Canadian Lower Middle Market Private Equity Research Report

The Canadian lower middle market private equity market is defined by deal count, not deal size. Statistics show the aggregate dollar figures and the deal-count figures describe two different markets, and the one that makes headlines is not the one most buyers operate in. Dollar totals sit at the top of the market and swing with a few large transactions each year, so a record year for capital deployed can coincide with flat or even falling deal activity. The deal-count view is steadier and far broader, and it is the better guide to the supply of acquirable businesses, the valuations they trade at, and the financing they require. Which statistic is the right one depends on the question: the asset class in aggregate, or a single company in the lower middle market.

This guide compiles the most reliable public data on the segment: private-equity activity from the CVCA, the broader Canadian M&A market from Crosbie & Company, the small-business universe from ISED and Statistics Canada, and the owner-succession wave that feeds future deal supply from the CFIB. The data carries a few results that the headline number hides. The record was driven by a small number of multi-billion-dollar take-privates while deal count actually fell, average deal size is a poor description of a typical transaction, and two provinces account for nearly all reported activity. Wherever the sources measure different things, the denominators are kept separate and labeled.

Current market context: Canadian M&A recorded its strongest year by value since 2022 in 2025. Announced Canadian deal value rose about 65.5% to roughly CAD $422 billion, while announced deal count edged down about 1.4%, according to Crosbie & Company.⁴ The pattern holds across both the all-market and private equity data: value rose sharply while deal count stayed roughly flat.

Metric note: The two main Canadian datasets do not measure the same thing. The CVCA tracks private equity only and reports dollars invested across completed deals, often grouped into capital-invested bands. Crosbie & Company tracks all announced Canadian M&A, strategic and financial, measured by enterprise value. Their figures can support the same conclusion, but they cannot be added, divided, or read as a single series. The methodology section keeps each universe in its own lane.

Contents

1. The Canadian Lower Middle Market Is a Count Story, Not a Dollar Story
2. How the Lower Middle Market Gets Defined in Canada
3. A Record PE Year Built on a Handful of Large Deals
4. Most Canadian PE Deals Are Small
5. The Whole-Market Backdrop: All Canadian M&A
6. Why the Average Deal Size Misleads
7. Where Lower-Market Deal Flow Actually Sits
8. The Succession Wave Behind Future Deal Supply
9. Who Buys Canadian Lower-Middle-Market Businesses
10. Why Canada Has No Clean Lower-Middle-Market Multiple
11. Exits Are M&A-Led, and the IPO Window Stayed Shut
12. What This Data Means for Investors and Sponsors
13. Canadian Lower Middle Market FAQ
14. Methodology and Caveats

The Canadian Lower Middle Market Is a Count Story, Not a Dollar Story

Two numbers frame the Canadian market. The first is dollars: private equity deployed a record CAD $57.5 billion in 2025.¹ The second is count: 592 deals, the lowest annual deal count in five years.² Those two numbers move in opposite directions because a small number of very large transactions can lift a dollar total without changing how many companies actually traded.

When the headline distortion is set aside, the underlying activity is consistent and small-cap. CVCA data, as reported by the CFIB, puts more than 65% of Canadian private-equity transactions in the SME segment.⁸ By count, the typical Canadian PE deal is a sub-CAD $25 million transaction, not a multi-billion-dollar take-private. The lower middle market is simply where most of the activity lives, and the volume base has been steady rather than volatile.

This is not a one-year pattern. The CVCA’s historical data shows years in which a handful of mega-deals exceeded the combined value of every other PE deal in the market. In 2019, for example, roughly CAD $11.6 billion of about CAD $19.0 billion in PE value came from large transactions.² A thin layer of headline deals sitting on a deep, steady base of small-cap activity is the structural shape of Canadian private equity, not a 2025 anomaly.

How the Lower Middle Market Gets Defined in Canada

The lower middle market has no single Canadian definition, which is why credible analysis of the segment starts by stating which cutoff it uses. Practitioners typically define it by enterprise value or EBITDA. Data providers define it by capital invested or deal value, using thresholds that differ by an order of magnitude. The table below separates those lenses so that no two figures in this article get compared across incompatible definitions.

The working approach in this article is straightforward. For private equity, below CAD $25 million is the cleanest small-deal proxy and below CAD $100 million is broader lower-market context, both from CVCA capital-invested bands. For the all-market view, Crosbie’s below CAD $250 million enterprise-value band is the relevant mid-market cut, and it is never blended with the CVCA figures. Where a statistic uses a different cutoff, the text says so.

