In the evolving landscape of private equity, the US middle market continues to carve out a path of resilience, even as broader economic uncertainties loom. PitchBook‘s Q2 2025 US PE Middle Market Report paints a somewhat optimistic picture for the first half of the year, showcasing sequential improvements in deal activity despite headwinds like policy volatility and moderating exit volumes.
With deal values climbing and valuations stabilizing, the sector appears poised for a solid year, potentially marking the second-best on record.
Deal flow in Q2 2025 demonstrated notable momentum, outpacing the overall PE market.
Total deal value reached $97.2 billion, reflecting a 4.9% increase quarter-over-quarter (QoQ) and an 18.1% rise year-over-year (YoY).
The number of deals closed or announced stood at 978, up 6.1% QoQ and a striking 39.1% YoY.
As indicated in the insights from PitchBook, this surge underscores the middle market’s appeal to investors seeking stable, scalable opportunities in companies typically valued between $50 million and $500 million in enterprise value.
Extrapolating from H1 2025 figures, the full year is projected to achieve $383 billion in deal value—a 4.3% YoY increase—and 3,829 transactions, representing an 11.8% YoY uptick.
This trajectory positions 2025 as potentially the second-strongest year for middle-market PE since the 2021 peak, when dealmaking hit record highs amid low interest rates and abundant dry powder.
Regionally, the mid-Atlantic emerged as a hotspot, capturing 20.7% of H1 deal value—170 basis points above its 10-year average—driven by sectors like healthcare and technology.
Conversely, the South lagged at 14.1% of value (150 basis points below average), while New England’s deal count share dipped to 5.9%, 80 basis points under historical norms.
These disparities highlight how local economic factors, including talent pools and regulatory environments, influence investment patterns.
Take-private transactions remained a steady feature, with 10 deals under $1 billion in Q2, up from seven in Q1 but down from 17 in Q2 2024.
The median deal size contracted 45.4% QoQ to $180.2 million, signaling caution among public companies eyeing privatization amid market fluctuations.
Founder-owned businesses, often prized for their agility, comprised 50.6% of H1 transactions (slightly below the five-year average of 51.4%) and 19.2% of deal value (under the 20.9% norm).
Meanwhile, carveouts and divestitures gained traction, accounting for 11.1% of Q2 deal value and 10.1% of count—both exceeding five-year averages of 11.4% and 8.9%, respectively.
This trend suggests corporations are streamlining portfolios to focus on core competencies, creating ripe opportunities for PE firms in H2 2025.
Valuations in the global middle-market M&A space showed signs of stabilization, with the enterprise value-to-EBITDA (EV/EBITDA) multiple settling at 11.3x and EV-to-revenue at 2x.
These levels align closely with pre-pandemic norms from 2017-2019, indicating a cooling from the inflated multiples of 2021-2022.
The report attributes this moderation to rising interest rates and geopolitical tensions, yet notes that plentiful credit and declining financing costs are bolstering buyer confidence.
Middle-market firms, with their operational flexibility, are better positioned to navigate these dynamics compared to larger counterparts.
Exit activity, however, presented a mixed bag.
Q2 saw 211 exits valued at $28.4 billion, down 5.3% in value and 7% in count QoQ, and 3.6% below Q2 2024 levels.
Trade sales dominated at 62.5% of exits, followed by secondary buyouts at 25.6%, reflecting limited IPO windows in a volatile public market.
Despite the slowdown, the report forecasts a potential rebound if economic indicators improve, as held assets from prior boom years mature.
Fundraising encountered headwinds, with 59 funds closing in H1 2025 at $41.6 billion in commitments— a decline from 67 funds and $65 billion in H1 2024.
Limited partners (LPs) are increasingly selective, prioritizing managers with proven middle-market track records amid concerns over prolonged hold periods.
Dry powder remains ample at approximately $1.2 trillion globally, providing ample fuel for deals.
Sector performance varied, with healthcare leading at 22.4% of H1 deal value, buoyed by aging demographics and innovation in biotech.
Technology followed at 18.7%, though software subsectors faced valuation pressures.
Consumer and industrials rounded out the top performers, each capturing around 15%, as PE firms target recession-resistant areas.
Looking ahead, the report expresses cautious optimism.
With policy uncertainties around trade tariffs and elections potentially resolving by year-end, middle-market PE could see accelerated activity.
As indicated in the update from PitchBook, Credit availability and moderating costs are key enablers, while strategic partnerships with founders and carveout plays offer untapped potential.
As the US economy eyes expansion, the middle market’s adaptability positions it as a cornerstone of PE growth.