Omnigence Research Finds Lower Middle Market Undercapitalized Relative to Private Equity

New analysis finds the U.S. lower middle market has about one-fifth the capital density of the segment above it, with a wider gap in Canada.

CALGARY, AB, CANADA, September 16, 2026 /EINPresswire.com/ — Omnigence Asset Management (“Omnigence”) today published new research quantifying how much less institutional private-equity capital is available to the lower middle market (“LMM”) — companies with roughly $1 million to $10 million of EBITDA — than to the larger segments of the market. The paper, Measuring Capital Availability in the Lower-Middle-Market, introduces a straightforward measure of capital density and finds the LMM is only a small fraction as well funded as the middle market immediately above it.

The paper defines a “financialization ratio” — the amount of institutional equity capital targeting a segment for every dollar of investable enterprise value within it — and calculates it across four size bands of the private equity universe. The result is a like-for-like picture of how densely each tier of the market is covered by institutional capital.

THE HEADLINE FINDING
In the United States, the research finds roughly 3.4 cents of institutional capital for every dollar of investable enterprise value in the lower middle market, against roughly 17.3 cents for the middle market above it — leaving the U.S. LMM about one-fifth as well funded as the tier immediately above it. In Canada the gap is far wider: roughly 0.3 cents per dollar in the LMM versus about 9.0 cents above it, or roughly one-thirtieth as well funded.

Framed at the level of companies rather than dollars, the paper finds that dedicated domestic institutional capital reaches only about 1 in 30 investable U.S. lower-middle-market companies, and fewer than 1 in 300 in Canada. In absolute terms, an estimated $150 billion of institutional capital targets the U.S. lower middle market, compared with roughly $2.9 trillion aimed at the middle and upper-middle market above it.

WHY IT MATTERS
It has long been observed that smaller companies change hands at lower earnings multiples than larger ones — the LMM typically transacts in the range of six to eight times EBITDA, while the median buyout sits closer to twelve times and the largest deals nearer sixteen. Conventional wisdom attributes that discount largely to a size-related risk premium. The paper argues the more complete explanation is structural: with fewer buyers, holding less capital, competing for each investable business, prices in the segment form under materially less competition. In the paper’s framing, thin demand — not risk alone — shapes lower-middle-market pricing at the margin.

That distinction has practical consequences for how founder-owned businesses are bought and sold. Sourcing in the segment is more fragmented, scaled intermediaries are fewer, and sponsor capital is far less concentrated — a market structure meaningfully different from the institutional buyout market above it, rather than simply a smaller version of it.

COMMENTARY FROM STEPHEN JOHNSTON
“Everyone knows small companies trade at lower multiples than large ones. What this paper does is measure why,” said Stephen Johnston, a director of Omnigence and lead author of the report. “When you put a number on it — about three and a half cents of institutional capital per dollar of value in the U.S. lower middle market, versus more than seventeen cents one tier up — the scarcity stops being an impression and becomes a fact you can measure.”

“The usual story is that the discount is all about risk. We think a large part of it is simply that there aren’t enough buyers,” Johnston added. “Fewer than one in thirty investable lower-middle-market companies in the U.S. is reached by dedicated domestic institutional capital. That isn’t a statement about how risky these businesses are; it’s a statement about how few people are competing to own them — and that is a very different, and we think under-appreciated, way to understand this part of the economy.”

AVAILABILITY
The research paper is available on request from Omnigence Asset Management.

About Arvore
Arvore is a hybrid evergreen private equity fund focused on consolidating lower mid-market businesses. Arvore acquires founder-led companies with a current focus on building products distribution, environmental services, automotive maintenance, master franchisors, and light industrial, and seeks to improve the businesses through, among other things, utilization of its technology-driven operating platform – EquiONE.

About Omnigence
Omnigence is a Canadian-based alternative investment platform focused on farmland, operational private equity, and secondaries with partner funds managing over $1.2 billion. The firm targets fragmented, unfinancialized investment theses where scale, operational complexity, or size constraints limit participation from larger participants and therefore value is more compelling.

DISCLAIMER:
This document is for information only and is not intended to provide the basis of any credit or other evaluation, and does not constitute, nor should it be construed as, an offer to sell or a solicitation to buy securities of Omnigence, Arvore or any other entity, nor shall any part of this document form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities. This document may contain forward-looking information and statements (collectively, “forward-looking information”) within the meaning of applicable securities laws. Forward-looking information is provided for the purpose of providing information about the current expectations and plans of management of Omnigence and Arvore relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. All statements other than statements of historical fact may be forward-looking information. More particularly and without limitation, this document contains forward-looking information relating to Omnigence’s and Arvore’s investment objectives and strategies, including, but not limited to, potential acquisition targets and strategies employed to improve acquired businesses post-acquisition. Forward-looking information is based upon a number of assumptions and involves a number of known and unknown risks and uncertainties, many of which are beyond Omnigence’s or Arvore’s control, which would cause actual results or events to differ materially from those that are disclosed in or implied by such forward-looking information. Although management believes that expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information since no assurance can be given that such information will prove to be accurate. Omnigence and Arvore do not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable securities laws. There is no guarantee of performance, and past or projected performance is not indicative of future results.

Matt Barr
Omnigence Asset Management
+1 587-393-0893
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Written By: EIN Presswire