A new report shares that the US private equity middle market started 2026 on a solid note, with deal value rising 10.7% year-over-year to $103.8 billion, marking the strongest first-quarter performance in five years. Accordingly PitchBook dataThis figure also exceeded the four-year first quarter average by 11%. However, the segment’s share of total US PE purchasing value fell to a record low of 39.9%, down from 41.7% in full-year 2025; This underlines the increasing concentration of capital in larger sectors. transactions.
Median to agree Its size increased by 9.4% compared to the previous year, reaching 193.1 million dollars, while the average reached 304 million dollars.
Also acquisitions It remained dominant, accounting for 68.4% of deal count and 53.5% of value, highlighting the appeal of development on established platforms.
Despite this momentum, the market is clearly divided into two. New data from StepStone’s SPI reveals that gaps in ground floors are widening: the $500 million to $1 billion total enterprise value (TEV) band closes 2025 at 13.4x TEV/EBITDA, compared to just 8.8x for the $25 million to $100 million band. This gap widened from around 3.4 rounds in 2023.
Leverage followed suit; higher bands use significantly more debt.
This split suggests that the upper middle market increasingly reflects megadeal dynamics with increased pricing and leverage, while the lower end offers more breathing room for potential multiple expansion in a less competitive environment.
Historically realized returns strengthen the case for smaller checks: Since 2009, the $25 million to $100 million TEV band has delivered a pooled gross IRR of 39%, outperforming larger bands with stronger upside participation and comparable downside protection.
There have been some changes in financing conditions. Special credit Spreads have narrowed in recent years, supporting LBO activity, but volatility in the first quarter driven in part by AI concerns has led lenders to take a more cautious stance.
Although middle market lending is expected to continue, spreads have begun to widen as maturities shift toward lenders as BDC redemptions increase.
Pitch Book On the exit side, activity remained resilient at $32 billion, up 14% year-on-year across 218 deals, he added.
While institutional buyers fell to post-pandemic lows (30.5% share), sponsor-to-sponsor transactions dominated with 69.5% of value.
Sector rotation was evident: B2B rose to 52.9% of exit value, while IT and financial services fell sharply.
Buyers preferred assets less exposed to AI disruptions in software. There is no middle market IPOs occurred, prolonging a multi-year drought. Decreasing median holding periods indicate some progress is being made in swap portfolios.
Fundraising challenges continued, with $33.4 billion raised from 38 funds.
The pace remains modestly ahead of 2025 lows (the weakest since 2018) as limited partners prefer established managers and experts.
Pitch Book He added that success will increasingly depend on operational improvements, manager selection and disciplined entry points as traditional levers such as leverage and multiple expansion become less reliable.
The first quarter painted a picture of a resilient but polarizing middle market. Pitch Book He concluded that although megaphones are gaining more capital, the lower middle market stands out for its relative value, lower competition and stronger historical returns, positioning it somewhat positively for the rest of the year. 2026 There seems to be more focus on creating real value.
