Middle Market Firm

What is a 'Middle Market Firm'

A middle market firm is a firm with sizeable annual revenues that fall centrally within the market in which the firm operates. As the term implies, such a firm is one that straddles the middle market between the smaller companies and the billion-dollar giants. In the case of professions, such as the legal, accounting or brokerage fields, middle market firms are those that are just below the dominant firms, such as the Big Four in accounting.

BREAKING DOWN 'Middle Market Firm'

The limits that define a middle market firm are not set, with some definitions setting the lower limit for annual revenues as low as $10 million, while others set the upper limit at $500 million, though the term is generally accepted to refer to those businesses functioning fairly centrally in their respective markets.

Aside from earnings, middle market firms also tend to have a moderate number of employees. To qualify based on the number of employees on staff, most middle market firms have a range of 100 to 2,000 individuals in their employ.

Middle Market Firms and the Economy

Middle market firms are one of the pillars of the U.S. economy, since they account for a significant share of job creation. They are generally among the fastest-growing firms in terms of revenues. Additionally, the cumulative earnings of all middle market firms within an industry are generally substantial and may rival the influence of the dominant firms in the marketplace.

In the investment banking industry, middle market firms include William Blair and Piper Jaffray. As of 2016, William Blair held more than $78 billion in assets with approximately 1,350 employees, while Piper Jaffray had approximately $7.5 billion in assets and approximately 1,330 employees.

Classification within the Stock Market

Publicly traded middle market firms may often be classified as mid-capitalization (mid-cap) stocks, a segment that investors find particularly attractive because of their high growth prospects coupled with a lower degree of risk than small-cap or speculative stocks. Generally, mid-cap stocks have market capitalization in amounts ranging from $1 billion to $8 billion.

Companies within the mid-cap range may be relatively new to the marketplace or well-established within the field, though most are considered to be at moderate risk for investments. Mid caps exist across practically all business industries and serves as a mid-point between large-cap and small-cap options.

The Big Four Accounting Firms

As of 2015, the Big Four accounting firms included PricewaterhouseCoopers (PwC), Deloitte Touche Tohmatsu Limited, Ernst & Young (E&Y) and Klynveld Peat Marwick Goerdeler (KPMG). Each firm within the Big Four earned between $35.4 billion and $24.4 billion during 2015. In comparison, the fifth-largest firm, BDO International, reported earnings of $7.3 billion, about $17.1 billion less than the nearest earnings of a Big Four firm.

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