Analysis

Deloitte Alternative Lender Deal Tracker

Focussed on primary deal flow in the European mid-market

Key highlights in this edition

  • Non-bank lenders recorded 195 deals in the UK and mainland Europe in 2014, up 43% on the 136 deals for 2013.
  • With strong year on year growth, 2015 could offer a bumper time for alternative lenders, now firmly established alongside mainstream banks. With increased confidence in the markets and wider funding options, we are seeing a pick-up in M&A activity.
  • For just over half (51%) of transactions M&A was given as the reason for the deal, overtaking refinancing, when considering deals since the tracker began at end of 2012.
  • 2015 is a great time to be a borrower, as the sheer size and diversity of the liquidity targeting the mid-market has resulted in downward pressure on pricing and the emergence of innovative new structures.
  • The deal tracker also found that 62% of deals (121 deals) were conducted in mainland Europe in 2014, compared to 38% of deals completed in the UK (74 deals). There is increasing activity in France, Germany and Southern Europe. However, mainland Europe may not embrace direct lenders with the same lightning speed as the UK due to the larger share of family or founder owned businesses, who are intrinsically more risk averse than private equity.
  • There remain ample opportunities for growth in the UK. Smaller mid-market private equity houses still using high street banks are likely to consider direct lending as the market moves down in deal size.
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Background

The alternative lender community is becoming increasingly relevant for European mid-market companies.  In 2013, we saw activity strengthening from alternative lenders, in particular with the success of the unitranche product.  As expected, this trend has continued through 2014, against the backdrop of a strongly improving economic outlook.

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 mid-market deal activity (up to €350m of debt) involving these lenders. More than 30 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.

Previous editions

Deloitte Alternative Lender Deal Tracker – December 2014
Deloitte Alternative Lender Deal Tracker – September 2014
Deloitte Alternative Lender Deal Tracker – May 2014
Deloitte Alternative Lender Deal Tracker – February 2014
Deloitte Alternative Lender Deal Tracker – November 2013

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