Deloitte’s Alternative Lender Deal Tracker, which covers the activities of 50 alternative lenders, recorded 67 deals in the third quarter of 2016, representing a 7 percent increase in comparison with the previous year.
Following the Brexit vote, mid-market M&A in the UK has declined and deal activity dropped 21 percent in the third quarter. However, this was more than offset by activity in the rest of Europe, which saw a 29 percent increase.
The report suggests that the continental European bounce was due to an increasing acceptance of alternative lenders in overseas jurisdictions. It highlights the Netherlands, which has traditionally been dominated by banks but where alternative lender deals climbed by 42 percent in the third quarter.
Despite the slowdown in the UK, the report notes that overall equity and credit markets have coped well with the volatility seen following the Brexit vote and US Presidential election.
However, the report paints a gloomier picture of alternative lender fundraising with the year as a whole likely to be some 40 percent down on 2015 as a result of the market volatility and the “bumper fundraising environment” of last year.
Set against that, the report sees strong demand for the direct lending space where around 130 managers were seeking to raise more than $50 billion as at November 2016. Given current low allocations and a favourable risk-return record to date, institutional investors are expected to increase their exposures to direct lending in 2017.
The Alternative Lender Deal Tracker report is co-authored by Deloitte’s Fenton Burgin, partner and head of UK debt advisory, and Floris Hovingh, head of alternative capital solutions.