A Record PE Year Built on a Handful of Large Deals

Canadian private equity invested a record CAD $57.5 billion across 592 deals in 2025, more than double the CAD $27.2 billion deployed in 2024.^{1, 2} That jump was not a broad small-deal expansion. It was concentrated in a small number of very large transactions. Through the first nine months of 2025, four take-private deals worth a combined CAD $23.5 billion accounted for 42% of all PE dollars, and five individual deals each topped CAD $2.5 billion across the full year.^{1, 3} Recognizable examples such as the GardaWorld take-private sit in this top layer; none of them is a lower-middle-market deal.

The five-year series shows why dollars and count have to be read together. Capital invested fell to a record low in 2023, recovered in 2024, and then more than doubled in 2025, while deal count drifted lower over the same period. Capital concentrated into fewer, larger deals on top of a shrinking-count base.

Most Canadian PE Deals Are Small

The clearest evidence that Canadian private equity is a lower-market business is the deal-size distribution. In the first half of 2025, about 85% of PE deals were under CAD $25 million and 92% were under CAD $100 million; for the full year, 93% were under CAD $100 million.^{1, 2} The very top band tells the opposite story for dollars: deals over CAD $1 billion were about 2% of transactions but absorbed roughly 87% of all capital invested.²

One detail matters for interpretation. Smaller private deals frequently do not disclose a value, so a distribution built from disclosed deals can still understate how common the smallest transactions are. That is another reason count-based shares, rather than dollar-based shares, are the better way to size the lower market.

The Whole-Market Backdrop: All Canadian M&A

Private equity is one part of a much larger M&A market. Crosbie & Company, a Toronto mid-market investment bank that publishes a quarterly Canadian M&A report, counted roughly 2,560 announced deals worth about CAD $422 billion in 2025, with value up about 65.5% year over year and count down about 1.4%.⁴ The same count-versus-value split that defines the PE data shows up here: in Crosbie’s reporting, mid-market deals under CAD $250 million enterprise value made up roughly 7% of total deal value in 2024 despite dominating deal count.⁵

The two datasets are useful side by side, but only as scale context. Crosbie counts all announced M&A; the CVCA counts completed private-equity deals. They cover different populations at different deal stages, so they should never be summed or divided into a single PE-share-of-M&A ratio.

Why the Average Deal Size Misleads

Average deal size is the statistic most likely to mislead a reader about the Canadian market. In the first half of 2025, the average PE deal was CAD $95.82 million including mega-deals but only CAD $12.57 million excluding them.² By the third quarter, the reported average had climbed to about CAD $168 million, pulled upward by a few giant transactions in that quarter.³ None of those means is a typical deal. With most transactions under CAD $25 million, a median would sit far below any of these averages, and Canada does not publish a public median PE deal size.

Geography carries the same imprint. Reported PE activity is heavily concentrated in two provinces: in the first half of 2025, Quebec and Ontario accounted for 99.6% of PE dollars and 83% of deals, with Quebec alone representing about 60% of deals.² Quebec led on both dollars (CAD $18.3 billion) and deal count (192 deals), ahead of Ontario (CAD $12.5 billion across 74 deals), reflecting an unusually active provincial institutional ecosystem.²

Where Lower-Market Deal Flow Actually Sits

Sector data shows the count-versus-value split in miniature, and it is where the lower-market base becomes concrete. In the first half of 2025, industrial and manufacturing businesses led PE deal count with 95 deals but only about CAD $2.1 billion of capital, while automotive and transportation led on dollars at CAD $3.4 billion on just 17 deals, largely a single large transaction.² Industrials represented roughly 29.5% of deals but only about 6.7% of dollars.² The volume of lower-market activity concentrates in industrials, information and communications technology, consumer and retail, and services, not in the sectors that produce the largest dollar headlines.

The buy-and-build strategy that suits this base remains central to the dollars as well. Buyouts and add-ons were about 52% of PE investment value through the third quarter of 2025, and in the first half, add-ons and add-on-driven M&A made up a majority of buyout-and-add-on dollars.^{2, 3} Add-ons cluster in exactly the kind of established, service-based and light-industrial companies that populate the lower market.

