France solidified its place in the number two slot in terms of European deal transactions in the first six months of the year. France witnessed 99 private credit transactions in the first half of 2022, a considerable increase on the 65 deals seen in H1 2021. The market accounted for a quarter of all European direct lending deals, up from 20 percent for the same period last year, according to Deloitte figures.

Number of funds focused on France to close since 2017

Total amount targeted by French-focused funds in market

Houlihan Lokey’s MidCapMonitor report for Q2 2022 records that the deal activity in France has continued to be driven by new financings, which accounted for 64 percent of transactions in Q2, and notes that the majority of closed transactions were in industrials, business services and consumer, showing lenders have appetite for most sectors.

Robert Connold, partner in debt advisory at Deloitte, says: “In France, access to government-backed support schemes was much more readily available to private equity-backed transactions during the pandemic, and as those schemes are rolling off, people are refinancing back to third-party debt, which is driving some of the uptick.”

Maxime de Roquette-Buisson, managing director for private debt at Eurazeo, says macroeconomic conditions are not so far causing significant challenges to French private debt portfolios: “Being primarily exposed to service-based companies, we expect a limited impact from energy prices,” he says. “However, recruitment is still a challenge when we look to sustain strong growth momentum.”

The Houlihan Lokey report notes debt funds recorded 50 unitranche and senior debt deals in the first half, compared to 53 completed by banks: “The market in France remains very competitive between banks and credit funds, with an almost equal share of the market,” says the report. “While the credit funds are able to provide more leverage and flexible terms, the banks continue to be able to price much cheaper than credit funds. However, we have recently noticed an increase in margins from banks.”