Middle market companies are an interesting breed. While less talked about than small and large cap businesses, they are the market that moves America. Harris Poll, on behalf of CIT, conducted an online survey among middle market businesses and a smaller sample of small businesses. Here are some facts about the middle market that may surprise you.
While small businesses are highly likely to define themselves as “small business,” middle market executives don’t always identify themselves as part of the middle market. In fact, many view themselves as a hybrid of sorts ― benefiting from the best of both worlds. Akin to small businesses with respect to culture, lack of bureaucracy and the flexibility to innovate, but large enough to attract and retain a more talented and productive workforce and provide a more stable and efficient workplace.
Executives at middle market companies are optimistic about the health and future of their companies. An overwhelming 81% foresee growth into adjacent markets over the next twelve months. 51% of middle market executives surveyed believe that their company will buy/acquire another company over the course of the next year. However that optimism does not extend beyond their company (or to the economy). Only a little over half evaluate their local economy as “strong”; less than half feel the same way about the national economy and far fewer (about 3 in 10) feel the same way about the global economy.1
Though middle market firms generate considerably less than enterprise-level corporations, their economic impact is exponentially higher. It is estimated that the sector contributes nearly $6.2 trillion to the national economy annually.2
Nearly 78% of respondents surveyed believe the workforce at their company will increase. According to the National Center for the Middle Market, employment grew at a rate of nearly five percent in the third quarter of 2016 at U.S. middle market companies. The annualized employment growth rate of 4.9 percent was the highest level observed across the middle market in nearly two years.3
Increased valuations and too few large cap deals have many investors turning their attention to the larger middle market. Middle market growth rates have outpaced those of the large cap sector, making the middle market an attractive prospect for private equity investors. The middle market has become such a hot ticket that smaller private equity firms, which almost exclusively focus on the middle market are now facing pretty stiff competition from larger firms that are now moving down market to invest.41. https://www.cit.com/thought-leadership/middle-market-economic-outlook-growth-2016/2. http://about.americanexpress.com/news/docs/2015x/MMPI-FINAL-14April15.pdf3. http://www.middlemarketcenter.org/MM_News/us-middle-market-employment-grew-by-49-percent-in-q3 4. http://www.cnbc.com/2014/01/23/private-equity-firms-salivate-at-bullish-small-and-middle-market-companies.html