The Succession Wave Behind Future Deal Supply

The supply side of the lower middle market is shaped less by fundraising than by demographics. In its most recent national succession research, the CFIB estimated that more than CAD $2 trillion in business assets could change hands over the following decade as 76% of small-business owners planned to exit, while only 9% had a formal succession plan and 54% cited finding a buyer as the hardest part of the process.⁶ Those figures come from a report published in 2023, based on a survey fielded in 2022, and they describe assets at stake rather than transaction value, so they should be read as supply pressure, not deal volume. The CFIB’s 2018 edition of the same research framed the wave at about CAD $1.5 trillion and 72% of owners, so the current figures mark the growth of a long-building trend rather than a new finding.

Two related findings deepen the picture. The CFIB reports that business exits have outpaced business starts in Canada for six consecutive quarters, a structural thinning of the owner base.⁸ And while most owners would prefer to keep a business in the family, a large share ultimately sell to an unrelated buyer, which is the opening that outside acquirers fill. That gap between owners who want to exit and owners who have a plan or a buyer is the practical reason the lower-market pipeline exists.

The supply base itself is deep. Canada had 1,099,521 employer businesses in 2024, of which 1,079,188 were small (1 to 99 employees), 16,953 were medium (100 to 499 employees), and 3,380 were large.⁷ The roughly 17,000 medium-sized firms are the closest headcount proxy for the upper end of the lower-market target universe, and the small-business pool is the deep end from which most succession transactions will come.

Who Buys Canadian Lower-Middle-Market Businesses

The buyers of Canadian lower-market businesses are a mix rather than a single category. Regional private-equity firms and family offices acquire and build platforms. Strategic buyers consolidate within their industries. Institutional capital partners, especially in Quebec, back many transactions. And independent sponsors, who acquire one company at a time and raise equity per deal rather than from a committed blind-pool fund, are an increasingly common buyer of established small-cap operating companies.

Acquisition entrepreneurs, including search funds, are a smaller but growing part of the Canadian buyer base, a trend documented by Osler in its 2026 review of search funds in Canada.⁹ Published search-fund return studies cover a different vehicle and a combined U.S.-and-Canada sample, so they are not a benchmark for Canadian lower-market private-equity performance.

The financing rails for these buyers are real and Canadian. The Business Development Bank of Canada, a Crown corporation, runs a Growth & Transition Capital arm that provides mezzanine and quasi-equity financing built specifically for acquisitions and ownership transitions, part of the infrastructure that supports lower-market deals.¹⁴

Why Canada Has No Clean Lower-Middle-Market Multiple

A sophisticated reader will want a Canadian valuation multiple, and the honest answer is that no authoritative one exists. There is no Canada-specific public dataset of lower-middle-market transaction multiples comparable to U.S. sources such as DealStats, Pepperdine, or Capstone. The CVCA and Crosbie publish deal counts and dollar values, not transaction-multiple distributions. This is a documented gap, not a search miss, and it is one of the most important things to state plainly about the Canadian market.

U.S. benchmarks exist, but they are U.S. benchmarks. As a rule of thumb, U.S. lower-middle-market businesses commonly trade in a range of about 4x to 8x adjusted EBITDA, with larger companies earning higher multiples.¹² The DealStats Value Index put the all-industry U.S. private-company median near 3.5x to 3.7x EBITDA through early 2025, while Capstone’s index put the larger U.S. middle market around 9.8x in 2025.^{11, 10} The spread between those figures comes entirely from differences in segment and sample, which is precisely why a single number cannot be lifted out and relabeled as Canadian.

Exits Are M&A-Led, and the IPO Window Stayed Shut

Exit activity is where the constraint on the market is most visible. In the first half of 2025, Canadian PE exits totaled CAD $1.8 billion across 22 transactions, with M&A driving about 92% of proceeds and no PE-backed IPOs, the ninth straight quarter without one.² Realization in the Canadian lower market runs through sale to a strategic or another sponsor, not through public listing.

That matters for the supply outlook. Crosbie’s own commentary notes that private equity’s need to monetize mature holdings should keep mid-market deal flow coming, since capital that went into companies in earlier years eventually has to be returned.⁴ Slow exits create a backlog of holdings that must eventually trade, which is one more source of future lower-market deal supply alongside owner succession.

What This Data Means for Investors and Sponsors

The lower middle market is the activity, even in a record dollar year. The CVCA’s record CAD $57.5 billion and its 592-deal count point in different directions because a few large take-privates carried the dollars while the small-deal base stayed steady.^{1, 3} For investors and sponsors who operate below CAD $100 million, the relevant question is not whether dollar totals set a record. It is how many small companies are trading, on what terms, and through which buyers.

