At GF Data, we continue to emphasize the importance of granular segmentation in middle-market M&A — especially as transaction dynamics evolve. A recent guest article we wrote for Middle Market Growth deep-dive, examines smaller-sized deals (total enterprise value [TEV] between $1 million and $10 million), which are now playing a larger role in the marketplace.
Key Observations
- In the first three quarters of 2024, GF Data tracked 81 deals in the $1 million to $10 million Total TEV range.
- Nearly 75% of those deals were add-ons, compared with 38% of the contributed-deal sample in 2023.
- Valuation spread remains significant: $1 million to $10 million deals averaged ~5.5× trailing-12-month (TTM) EBITDA, whereas the $10 million to $25 million tier averaged ~6.4× TTM EBITDA in the same period.
- Add-on transactions in the very small-deal tier achieved higher valuations and better debt coverage than comparable platform deals — signaling structural advantages in the “small-deal add-on” strategy.
What This Means
- For owners of smaller businesses, the data shows this segment remains active and well-positioned, especially for tuck-in acquisitions.
- For sponsors and acquirers, the dominance of add-ons in the sub-$10 million tier underscores the advantages of platform-plus-bolt-on strategies, reflected in valuation and financing differences.
- For advisors and intermediaries, the insights highlight the importance of size-specific expectations around multiples, structure and execution, particularly at the smallest end of the market.
While much of the broader market narrative focuses on large-cap “middle-market” deals, the under-$10 million segment is quietly becoming a dynamic zone — not only because of price or size, but because the structure (add-on versus platform), the financing leverage, and the owner transition dynamics are all aligning.