There is a lot of dry powder in the middle market as indicated in the graph below. Our gauge of the supply of capital shows about $800 billion in dry powder available for the middle market.

This is the difference between closed deal value and the purchasing power of new equity funds raised. We measure purchasing power of new equity funds by dividing yearly new funds raised by 40% – an approximation of the equity investment into each deal. This gives you the amount of value that the new equity funds can purchase assuming loans represent 60% of the value structure.

So unlike 2008 when the market buckled, the current middle market is likely to be strong for the foreseeable future due to the sheer amount of dry powder available for investment.

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In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.

Middle Market Snapshot

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