Declines in asset values in recent years created opportunities for private-equity firms to buy companies at lower prices, while making it more critical to expand acquired businesses to boost returns.     

One midmarket-focused buyout shop, Clearview Capital in Stamford, Conn., sees the evolving market as providing good reasons for sticking to its strategy of favoring companies with simple business models that can withstand economic slumps.

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Higher interest rates and market volatility slowed buyouts starting last year as financing became more expensive and business sellers proved reluctant to accept lower prices, investment bankers and private-equity executives have said. But these effects have been less pronounced among midsize companies partly because debt typically represents a lower portion of deals in the market segment compared with buyouts of larger businesses.

“We certainly found that there is more activity in the lower end of the middle market [as] sellers have adjusted a lot faster to a new valuation paradigm, especially in founder-owned and operated businesses,” said Mohammed Ansari, president of merchant bank Berenson & Co. in New York. “There is a recognition that you have to move on.”

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