Middle-Market Firm

A company with a size that falls in the middle range of a market or industry

What is a Middle-Market Firm?

A middle-market firm is one with a size that falls in the middle range of a market or industry. U.S. businesses can be divided into three categories – the big, middle-market, and small businesses. The middle-market firms are larger than the small businesses and smaller than the big businesses. They can be further divided into the upper-middle, middle, and lower-middle markets.


Middle-Market Firm Diagram


No unified standard exists to define middle-market firms. The size of a firm can be measured through various metrics, i.e., asset size, annual revenue, net income, or the number of employees. Compared with the Fortune 1000 companies, middle-market firms offer more growth potential. Compared with small businesses, they are lower in risk.



  • Dividing U.S. businesses into three categories – big, middle-market, and small businesses, middle-market firms fall in the medium size range.
  • The size of a firm can be measured by its market capitalization, total revenue, enterprise value, the number of employees, or other metrics. There is no unanimous standard for middle-market firms.
  • Mid-cap stocks come with a lower risk than the small-cap and higher growth than the large-cap stocks, which makes them attractive to investors.


Understanding Middle-Market Firms

Different authorities use different definitions for middle-market firms. The standards may vary in different industries regarding the requirements for human and physical capitals or the existence of outliers.

Typically, in the U.S., companies with annual revenues above $100 million and below $3 billion are regarded as middle-market firms. Defined by the number of employees, the companies with more than 100 and less than 2,000 employees can usually be considered to be middle-market firms.

Several organizations exist to support the development of middle-market firms. The Association for Corporate Growth (ACG) is one example. The ACG aims at driving the growth of the middle market by supporting a global community for corporations and professional service firms.


Investment in Middle-Market Firms

Middle-market firms that are publicly traded are considered mid-cap stocks, in contrast to small-cap, large-cap, and even mega-cap stocks.

Generally, larger companies come with a lower risk to invest in but are more limited in growth potential. Hence, mid-cap stocks enjoy a bigger space to grow than the large-caps and come with lower investment risk than the small-caps at the same time. Such a characteristic makes mid-cap stocks attractive to investors.

Investors can track the performance of mid-cap stocks through several indices, such as the S&P Mid-Cap 400 Index, the CRSP U.S. Mid-Cap Index, and the Russell Mid-Cap Index. The S&P Mid-Cap 400 is a float-weighted index that covers 400 U.S. middle-market firms. It defines the mid-cap stocks as the ones with their market capitalizations above $200 million and below $5 billion. Firms that fall below the $200-million threshold are classified as small-cap, and those with more than $5 billion are classified as large-cap.

Investors can invest in middle-market firms by purchasing their shares directly or through ETFs. There are a wide variety of mid-cap ETF selections available. Examples include iShare S&P U.S. Mid-Cap Index ETF, Vanguard Mid-Cap Growth Fund (VOT), and Invesco S&P Mid-Cap Low Volatility ETF (XMLV).

VOT is a passively managed fund. It replicates the CRSP US Mid Cap Growth Index, which covers 158 U.S. mid-cap stocks with the growth style. XMLV tracks the S&P Mid-Cap 400 Low Volatility Index with more than 90% of its assets. The index contains 80 mid-cap stocks with the lowest 12-month realized volatility from the S&P Mid-Cap 400 Index.


Middle-Market Investment Banks

In the investment bank industry, the Bulge Bracket consists of the largest global investment banks of the world, i.e., J.P. Morgan, Goldman Sachs, and Barclays Capital. The Bulge Bracket banks usually offer mergers & acquisitions (M&A), initial public offering (IPO), and corporate financing advisory to large multi-national businesses.

The middle-market investment banks, which are smaller than the Bulge Bracket ones, usually provide services to mid-cap firms. Many middle-market investment banks are full-service banks that also offer commercial banking services but operate over a boutique platform in investment banking and capital markets.

Examples of middle-market investment banks include BMO Capital Market, RBC Capital Markets, and SunTrust. RBC Capital Markets and BMO Capital Markets are in the Bulge Bracket list in their domestic market – Canada – but are considered to take on a middle-market presence, comparing with the Wall Street players.


Related Readings

CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

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