Levi Pettit: The Untapped Potential of Lower-Middle Market Private Equity

Lower-Middle Market Private Equity (LMMPE) represents a significant opportunity in the investment landscape. According to Levi Pettit, “LMMPE is generally defined as companies generating revenues between $1 – $40 million. This encompasses 99.9% of businesses in the USA.”
On the unique advantages of this market segment, Pettit notes that larger private equity funds typically focus on bigger deals, as they find it “more efficient and cost-effective at making 10-20 large acquisitions per fund as opposed to making hundreds of $10 – $30 million investments in portfolio companies.”
One key opportunity in this space comes from generational shifts.

Pettit points out that recent studies have shown significant potential for transactions, stating that “52% of families do not want to pass their family business down to their children.”
Regarding the AI transformation in this sector, Pettit observes that “99.9% of businesses in America are considered small businesses. These small businesses and public sector entities are not naïve.

They know they will have to incorporate artificial intelligence into the infrastructure of their business to survive and grow over the next decade.”
However, Pettit also emphasizes the importance of understanding the risks, noting that “investors should be mindful of liquidity risks generally associated with private equity investments.” He explains that these smaller businesses “can suffer from intense customer or supplier concentration.”
Despite these challenges, the sector shows promising potential. As Pettit concludes, “LMMPE has historically generated significant returns and is poised to continue to do so. However, it is crucial to understand fund managers’ strategies.” Follow Levi Pettit on Twitter for more.