Ever since the recession took the wind out of M&A's sails, dealmakers have been looking downstream to the lower middle market for opportunities. In this pool, where deals top out at $250 million, the pace of acquisitions has been accelerating over the last few years. The upshot is that small deals are here to stay - whether or not mega mergers return with the recovery - and private equity firms are taking advantage of the trend by raising new funds aimed specifically at smaller deals. For proof that the lower middle market is thriving, consider data from the first quarter of 2013. Thomson Reuters marked 432 transactions with values of $1 billion and under. A full 367 of those middle-market deals, or nearly 85 percent, were valued at $250 million or less. (For more, check out the May issue of Mergers & Acquisitions.)

Now more scrupulous than ever in the post-recession era, limited partners (LPs) have begun to appreciate the appeal of the lower middle market. Debt levels and initial rates of return in this sweet spot tend to be more consistent-a sharp contrast to many of the deals that are facilitated by bulge-bracket private equity firms.

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