Small Deals Still a Big Factor in Middle-Market Private Equity Through H1 2025
PE continued to lean into the low end of the middle market in the first half of the year, as GF Data reveals
Private equity sponsors continue to lean into the low end of the middle market, where valuations and financing conditions still favor add-on activity over platform creation.
GF Data’s expanded dataset, which now tracks deals from $1 million to $500 million in total enterprise value (TEV), shows that deals in the $1 million–$25 million range continue to behave differently than those in the $10 million–$500 million range that we have traditionally tracked.
While overall middle-market deal activity slowed in the first half of 2025, the small-deal segment remained comparatively active— especially for add-on investments. Sponsors continue to find opportunities to execute tuck-ins at lower valuations, even as new platform formation lags.
Small Deals Gain Ground
Deal activity at the low end of the middle market has held up better than expected. Through the first half of 2025, GF Data tracked 118 trans actions involving companies with $1 million–$25 million TEV, compared to 142 transactions in our core $10 million–$500 million universe. This marks a greater proportional share than in 2024, when we recorded 269 small deals compared to 388 in the standard range. Even as overall middle-market activity remains muted, small trans
actions—particularly add-ons—continue to account for a rising share of deal flow.
Valuations continue to reflect the enduring size premium between very small and larger small-deal tiers. In H1 2025, transactions in the $1 million–$5 million and $5 million–$10 million tiers averaged 5.5x and 5.6x EBITDA, respectively, while deals valued between $10 million and $25 million averaged 6.2x–6.7x. Buyout only comparisons show a 0.9x spread between sub-$10 million deals and deals valued between $10 million and $25 million, consistent with the historical average of 0.7x EBITDA.
While buyers are increasingly active in small deals, they remain disciplined on price at the very bottom of the market. Despite the rise in activity, the pricing gap between sub-$10 million and $10 million–$25 million trans actions has held steady at historical levels rather than converging. This persistence reinforces a two-tiered market in which scale continues to command a premium.
Platforms vs. Add-ons
The difference between platform and add-on pricing in small deals is especially striking. In the first half of 2025, the smallest four of the five TEV ranges we track saw add-on transactions valued at a premium compared to similar sized platform transactions. Overall, add-ons were only valued at an EBITDA multiple 0.3x greater than platforms in H1 2025, but three of the four ranges with premium pricing for add-ons mea sured a difference of at least 1.2x.
This ongoing trend, first seen in 2023, underscores the structural reality of a troubled debt market: At the low end, add-ons are viable and financeable, while platforms are penalized with equity-heavy structures and weaker multiples. Financing dynamics further reinforce the add-on premium. In the first half of the year, add-ons valued between $1 million and $5 million carried total debt coverage of 5.7x EBITDA, versus just 2.3x for plat forms. The pattern holds in the next TEV tier of $5 million–$10 million, where add-ons averaged 4.7x EBITDA against platform levels of 1.9x. This is consistent with lenders’ preference to finance add-ons through existing revolvers and credit lines, while requiring sponsors to commit heavier equity on new platforms.
Comparing Industries
Manufacturing deal volume tracked by GF Data reached 22 transactions in H1 2025, with multiples averaging 5.8x TEV/EBITDA, only slightly above the long-run norm of 5.6x. Beneath this stability lies a split market. Tariffs, shifting trade policies, and regulatory uncertainty continue to weigh on commodity manufacturers, where equity-heavy structures suppress valuations. In contrast, niche suppliers tied to reshoring or specialized production can still command meaningful premiums.
The business services sector, meanwhile, has solidified its role as a safe haven for private equity sponsors and lenders. With 57 reported deals through H1 2025, the sector represented nearly half of all small transactions. Multiples averaged 6.2x EBITDA, a 0.4x premium to the historical average of 5.8x, underscoring the resilience of asset-light, recurring-revenue models. In today’s higher cost of capital environment, these businesses remain the most financeable at the low
end of the market.
An Add-on Dominated Environment
Taken together, the data shows that:
• Sub-$10 million deals consistently trade at lower multiples, but add-ons command a premium relative to platforms.
• Debt coverage is materially higher for add-ons, further supporting stronger pricing.
• Transaction costs weigh heavily on the smallest companies, contributing to platform pricing pressure.
• A size premium of nearly a full turn of EBITDA persists between sub- $10 million TEV deals and the $10 million–$25 million tier.
In short, in the current environment, the sub-$25 million market continues to reward add-on strategies while penalizing stand-alone plat forms. The multiple arbitrage opportunity remains intact, but only for those able to tuck small targets into larger platforms.
Ryan McCann is Middle Market Analyst, GF Data.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.
