Private debt M&A picks up in Europe

M&A accounted for 59% of private debt transactions in the second quarter of 2014 according to Deloitte debt advisory.

Private debt transactions are up 6 percent in the second quarter of 2014 and have been driven by significant M&A activity, a new report from Deloitte debt advisory reveals.

Alternative lenders recorded 34 deals in the UK and Europe in the second quarter compared with 32 deals in the same period for 2013. For the first half of 2014, there is a more pronounced increase with 69 deals completed compared with 50 in the first half of 2013, as outlined in September’s Deloitte Alternative Lender Deal Tracker.

M&A accounted for 59 percent of deals in the second quarter of 2014, compared with a low of 38 percent in the same period of 2013, and is rising.

Fenton Burgin, head of UK debt advisory at Deloitte, said in a statement: “Importantly, we’ve seen a pick-up in alternative lending being used to support M&A activity in the mid-market, providing evidence that alternative lending is becoming more mainstream for buy-out transactions.” 

Over the last nine months, banks have responded to the “steady rise” of alternative lenders and the products they offer. “In the face of turbo-charged alternative lender liquidity, a small number of European banks have increased their flexibility to provide and underwrite non-amortising structures that are similar to those provided by alternative lenders. Even with this response, alternative lenders are here to stay and will continue to expand at pace,” Burgin said.

The UK remains the main destination for activity at 48 percent, with France second at 25 percent and Germany third at 12 percent, in the second quarter. Burgin concludes that: “Increasing numbers of alternative lenders with large amounts of recently raised capital are looking to Europe for investment opportunities.”

In order to stand out from the crowd in the UK mid-market in particular, “private debt funds increasingly need to differentiate themselves in terms of their scale, geographic capability, sector expertise and flexible terms,” Floris Hovingh, head of alternative lender coverage, added.