Asset deal M&A transactions are more prevalent in the lower middle market for several reasons:

Liability protection: In an asset deal, buyers can pick and choose which liabilities to assume, reducing the risk of inheriting unknown or undesirable liabilities from the seller, which is especially important when acquiring smaller companies with less formalized structures.

Flexibility: Asset deals provide buyers with greater flexibility to acquire only the specific assets they need or desire, rather than purchasing the entire company, which can be more appealing in the lower middle market.

Tax benefits: In some jurisdictions, asset deals may offer tax advantages for the buyer, such as increased depreciation and amortization deductions resulting from stepped-up asset basis,

which can be particularly attractive for lower middle market deals.

Simplified due diligence: Asset deals often involve a more straightforward due diligence process, as buyers focus on the specific assets being acquired. This can be advantageous in

the lower middle market, where businesses may have less comprehensive documentation and record-keeping practices.

Easier regulatory approval: Asset deals may face fewer regulatory hurdles, such as antitrust concerns, compared to stock deals, as they involve the transfer of specific assets rather than control of the entire company. This can make asset deals more attractive for smaller transactions in the lower middle market.