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The Private Debt Deal Tracker Autumn 2023

Market waits for uptick in European M&A, as lenders prowl in the wings with eyes wide-open

This issue of the Private Debt Deal Tracker covers data for the first half of 2023 and includes 256 new private debt deals. This represents a 36% decrease in the number of deals from H1 2022 and a 26% decrease from H2 2022.

Key highlights:

  • Interest rate hikes, a weak M&A market, and investor overexposure to private markets are all likely to culminate in pressure on liquidity throughout the value chain. 
  • Deal volume reported by the 76 contributors of the tracker in the six-month period to June 2023 reflect this trend, with 256 deals comparing to 401 in the equivalent period to June 2022, a 36% reduction overall, unlikely to reverse as of Q3, with this quarter traditionally marking lower activity due to European summer holiday season. 
  • The general macroeconomic picture is not particularly rosy, reflected by weak European growth, stalling recovery in China, and oil prices that rose by almost 20% in the last three months. 
  • Financial markets think that interest rates are at or near peak levels, however a return to the very low rates witnessed before the pandemic is highly unexpected
  • Interest of alternative lenders in the Benelux market has remained resilient, with 36 deals being completed in the first half of 2023, compared to 40 deals to June 2022. 
  • M&A remains the key driver for private debt deals in the Benelux (75%), gaining importance compared to 2021 (61%). 
  • The majority of deals (89%) in the Benelux region in H1 2023 were structured as first lien solutions. This is higher than the rest of Europe at 83%
  • As private credit continues to expand as an asset class, alongside rates that have risen ubiquitously in the last 18 months, the need to hedge floating rate debt has become more critical amid rising borrower demand for protection. 
  • The UK still leads as the main source of deal volume for private debt lenders in Europe, however its prevalence has slowly declined over time following stiff competition for new opportunities in other European jurisdictions
  • Global private debt quarterly fundraising has so far reached $31.9bn in 2023 YTD, reflecting the slowest start to the year since 2018, and 52.6% drop-off compared to the equivalent period in March and June 2022. 
  • Q4 2023 has the potential to be busier, but it’s unlikely that it can reverse what has been a poor year-to-date. Deals are taking longer than they have traditionally—financing, for the most part, is tougher to arrange and investors are generally spending longer periods of time on diligence, so there is also the potential for some Q4 spillover into Q1 2024

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