Middle market M&A trends for Q2 2023 show that deal flow remains lower than previous years due to expensive financing and overall economic uncertainty, limiting firms' capacity for traditional buyouts. This has posed challenges for PE firms, as many firms are looking to delay exits in hopes that valuations will recover in the near term. Over the first half of 2023, there has been a 65% decline in buyout-backed exits. Amidst a 10% decrease in EV/EBITDA since 2022, buyers and sellers are facing difficulties in reaching a consensus on a fair multiple, resulting in buyers' reluctance to meet the premium that PE firms seek when liquidating their positions. The decline in multiples has had a negative effect on deal activity in sectors like healthcare and technology, where higher and more lucrative multiples are typically anticipated. With that said, firms continue to sit on a significant amount of dry powder, with 75% being raised in the past three years. This poses a challenge in that many firms need to liquidate but also still have ample capital to deploy. The solution to deploy capital has been through alternative methods, including add-on acquisitions and growth equity investments. Add-on acquisitions now make up approximately 80% of all buyouts, emerging as an effective approach for firms to deploy their capital. Growth equity transactions are also on the rise and are currently on pace to outnumber traditional buyout deals by the end of 2023. Although markets are still fighting costly financing, firms are finding a niche in growth equity investments and add-on acquisitions.