The latest version of GCA Altium’s MidCap Monitor showed banks managing to force debt funds to the margins last year.
At the end of 2015 the share of the German LBO market claimed by debt funds was 26 percent, but this fell to 18 percent last year.
GCA Altium said its analysis showed that the banks had adapted their structures in response to debt fund competition, not only reducing the cost of bank finance but also offering more flexibility around “soft” factors such as covenants and other credit terms.
However, there were some signs of a debt fund fightback in the second half of the year. While finishing on an 18 percent market share, they only had 15 percent of the market in the first six months.
“In the second half of 2016, debt funds were…able to stabilise their market share and actually increase it again slightly,” observed Johannes Schmittat, managing director in the Frankfurt office of GCA Altium.
Overall, 2016 was a record post-Lehman year for German mid-cap LBOs with 77 transactions representing a 10 percent increase on the previous year.
Primary deals accounted for 55 percent of the market in 2016, up from 43 percent in 2015; while recaps and re-financings claimed 35 percent. Add-on financing dropped over the year from 13 percent to 10 percent.
The market for unitranche deals declined in Germany during 2016, with 12 transactions against 16 the previous year. This bucked the positive trend for unitranche in Europe as a whole, with the number of deals rising from 92 to 102. The UK accounted for 41 of these.
GCA Altium is the European division of GCA, the global investment bank offering M&A, debt, public and private finance and restructuring advice to growth companies. Its MidCap Monitor aims to boost the transparency of the German mid-cap LBO market.