Regional Guide to Europe: Germany

Senior and unitranche deals saw the best H1 since 2012 as debt funds continued to increase their share versus banks.

Germany is on track to see a record number of leveraged buyouts in 2021 after momentum built during the first half of the year, per research from GCA Altium. The country recorded the best first half for senior and unitranche deals since 2012, with 60 transactions, while debt funds increased their market share against the banks to finance 65 percent of all transactions, a massive increase on the 52 percent seen in 2019 and the 16 percent in 2016.

Norbert Schmitz, managing director for debt advisory and restructuring at GCA Altium, says: “If you had asked me a few years ago I would have said there was no space for debt funds in Germany because there were such strong local banks, but the shift really kicked off in 2017 and it won’t go back now.

Number of Germany-based funds in market

Total amount targeted by funds in market

“The banks are really suffering with high regulation and ticket sizes are another issue, with banks just more risk averse. Then, on the people side, many people from the leveraged finance teams of the big banks have moved to debt funds in Germany.”

Germany’s Golding Capital Partners invests across Europe and the US in senior direct lending, subordinated capital and opportunistic credit. The firm’s managing director and head of private debt, Abhik Das, believes that there are many interesting situations for private debt funds in the German market: “A number of businesses may have short-term liquidity needs or might need a more permanent solution with their capital structure. With banks leaving a void, this creates a wide range of opportunities.”

He points to the many industrial businesses that are facing both covid and broader macroeconomic challenges, creating spin-out effects for suppliers across the German market. “The whole supply side shock, combined with issues around the Chinese regulatory crackdown, will impact the German economy more than some others just given the share of the economy that is export-orientated, and particularly orientated towards China,” says Das.

“Every disruption in the recent past has created opportunities for private debt and we expect that to continue.”