Middle Market vs. Megafund Private Equity
Understanding the Differences and How to Choose
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, Last Updated :
Feb 25, 2025
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When you think of private equity (PE), household names like Blackstone, Apollo, and KKR often steal the spotlight. Many aspiring finance professionals view these “megafunds” as the pinnacle of the industry—the trophy institutions where only the best and brightest land jobs. While these large players certainly command prestige and handle billion-dollar deals, seasoned insiders know that smaller firms in the middle market arena can often be just as lucrative, if not more so, for certain types of professionals.
In this article, we’ll explore the core distinctions between middle market and megafund private equity, including:
How each category is defined
Why middle market deals aren’t necessarily less profitable than high-profile mega deals
How you can decide which route might be the best fit for your career
Much like private equity in general, middle market PE focuses on investing in companies that aren’t listed on public stock exchanges—or sometimes taking public companies private—then restructuring them for long-term gains. However, unlike the largest PE firms, middle market funds typically manage lower total capital and target smaller deals.
While the terminology varies from one source to another, the middle market can be further broken down into three rough subcategories:
Lower Middle Market:
Fund sizes below $1 billion
Deals under $100 million
Core Middle Market:
Fund sizes ranging from $1 billion to $5 billion
Deals typically between $100 million and $500 million
Upper Middle Market:
Fund sizes between $5 billion and $15 billion
Deals in the $500 million to $1 billion range
These brackets aren’t etched in stone; for the right investment, middle market firms can still pursue deals larger—or smaller—than their usual range. A distinctive feature of upper middle market players is that while they’re sometimes too large to focus on traditional middle market transactions, they still don’t quite reach the scale of the “megafunds.” As a result, they often collaborate on so-called club deals with bigger firms when they want to tackle multibillion-dollar buyouts.
Why Middle Market Deals Can Be Attractive
A common misconception is that the biggest PE deals deliver the biggest returns. In reality:
Sheer Number of Opportunities – There are far more mid-sized companies than massive corporations, which means a broader pool of potential targets.
Room for Operational Improvements – Smaller and mid-sized companies tend to have more inefficiencies that a PE investor can correct—through streamlining operations, upgrading management, or injecting growth capital. This often creates more space for meaningful value creation.
Diversification – Middle market PE firms can spread their capital across multiple deals, reducing concentrated risk while still aiming for high returns.
What Is a Megafund?
Megafunds are the giants of the private equity landscape, often involved in splashy, multibillion-dollar deals that frequently make headlines. Though definitions vary, megafunds are typically characterized by:
Flagship Fund Sizes – $10 billion to $15 billion or more in assets under management (AUM).
Deal Sizes – $1 billion and up—often stretching into the multi-billions for leveraged buyouts, mergers, or acquisitions.
There are two ways to define a megafund:
Traditional View
Firms not only maintain $15+ billion flagship funds but also run multiple major strategies in parallel—such as credit, real estate, infrastructure, and secondaries—across various geographic regions.
Examples include Blackstone, KKR, Apollo, and Carlyle.
These firms may be publicly traded and have grown so large that their non-PE arms (like credit or real estate) can eclipse their buyout funds in total AUM.
Broader Modern View
Any private equity shop with a $15+ billion flagship fund can be considered a megafund, even if it specializes in a narrower strategy or geography.
Under this definition, firms like Thoma Bravo (which focuses on enterprise software) or CD&R (Clayton, Dubilier & Rice) can also fall under the megafund umbrella, given their recent capital raises exceed $15+ billion, even if they aren’t as diversified as the traditional megafund players.
Megafund deals are characterized by complex deal structures, as the large amounts of capital involved often require sophisticated financing arrangements and layered equity structures. These transactions frequently operate on a global scale, reshaping entire industries through cross-border mergers or acquisitions. Additionally, they offer prestige and visibility, with $10+ billion buyouts attracting significant public and industry attention, leading to larger—though highly competitive—professional networks.
How Do You Choose Between the Two?
Choosing the right category in private equity often depends on your career goals, lifestyle preferences, and appetite for risk and reward. Here are some key points to consider on both sides.
Career Progression and Responsibility
Middle Market – Smaller teams mean broader responsibilities, which can translate into more hands-on deal experience early in your career.
Megafund – Larger deal teams often mean more specialized roles, especially at the junior level.
Work-Life Balance
Middle Market – Generally better work-life balance due to smaller deal sizes and a leaner structure.
Megafund – More intense hours, given the higher deal volume and capital at stake.
Earnings Potential
Middle Market – Lower base salaries, but long-term earnings through carry can be significant.
Megafund – Higher salaries and bonuses at the junior level, but burnout is common.
Deal Complexity and Variety
Middle Market – More deals with a hands-on approach and operational improvements.
Megafund – Larger, more complex transactions with higher financial engineering.
Brand Recognition and Networking
Middle Market – Strong networks within their niche.
Megafund – Greater global brand recognition and alumni networks.
⚡ Quick considerations:
Do you want early exposure to all aspects of a deal? → Middle Market
Do you want to work on large, industry-shaping deals? → Megafund
Is long-term wealth-building through carry a priority? → Middle Market
Are prestige and brand name important to you? → Megafund
The Bottom Line
Middle market private equity firms and megafunds each offer distinct advantages and potential drawbacks.
Middle market PE can provide a more balanced environment, greater responsibility early on, and strong returns through operational improvements.
Megafunds, on the other hand, offer marquee deal experience, high-caliber training, global networks, and a shot at world-class compensation—albeit with more demanding hours and stiff competition.
Regardless of your path, remember that building expertise, strong relationships, and a solid track record—whether at a middle market shop or a megafund—can propel you forward in the world of private equity.
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