What is the Middle Market

The middle market is a segment reserved for American businesses with revenues in the $10 million to $1 billion range. There are about 200,000 such firms — most are privately held — and their annual revenues total more than $10 trillion, which is approximately one-third of the annual $30 trillion in U.S. private sector gross receipts and 30 million jobs.


The middle market is a critical sector of the American economy and an important engine of job creation, accounting for the majority of new U.S. jobs since 2008. The sectors involved are heavily concentrated in service-oriented activities, which include business services, health services and educational services. A significant number of firms that fall under the middle market umbrella are also engaged in retail and wholesale trade, construction activity and manufacturing.

Defining the Middle Market

Perhaps one of the more interesting, and possibly frustrating characteristics of the middle market is that there's no universally accepted definition of the middle market. Traditionally, annual revenues were the key differentiator. However, more recently analysts have come to define the middle market by asset levels or numbers of employees (headcount).

The lack of clear delineation results in many gray areas when trying to batch businesses by the classic three-level approach: small business, middle market and big business. Although we have substantial information on small and big businesses, with little information available on middle market entities, their interest is often underrepresented in policy and economic debates, both locally, and internationally.

Middle market businesses are unique in that they generate significantly more revenues than small business enterprises but are often unable to tap capital markets like big businesses for growth initiatives. Relative to big, often public companies, middle market businesses often find it harder and more costly to raise debt and equity capital. Although many boutique investment and commercial banks aggressively compete for the business of middle market businesses, larger businesses regularly enjoy an economies of scale advantage. Many theories explain the reasoning, but it often boils down to the added transaction cost, due diligence, marketing and agency challenges banks and investors take on when working with middle market managers. Because there's often a lack of transparency and added friction with middle market businesses, those investors and lenders willing to put in the extra effort can be rewarded with undiscovered value.