European deal activity remains strong amid fears of slowdown in H2

European deal numbers saw the third-best ever quarter in an unprecedented 12 months of deal activity.

European private debt deal activity stayed at a high level in the second quarter of 2022 despite growing fears about the state of Europe’s economies, according to the Deloitte Private Debt Deal Tracker.

Q2 2022 saw 216 deals completed, up 39 percent on the second quarter of 2021. It marks the third-greatest number of deals in a quarter since Deloitte began recording figures in 2012. Appetite for deals has been so strong that the four highest quarters recorded were all seen in the past 12 months.

The UK remains the largest market with 63 deals, but has lost market share to other parts of Europe. UK deal share was at 29 percent for the second quarter running, the first time the UK has made up less than 30 percent of the market across a six-month period. France has seen a resurgence in activity and recorded 52 deals in the quarter. Market share for private debt funds in France also increased, up from 19 percent in Q2 2021 to 24 percent today.

Safe sectors such as telecoms, business and professional services, and healthcare continue to dominate, accounting for 60 percent of deal activity between them.

Acquisition finance remains a major driver for direct lending activity, with 43 percent of deals being leveraged buyouts, while 26 percent were to fund bolt-on M&A and 15 percent were growth capital deals.

Deloitte says fund managers appear to be taking a more “risk off” approach in H2, which may lead to cooling deal activity in the second half of the year. With the war in Ukraine appearing unlikely to be resolved in the near future and growing warnings that Europe may see energy rationing to deal with disruptions to supply, managers are facing a challenging macroeconomic backdrop.