How much capital is available to buy a Canadian lower-middle-market business in 2025?
For Canadian business owners running a lower-middle-market company — typically generating $5–$100 million in annual revenue or $2–$20 million in EBITDA — there is a substantial pool of capital available from private equity (PE) firms and strategic acquirers in 2025. Combining both buyer types, an estimated $15–$35 billion in capital is likely available to acquire Canadian lower-middle-market businesses in 2025. (These figures are estimates that depend on buyer priorities, industry focus and macroeconomic conditions.)
How much private equity “dry powder” is available?
Private equity firms hold large amounts of unallocated capital known as “dry powder.” Globally, PE funds held over $1.6 trillion in dry powder as of mid-2024, with a significant portion in North America. In Canada, mid-market-focused PE firms are particularly active. Key players actively seeking Canadian lower-middle-market companies include:
- Birch Hill Equity Partners ($5 billion in assets)
- Ironbridge Equity Partners ($750 million+)
- CAI Capital Partners ($1.6 billion invested historically)
- CM Partners ($200 million+ in its latest fund)
- Novacap ($8 billion in assets, including a $1 billion digital infrastructure fund closed in January 2025)
While exact figures targeting this segment are hard to pin down, Canadian mid-market PE firms are estimated to have $10–$20 billion available for deals in this space. PE firms favour the lower middle market because these businesses often trade at lower purchase multiples — roughly 15–22% below large-cap deals — making them a value-driven sweet spot. With 96% of North American private companies in the small or mid-market range, the opportunity set is vast.
How much capital do strategic acquirers have?
Strategic acquirers — large Canadian or U.S. corporations — also have deep pockets. North American public companies held over $5 trillion in cash reserves as of a decade ago, a figure likely higher today. Canadian lower-middle-market businesses are appealing to strategics because they are large enough to add value but small enough to avoid major regulatory hurdles. In 2024, global strategic M&A activity reached $261 billion, with corporates such as Home Depot (its $18 billion acquisition of SRS Distribution) showing strong appetite for mid-sized targets. In Quebec, local strategic acquirers are stepping up, backed by institutions such as Investissement Québec, which provides equity, loans and advisory support. Strategic acquirers are estimated to deploy $5–$15 billion annually for Canadian lower-middle-market acquisitions.
Why does this abundant capital matter for Canadian business owners?
The abundance of capital creates a favourable selling environment:
- High demand, limited supply: the lower middle market is competitive, with fewer quality targets and strong buyer interest, which can drive up valuations for businesses with strong fundamentals
- Local advantage in Quebec: Quebec-based businesses benefit from local PE firms and strategic acquirers, often supported by government-backed financing, which can outbid international players
- Lower multiples, higher appeal: your business may command a lower multiple than large-cap firms, making it attractive to PE firms seeking value or corporates expanding capabilities
What factors will shape capital deployment in 2025?
- Interest rates: anticipated rate cuts could lower debt financing costs, unlocking more deal flow
- Trade tensions: tariffs such as the 25% U.S. tariff on Canadian goods (imposed March 2025) may push buyers toward domestic acquisitions, concentrating capital in Canada
- Valuation pressures: high valuations from pre-2022 deals may make buyers selective, so positioning your business as a high-quality target is key
How should you position your business to attract this capital?
1. Strengthen financials — consistent revenue, healthy EBITDA margins and growth potential; clean financials and a clear value proposition set you apart
2. Understand your value — work with advisors to assess valuation, which may benefit from lower-middle-market multiples (often 5–8x EBITDA)
3. Target the right buyers — research PE firms and strategic acquirers in your industry (e.g., Novacap focuses on tech and digital infrastructure; Birch Hill targets diverse sectors)
4. Leverage local support — in Quebec, explore resources such as Investissement Québec to connect with local buyers or secure favourable terms
Key facts: capital available to buy Canadian lower-middle-market businesses (2025)
Total estimated capital: $15–$35 billion available in 2025 (PE + strategic acquirers)
Global PE dry powder: $1.6 trillion+ as of mid-2024
Canadian mid-market PE estimate: $10–$20 billion for lower-middle-market deals
Strategic acquirer estimate: $5–$15 billion annually for Canadian deals
Lower-middle-market multiples: often 5–8x EBITDA; ~15–22% below large-cap deal multiples
Market scope: 96% of North American private companies are small or mid-market
2025 drivers: anticipated rate cuts, tariff-driven domestic focus, selective high-valuation buyers
Disclaimer: Capital figures are estimates based on sources believed reliable and depend on buyer priorities, industry focus and macroeconomic conditions. This article is for informational purposes only and is not legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
