Deal volumes plummet in Q1 2024 as broadly syndicated loan offerings start the year strongly
1121 private debt deals were completed in the first quarter of 2024, marking a sharp decline of 41%1 from Q4 23. Although macro conditions have appeared to stabilise and Europe anticipated positive economic growth prospects, overall M&A activity remained subdued.

Conversely, the broadly syndicated loan ("BSL") market experienced a bumper quarter with total issuance of €29.3bn in Europe, the highest level since Q2 212 . This was fuelled by a flurry of repricings hitting the market, and with arranging banks pitching aggressively to win back market share following 12-18 months of lukewarm market conditions.

Average new-issue TLB spreads decreased by 46 basis points from the previous quarter, marking the largest quarter-on-quarter decline since Q4 22. As a result, a number of private debt facilities were refinanced with BSL issuances. The volume of private debt transactions is expected to remain subdued throughout H1 24 as rampant CLO issuances (both new-issues and resets alike) look set to further bolster BSL activity.

Debt service pressure leads to lower leverage and an increased uptick in reduced-cash pay structures
The proportion of unitranche and senior debt structures remained relatively flat compared to the same period last year at 59.5% and 24.6% of total deals respectively. In contrast, there was an increase in aggregated PIK and mezzanine structures over the past year from 12 (L6M Q3 23) to 25 (L6M Q1 24). There was also a notable 0.6x reduction in leverage from LTM Q1 23 to LTM Q1 241.

France and UK remain the most active regions, but both saw a decline in deal activity in Q1
France experienced a sharp retraction in private debt deal activity, with volumes falling 57% quarter-on-quarter, leading to the country’s lowest share of total deals since Q4 21 (21%). The decline in UK activity was less pronounced, with 39 deals being completed, equivalent to a 35% share of total activity. The rest of the continent also saw a decline in terms of absolute number of deals, however, the relative proportion of deals rose in Germany (16%), Benelux (12%), and the Nordic region (8%).

TMT dominates deal activity
The TMT sector represented the highest proportion of deals (27%) with Business & Professional Services (19%) and Healthcare & Life Sciences (18%) following suit. Of the TMT deals, 43% were LBOs and 30% were bolt-on M&A deals. We expect this sector to have a strong H2 amidst expected M&A in data centres and European telecom operators, according to Deloitte’s Summer 2024 M&A Outlook. TMT, Business, Infrastructure & Professional Services, and Healthcare & Life Sciences represented 63% of all deals in Q1 24, the highest concentration in a single quarter observed since Q3 21.

In the ten years we have been tracking alternative lending, one of the most remarkable observations has been the speed at which it has grown. Since 2012 the asset class has grown in Europe from $36.2bn of AUM to $187bn today. The number of lenders we collaborate with for this publication has grown from 20 to 78. The headcount in the direct lending market has more than doubled since 2016. In the space of a decade the alternative lending market has grown to be more than just a niche subcategory of a larger fixed income/alternatives strategy, to an asset class of its own right.

In our Spring 2022 edition of the Alternative Lender Deal Tracker, we questioned whether it may be time to refresh the title of this publication given that non-bank lending makes up an estimated 80% of mid-market deals. We had to ask ourselves “Is ‘alternative lending’ really that alternative?”

Now, as we finish celebrating ten years of the Alternative Lender Deal Tracker, we are happy to announce that we are renaming our publication to the Private Debt Deal Tracker. There are many ways in which the field is still growing and developing and there is a long way to go on the road to full maturity. We look forward to delivering insights on the twists and turns along the way. Here’s to the next ten years!