Private equity salivates at bullish 'middle market'

Mark Wragg | E+ | Getty Images

The most common story line in private equity is that there are few bargains left. While selling or taking companies public has been easier, it's difficult for larger PE shops to buy or invest in a business because valuations have increased dramatically since the financial crisis.

(Read more: Blackstone: We're in an 'epic credit bubble')

But there's a slice of private equity that isn't too concerned about valuations: So-called middle market firms that focus on small and mid-sized companies, usually with under $500 million in annual revenues.