Behind every successful business, there is a unique story of evolution, innovation, and growth. Often, the narrative around business evolution is dominated by large corporations however there is a segment of the market generating consistent deal flow and significant value that is poised to become tomorrow’s leaders, called the pre-middle market.
It takes a discerning eye and experiential insight to identify the optimal partner company. With revenues between $5 to $50 million and EBITDA under $5 million, these companies exhibit effective business models with strong growth potential. They are typically operated by nimble teams with specific skill sets but have limited access to resources or have dated systems in place. With the right combination of capital, operational refinements, and a dynamic partnership structure, they become fertile ground for scalability.
The Role of the pre-middle market on the american economy
According to the Small Business Administration’s Office of Advocacy, as of July 2024, [1], small businesses account for 61% of net new job creation, making them the heart of the American economy. The diversity and resilience of this market segment make it more adaptable to changing market conditions, capable of seizing new opportunities and contributors to a competitive economic landscape. Growing these companies is crucial for the customers who rely on their services and products, the employees who depend on their jobs, and for the overall health of the American economy.
Greybull’s diverse portfolio of multi-industry businesses is a testament to the strength and stability of the segment. While the perceived risk of investing in smaller or lesser-known companies may deter some, the opportunities for rewards are substantial. We employ a rigorous due diligence process and selectively vet companies with established businesses to help address and reduce the overall risk. Moreover, these companies thrive in niche industries, driving specialized innovation and addressing customer needs that larger corporations might not prioritize. As they expand within their fields and beyond, we take the most pride in watching them grow and the gratification of making a foundational impact on the employees and customers.
Greybull's Systematic Approach
Greybull is specifically engineered to serve and scale this segment of the market. By investing in businesses that rise to the top of the pre-middle market, we are able to focus on refining the strategy and business processes to enhance the company’s profitability and growth trajectory. Operational excellence is at the cornerstone of our approach, recognizing that these businesses often possess strong core competencies but may lack the infrastructure to scale efficiently. Our team is comprised of owners and operators who work closely with management teams to identify opportunities for improvement and implement practical solutions across multiple facets of the business. As Greybull’s CEO Mason Myers discussed on The Private Equity Podcast, the ability to offer founders and CEOs operational support and fill in systematic gaps is imperative to value creation.
We are committed to the spirit of partnership. Rather than abide by the traditional private equity timetable, we structure dynamic deals that allow us to partner with businesses through multiple growth phases with longer hold periods. This practice ensures that we can realize the greatest results.
The pre-middle market is a fruitful segment of the market when you know it’s nuances. By understanding the unique characteristics of these businesses and providing the right support, investors can tap into significant value.