Number of debt transactions with alternative lenders up 43% year on year in Q1 as M&A picks up

Non-bank lenders recorded 50 deals in the UK and mainland Europe in the first quarter of 2015, up 43% on the 35 deals last year. Of the 50 deals, 28 deals were in the UK, the highest number since the Alternative Lender Deal Tracker from Deloitte began.

Fenton Burgin, head of UK debt advisory at Deloitte, commented: “The alternative lenders continue their forward march, alongside the mainstream banks. We expect to see more M&A from private corporates fuelled by funding from Alternative Lenders. This relatively new type of debt financing is providing opportunities for privately owned companies accessing debt for larger scale acquisitions that were traditionally beyond their capability.”

According to the tracker, 33 of the 50 deals had M&A as the deal purpose in the first quarter, compared to 17 (of 35) this time last year. As M&A activity in the US hit an all-time monthly record in May, we expect that more US companies and PE sponsors will look to acquire assets in the improving European market.

The upper mid-market (from €300-500m of debt) is opening up for alternative lenders as they take up large single hold positions (up to €300m) in a directly arranged transaction between borrower and lender, higher than where banks would usually hold.

Floris Hovingh, head of alternative lender coverage at Deloitte commented: “This is likely to take Alternative Lenders to the next level as larger borrowers have a choice between a bespoke direct lending solution versus an off the peg capital markets product.

“Another innovation in the market is US style transactions with no maintenance covenants (triggers) reaching the shores of Europe, with a small number of direct lenders now offering this flexibility. The direct lending market has become a melting pot where products from different debt markets are fused together.”

End

Notes to editor

Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from over 36 subscribing, leading alternative lenders. The deal tracker covers a total of 354 transactions since the fourth quarter of 2012. Deloitte tracks primary mid-market deals across Europe with up to €350m of debt. On a quarterly basis, full data is provided to all subscribers and a summary report provided to market participants highlighting key market trends and developments.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte debt advisory provides independent advice to borrowers across the full spectrum of debt markets through our global network of 140 debt professionals in 30 countries. Deloitte debt advisory is the market leader for UK mid-market alternative lender transactions, having advised on over 20 alternative lender transactions in UK since 2012.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.