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Alternative Lender Deal Tracker
Direct lenders thrive on market dislocation
This issue covers data for the first half of 2020 and includes 140 Alternative Lender deals, which represents a 29% decrease in the number of deals from H1 2019.
Our Debt Advisory team has been in active dialogue with the leading European Alternative Lenders to set up a quarterly database, which monitors the primary European deal activity involving these lenders. 60 alternative debt funds currently participate in the Deloitte Alternative Lender Deal Tracker and the results are released to interested parties on a quarterly basis in a public version of the tracker.
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- European deal activity continues a downward trend for the second consecutive quarter, with 58% fewer deals year-to-date compared to last year
- In Q1 we saw the highest first quarter deal volumes on record, with 12.2% more deals than in Q1-19. In Q2, the effect of the pandemic on deal volume quickly became apparent, with only 48 deals completed, a 58.3% decline from Q2-19 and the lowest number of deals completed in any single quarter since Q2-14
- Whilst the onset of summer and relaxing of restrictions across the continent resulted in a 30% increase in Q3 compared to Q2, a total of 62 deals represented a 60% decline from the 156 deals seen in Q3-19
Focus on COVID-19 impacted Q2 and Q3-20 vs Q2 and Q3-19
- Looking at the period impacted by the pandemic, the industries with the largest absolute decline in deal activity were Business, Infrastructure & Professional Services, followed closely by TMT, which saw declines of 38 deals (67%) and 31 deals (54%) respectively. Healthcare and Financial Services proved more resilient, with only 20 (43%) and 17 (35%) fewer deals respectively.
- On an absolute basis, the UK saw the largest decline in deal volume across Europe, with 49 (57%) fewer deals, followed closely by France, with 45 (69%) fewer deals than the same period in 2019. Comparatively, Germany’s 39% (12 deals) decline in deal volumes has made it one of the more resilient regions. This resilience is attributed to the country’s low historical deal activity in retail, leisure and real estate, and sustained activity in TMT and Healthcare throughout the pandemic.
- Dividend recaps saw the largest decline in volumes, with only 2 deals in Q2 and Q3-2020, down from 19 deals in the same period in 2019, an 89% decline. Bolt on M&A and LBOs declined by 39 deals (59%) and 51 deals (50%) respectively, while refinancings declined by 37 deals (66%).
- The road ahead remains unclear, with many European countries entering into fresh lockdowns post summer after a resurgence in COVID-19. The positive developments around a vaccine have given a much-needed boost to the economic outlook, but is unlikely to have a positive impact on the direct lending market until Q1-21