A recent, detailed and rather dry analysis, published by the Yale School of Management of 59 company exits, reveals a surprising truth about how value is actually created in lower middle-market companies.A Mathematical Analysis of Value-Creation Attribution in Search Fund Projects
When the authors Lazier, Thomas and Wasserstein decomposed enterprise value growth across dozens of ETA deals, they found that roughly 80% of the increase in company value came from EBITDA multiple expansion, while only about 20% came from actual EBITDA growth. In other words, the biggest driver of returns wasn’t simply improving operations and profitability: It was building a bigger, more investable company for a buyer willing to pay a higher valuation multiple. And one of the clearest factors behind that higher multiple turns out to be company size.
Larger businesses with more revenue and EBITDA, even lower EBITDA margins, consistently attracted higher valuations at exit.
This is where a scalable go-to-market (GTM) engine becomes critical for lower mid-market companies looking to optimize their valuation. When a company builds a repeatable, predictable revenue system that includes clear pipeline management, diversified customer acquisition, consistent sales execution, and reliable forecasting, it becomes capable of provably growing revenue faster, and more consistently, with greater capital efficiency (lower working capital needs).
That growth doesn’t just add EBITDA dollars; it moves the company into a different category of buyer altogether. As companies move from sub-scale to scale, they become attractive to larger pools of capital, particularly mid-market private equity firms, strategic acquirers, and platform buyers, each with lower return requirements and a willingness to pay higher multiples. Simply put, predictable growth reduces risk. Lower perceived risk translates into higher valuations.
The takeaway is simple: operational improvements alone help, and they’re important, but they rarely drive the biggest valuation gains. Scaling the revenue engine and derisking growth matters a lot, for owners and investors. A founder-driven sales model may generate revenue and growth, but a scalable GTM system creates size, predictability, and buyer confidence. And in the world of exits and acquisitions, those are the attributes that command premium multiples.
When it comes to valuation, the study confirms what experienced operators and investors already know: Size Matters.