UK sees record high recaps in first quarter – report

Positive business sentiment as a result of the UK’s strong vaccine rollout is thought to have helped drive transaction volumes.

The UK saw a record number of refinancings and recapitalisations during the first quarter of 2021, according to research from GCA Altium.

In its latest MidCapMonitor report, GCA’s analysis found there were 71 refinancing and recap transactions completed during Q1, the highest amount since it began tracking transactions in 2015.

Simon Chambers, managing director at GCA Altium, said: “The number of debt deals completed in Q1, coupled with the bounce back of the wider M&A market, represents a positive return to performance following a year of uncertainty for the markets. There is a renewed optimism around a return to growth and the impact of the pandemic on the deal market is beginning to fade.”

GCA highlighted the UK’s successful vaccine rollout as a factor helping to improve business sentiment and drive transaction volumes. A proposed rise in capital gains tax as part of the March 2021 budget may also have prompted firms to realise gains early, however no formal increase has been announced so far and GCA expects activity to remain strong until at least the Autumn budget announcement by the UK Chancellor.

Chambers added: “It is important that we continue to support those companies that remain under pressure as a result of the pandemic, and that the debt market remains easily accessible to enable them to return to growth.

“Nevertheless, as market sentiment and activity levels remain positive, alongside the continued reopening of the UK economy, we expect there to be significant competition for high quality businesses hitting the market in Q2 21.”

Private debt activity overall reached record levels in the first quarter of the year, with Deloitte reporting a record quarter for European mid-market transactions in its latest Alternative Lender Deal Tracker.