Q3 deal activity stalls amidst challenging macro-economic headwinds
The third quarter of 2022 saw 1931 deals completed, representing a 15.7% year-on-year decrease when compared with the same quarter in 2021 (229), and a 11.1%1 decrease compared to the 217 executed in Q2 2022. Despite this gradual slowdown, induced by adverse market conditions, 2022 deal volumes (617 year-to-date) are on track to exceed those observed in 2021 (791 total), in large, due to the volume of opportunities arising earlier in the year off the back of dislocated public debt markets.

UK deal flow remains stagnant as lenders continue to diversify their investments into other European geographies
The UK accounted for only 28.5% of deals in Q3, its lowest volume (by percentage) since deal tracker inception (previous lows of 29% in Q1 2022 and Q2 2022). In line with the wider slowdown in deal activity, UK activity shrunk by 12.7% from 63 to 55 deals. France activity, on the other hand, maintained strong momentum moving into H2 2022, accounting for 26% of quarterly deal volumes (third successive quarter in excess of 24%). On a year-to-date basis, France’s deal volumes have already eclipsed totals observed across the entire calendar year of 2021. Beyond the UK, France and Germany, other European geographies are on track to record yearly deal volumes in excess of 250, the first time on record in the deal tracker’s history.

Lenders continue to target TMT, Business Services and Healthcare – a trend which has grown to become increasingly stable and predictable over time
Quality assets within TMT, Business, Infrastructure & Professional Services and Healthcare & Life Sciences sectors remain popular, accounting for 25%, 20% and 17% of deals in Q3 respectively. Since 2020, there has been a remarkable level of consistency in this trend, with the three sectors accounting for between 59% and 66% of all deals (as measured on a quarterly basis). In the UK alone, Business, Infrastructure & Professional Services, Financial Services and Healthcare & Life Sciences tapered off slightly in Q3 (from 63% to 45% combined), offset in part by noteworthy increases in Manufacturing (from < 1% to 5%), TMT (from 21% to 33%) and Energy, Resources and Industrials (from 2% to 7%).

Acquisition-related financing remains strong, even amidst a backdrop of surging inflation, rising interest rates and broader socio-economic uncertainty
Leveraged Buyouts and Bolt-On M&A continue to account for the majority of deals, responsible for 75% of those completed in Q3 (78% of UK deals and 74% of deals across other European geographies). This reflects the highest proportion of acquisition-related deals in deal tracker history (on a quarterly basis). Refinancing-motivated deals fell from 16% of deals in Q1 2022 and Q2 2022 to 12% in Q3 2022, reflecting a continued long-term decline in their proportional representation.

1 On a like-for-like basis (i.e., by adjusting the deal count to reflect the same population of Lender respondents from the immediate prior quarter), these figures would respectively be: 181 and 16.6%.