In squad battles, the matchmaking system is rather different: it takes the highest rating from a squad and tries to find an opponent team according to it ignoring the rating of other squad members. If, say, a squad consists of 5 Silver league players and one Diamond league player, the system will locate players within the rating range for a Diamond league player.
The squad matchmaking algorithm always tries to match a squad against another squad as a priority. But because sometimes there are no squads in queue (in high leagues particularly) a squad can be matched against a team of solo players.
NOTE: Rating points are equally distributed among all the squad members. So, even if you place first on the losing team, you will still lose rating points.