Midsize companies are big business for Wall Street’s megabanks

livemint.com:

America’s biggest bank has a thing for midsize companies. Known for financing and advising megamergers, JPMorgan Chase is spending more of its resources on doing deals for companies valued at $2 billion or less. The goal is to leverage the relationships it has with the roughly 30,000 U.S.

businesses—names such as fast-casual restaurant chain Cava Group and virtual driving-range operator Topgolf—that get their checking accounts, lines of credit and payment processing from JPMorgan’s commercial bank. JPMorgan wants to provide them with investment-banking products and services when they need a loan, decide to go public or are acquired by a private-equity firm. Big banks are moving deeper into territory normally reserved for smaller lenders.

Many companies shifted their deposits to bigger banks during last year’s banking crisis, and some regional banks have scaled back lending as they adjust to the impact of higher interest rates. Meanwhile, big banks are going head-to-head with specialized boutiques, recognizing that advising on smaller deals helps them win repeat business from companies as they grow. There is another benefit for big banks: Midsize companies are a favorite target of private-equity firms.

Buyouts for such businesses have remained relatively robust despite an overall decline in private-equity deals in recent years. Smaller buyouts are less affected by rising interest rates than bigger deals because they tend to rely less on debt. Middle-market deals made up a record 74% of private-equity buyouts by count in 2023, outpacing the previous high of nearly 72% set in 2019, according to PitchBook.