Future supply is a demographic question. The CFIB’s succession figures, dated to a 2023 report on a 2022 survey, describe a large cohort of owners who intend to exit, most without a plan or an identified buyer.⁶ Combined with exits that have outpaced starts for six straight quarters, the pipeline of small companies needing a new owner is structural, not cyclical.⁸ That pipeline is the raw material for lower-market dealmaking over the next decade.

The data Canada does not have matters as much as the data it does. There is no public Canadian lower-market multiples series and no reliable Canadian lower-market return benchmark, and the U.S. figures that exist measure different markets.^{10, 11} The practical consequence is that underwriting has to happen at the level of the individual company, sponsor, purchase price, debt structure, and exit path, because category-level averages cannot carry that weight in this market.

For accredited investors, the same data points to a structural access problem. The institutional datasets above describe a market most individuals cannot reach directly, because the most relevant deal flow is private, fragmented, and often led by independent sponsors. The usual routes are a commitment to a private-equity fund, which is a blind pool of future deals, or direct acquisition, which requires sourcing and operating a company. A third route is deal-by-deal co-investment, in which an investor reviews a specific transaction and decides whether to participate.

CapitalPad is a private equity co-investment group that lets accredited investors review and invest in lower middle market private equity deals in Canada and the United States on a deal-by-deal basis.¹⁵ For investors studying Canadian lower middle market private equity, the relevant overlap is the underwriting problem: a small private-company transaction turns on the specific sponsor, seller, purchase price, financing structure, and exit path rather than on headline market dollar totals.

Canadian Lower Middle Market FAQ

What is the lower middle market in Canadian private equity?

There is no single Canadian definition. Practitioners usually define the lower middle market by enterprise value (roughly CAD $5 million to $100 million) or EBITDA (roughly CAD $1 million to $10 million). Data providers use different cutoffs: the CVCA frames its small-deal commentary around the sub-CAD $25 million band, while Crosbie uses sub-CAD $250 million enterprise value for its mid-market context. Any credible figure states which cutoff it uses, because the thresholds differ by an order of magnitude.

How big is the Canadian private equity market?

Canadian private equity invested a record CAD $57.5 billion across 592 deals in 2025, per the CVCA, more than double the CAD $27.2 billion in 2024.^{1, 2} That total was concentrated in a handful of mega-deals, so it reflects dollar concentration at the top of the market rather than broad small-deal growth.

How much of Canadian private equity is lower-middle-market?

By deal count, most of it. In 2025, 93% of Canadian PE deals were below CAD $100 million, and about 85% were below CAD $25 million in the first half of the year.^{1, 2} CVCA data reported by the CFIB also puts more than 65% of Canadian PE transactions in the SME segment.⁸ By dollars the picture inverts, because deals over CAD $1 billion took roughly 87% of capital invested while making up about 2% of deals.²

Why did Canadian PE dollar value look so high in 2025?

Mega-deals and privatizations drove the dollar total. Four take-private transactions worth a combined CAD $23.5 billion accounted for 42% of all PE dollars through the third quarter of 2025, and five individual deals each topped CAD $2.5 billion for the year.^{1, 3} Deal count fell over the same period, so the record was concentration, not breadth.

How large is the broader Canadian M&A market?

Crosbie & Company counted roughly 2,560 announced Canadian M&A deals worth about CAD $422 billion in 2025, with value up about 65.5% and count down about 1.4%.⁴ This is all announced M&A, strategic and financial, measured by enterprise value, and it is a different population from the CVCA’s PE-only completed-deal data, so the two are not directly comparable.

Which provinces dominate Canadian PE activity?

Quebec and Ontario. In the first half of 2025 they accounted for 99.6% of PE dollars and 83% of deals, with Quebec alone representing about 60% of deals, reflecting a distinctive provincial institutional ecosystem.² The CVCA notes that provincial coverage reflects where reporting firms operate, so activity outside those provinces is best read as under-reported rather than absent.

Which sectors see the most lower-market deal activity?

Measured by deal count, industrial and manufacturing led with 95 deals in the first half of 2025, followed by information and communications technology, consumer and retail, and life sciences.² Dollar leadership is different and can flip on a single large deal: automotive and transportation led on capital at CAD $3.4 billion across only 17 deals.

Is the Canadian succession wave real?

Yes, though the headline figures should be dated. The CFIB estimated that more than CAD $2 trillion in business assets could change hands over a decade as 76% of owners planned to exit, with only 9% holding a formal plan, in a report published in 2023 based on a 2022 survey.⁶ Those numbers describe assets at stake, not transaction value, and not all of those assets will transact.

