European private debt deal volume surged in the fourth quarter of 2020 as the market made a rapid recovery from the effects of the covid-19 pandemic.
The latest figures from Deloitte’s Alternative Lender Deal Tracker, which tracks European mid-market deals, show there were 155 deals in Q4 2020, a fourth-quarter record and 2 percent higher than the previous record set in Q4 2019.
However, the second and third quarters of 2020 were marked by the outbreak of the pandemic and widespread economic shutdowns, which saw many transactions canned or delayed. The second quarter saw just 52 deals completed, the lowest figure in a single quarter since Q2 2014. A small recovery in the third quarter saw 77 deals done, but this was less than half the 159 seen in Q3 2019.
This also led the second half of the year to record a 26 percent decline in deal volume from 311 in H2 2019 to 232 in the second half of last year.
The resurgence in deal activity has also been mixed across geographies. The UK and Germany were fairly resilient markets, with deal volumes down only 3 percent and 18 percent respectively from H2 2019 to H2 2020. However, over the same period, France saw deal numbers fall by a whopping 57 percent, while the rest of Europe saw deals down 26 percent.
While France has traditionally been a more active and mature private debt market than Germany, the pandemic has shaken things up. In Q2 2020, the countries had nine deals each but in Q3 Germany pulled ahead with 16 deals compared to 13 in France and in Q4 they recorded 20 and 19 deals, respectively.
Deloitte said the increase in deal volume seen in the fourth quarter may not be a sign of a wider return to normal for private debt markets. “It should be noted that the sharp increase in dealflow in the fourth quarter largely reflects the release of pent-up demand from the quieter preceding three quarters and does not necessarily indicate a return to ’business-as-usual,’” Deloitte’s report said.