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U.S. Middle Market Performance Remains Strong, Q4 2023 Golub Capital Altman Index

Private companies in the middle market, according to the recent Q4 2023 Golub Capital Altman Index, witnessed a remarkable 16 percent year-over-year growth in earnings in the initial two months of the fourth quarter of 2023. This represents the most substantial earnings growth since Q2 of 2021. Additionally, revenue experienced a 7 percent growth during this corresponding period.


Lawrence E. Golub, CEO of Golub Capital, said, “We expected to see strong growth in Q4 2023 and the data exceeded even our expectations. As we said throughout 2023, private equity-owned middle market companies in general are proving resilient and adapting well to the environment. Our middle market report has also performed well. Every quarter in 2023, our data provided consistently correct early insight that economic growth was exceeding the prevailing consensus. The strong revenue and earnings growth of the Golub Capital Altman Index in Q4 2023, in our view, caps off a year that bodes well for investors in private equity. Despite concern about the potential impact of high interest rates and economic uncertainty on the returns of recent private equity fund vintages, fundamental earnings growth gives investors a reason for cautious optimism.


Dr. Edward I. Altman said, “The Golub Capital Altman Index for Q4 2023 shows that the middle market is in robust shape. Quarterly EBITDA growth of 16.3 percent year-over-year was the highest in the eight-year history of the Index, apart from the anomalous rebound from 2020 Covid shutdowns in Q2 2021. While Index results were strong across all subsectors, technology continued to outperform. The latest employment data shows that the labor market remains tight, and small- to medium-sized businesses face ongoing shortages of skilled labor. It is not surprising that mission-critical providers of productivity-enhancing enterprise software would benefit from these trends. Our middle market firm indexes, especially the growth rate of aggregate and sectoral EBITDA, have proven to be excellent predictors of overall GDP and larger firm growth in 2023 and we expect these indexes of primarily private equity-owned firms, diversified across several industrial sectors, bodes well for 2024.”


Out of the sectors tracked, technology continued to outperform, with earnings growth of 37 percent and revenue growth of 11.5 percent. The remaining three sectors tracked—Consumer, Healthcare, and Industrial—also showed double-digit growth, with the Consumer sector reporting earnings growth of 13.8 percent and revenue growth of 4.8 percent, the Healthcare sector reporting earnings growth of 11.4 percent and revenue growth of 6.7 percent, and the Industrials sector reporting earnings growth of 10.6 percent and revenue growth of 6.8 percent.


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