industry to watch closely. M&A will be the first choice option for tech companies to scale up quickly, with the biggest opportunities coming from emerging markets. Deal flow in the Financial Services industry should continue to recover, largely on the back of improving revenues and increased appetite for deals among private equity players.

In Recruitment, there has been a wave of global consolidation and we expect to see more strategic buyouts, driven by demand for overseas expansion – as their search firm clients increasingly extend their international reach – and sector diversification. Property-related business services, including homebuilders, estate agents and property brokers, also looks ready for further deals. Improving economies and increased demand have helped propelled European real estate deals to their highest number in six years.

Overall, we expect the strong deal flow in mid-market M&A globally to continue. Certainly for independent advisory firms such as Cavendish the recent rebound has helped us to record an excellent run of deals and pick up a variety of awards from boutique investment bank of the year to best M&A deal of the year. All, I hope, will help gain further recognition for the undervalued role mid-market deals plays in driving M&A globally.