What multiples do Canadian lower-market businesses sell for?

There is no authoritative public Canada-specific dataset of lower-middle-market transaction multiples. U.S. references exist, such as a 4x to 8x adjusted-EBITDA rule of thumb and an all-industry DealStats median near 3.5x, but those are U.S. data measuring different segments and should not be relabeled as Canadian.^{11, 12} Any Canadian multiple cited without a named dataset is a practitioner estimate, not a measured figure.

How can accredited investors get exposure to Canadian lower-market deals?

At a high level there are three routes: committing to a private-equity fund, which is a blind pool of future deals; acquiring a company directly, which requires sourcing and operating it; and deal-by-deal co-investment, in which an investor reviews a single transaction and decides whether to participate. Each carries illiquidity and concentration risk. CapitalPad is a private equity co-investment group that gives accredited investors deal-by-deal access to lower-middle-market acquisitions led by independent sponsors, with deal flow primarily in the United States and Canada.

Methodology and Caveats

This guide compiles Canadian market data from the CVCA, Crosbie & Company, ISED, Statistics Canada, and the CFIB, with U.S. valuation benchmarks used only as labeled contrast. Because the sources measure different populations, the article keeps each universe in its own section and does not present them as one series. Every precise figure includes a data year or cutoff in the text.

Several denominator conflicts are worth stating directly. The CVCA’s mid-market commentary (sub-CAD $25 million capital invested) and Crosbie’s mid-market band (sub-CAD $250 million enterprise value) differ by roughly tenfold and measure different things, so figures across the two are not comparable. Dollars invested are not enterprise value, and a CVCA dollar total should not be read as a deal price. PE-only is not all-M&A, so the CVCA’s 592 deals are not a clean percentage of Crosbie’s roughly 2,560. Average deal size is inflated by mega-deals and is reported as anywhere from about CAD $11 million to CAD $168 million for overlapping 2025 periods depending on whether mega-deals are included, which is why this article prefers the ex-mega figure. Partial-year and full-year data can conflict, and the CVCA revises history, so the full-year 2025 total of CAD $57.5 billion does not reconcile exactly to the year-to-date Q3 figure of CAD $56.5 billion plus the fourth quarter. Disclosure bias means small private deals often report no value, so dollar-weighted shares understate small-deal prevalence and count-based shares are the better lower-market signal.

Two gaps are structural rather than incidental. There is no authoritative public Canada-specific dataset of lower-middle-market transaction multiples, and there is no reliable public Canadian lower-market return benchmark. U.S. multiples are not a substitute for either, and this article does not present them as such. None of these caveats changes the central finding, which the data supports on its own terms: Canadian dealmaking is structurally a lower-middle-market business by deal count, even in a record dollar year shaped by a small number of large transactions.

Sources & References

1. CVCA, “Year-End 2025 Canadian Private Equity Market Overview” (2026). Source
2. CVCA, “H1 2025 Canadian Private Equity Market Overview” (2025). Source
3. CVCA, “YTD Q3 2025 Canadian Private Equity Market Overview” (2025). Source
4. Crosbie & Company, “Canadian M&A Report Q4 2025,” reported by Investment Executive, “Mega deals drive robust M&A: Crosbie & Co.” (2026). Source
5. Crosbie & Company, “Mergers & Acquisitions in Canada, Q1 2025” (2025). Source
6. CFIB, “Over $2 Trillion in Business Assets Are at Stake,” succession research (report 2023; survey fielded 2022). Source
7. Innovation, Science and Economic Development Canada, “Key Small Business Statistics 2025,” with Statistics Canada, Canadian Business Counts (December 2024). Source
8. CVCA data reported by CFIB, “Reinvigorating Entrepreneurship” (2026), via Investment Executive. Source
9. Osler, “Search Funds in Canada: Navigating Cross-Border Challenges” (2026). Source
10. Capstone Partners, “Middle Market M&A Valuations Index” (2026). Source
11. Kreischer Miller, reporting the DealStats Value Index, “Private Company M&A Trending Multiples Through Q1 2025” (2025). Source
12. Raincatcher, “EBITDA Valuation Multiples by Industry and Size” (2026). Source
13. Windsor Drake, “What Is a Good EBITDA Multiple in Canada” (2026). Source
14. Business Development Bank of Canada, “Growth & Transition Capital.” Source
15. CapitalPad, investor and sponsor materials. Source