How two deals capture a decade of growth

The last 10 years have seen private debt firms move from claiming increasing share in the mid-market to starting to do the same at the larger end.

As we celebrate the 10th anniversary of Private Debt Investor, we’ll be presenting you with a feast of related content over the coming weeks. One project we undertook was a 10-year timeline examining the headline-grabbing events that took place during the period. When we turned the clock all the way back to 2013, we found that the spotlight was on the $24.4 billion mega-buyout by private equity firm Silver Lake Partners of PC manufacturer Dell.

One notable aspect of the deal – among many – was the absence of private debt firms. Banking heavyweights Bank of America Merrill Lynch, Barclays, Credit Suisse (remember them?) and RBC Capital Markets lined up to provide ‘B’ and ‘C’ term loans and bridge finance. Even in the mezzanine layer – where the banks stepped to one side – it was Microsoft coming forward with a hefty $2 billion facility. Private debt was nowhere to be seen.

At the time, a North American banking source told PDI that “the US debt markets are extremely liquid at the moment, sufficient to make a deal like this possible”. It’s an interesting reminder that the involvement of banks in mega-buyouts has not been on a steady downward trajectory ever since the global financial crisis – even though the GFC tends to be seen as the catalyst for the birth of the ultimately huge direct lending industry. There have been peaks and troughs.

It also reminds you how unlikely it would be for private debt firms to be absent from such a deal today. With the capital markets in a parlous state, one would expect to see private debt in the consortium – if not in control of it. Indeed, it seems more likely that the banks would be the ones completely side-lined in today’s market.

Skipping forward, our Deals of the Decade – first published in November last year – recalled Blackstone Credit’s $2.6 billion loan in support of Thoma Bravo’s $6.6 billion acquisition of in October 2021. The deal was a standout in the evolution of private debt as a potential solution for very large companies, and was transformational in creating the large-cap private unitranche and making it a dominant force in the capital markets.

Countless other similar deals have followed in its footsteps since, helping to define the last decade as one where private debt – having claimed from the banks a large share of mid-market corporate lending in the GFC’s aftermath – began to muscle their way into the capital markets as well. Over the next decade, it’s a trend only likely to gather momentum.

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