Number of debt transactions with alternative lenders up 56% year on year (for H1) as their audience widens
5 October 2015
Non-bank lenders recorded 111 deals in the UK and mainland Europe during the first half of 2015, up 56% on the 71 deals for the same period last year. Of the 111 deals, half (56) 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 lending market has expanded at an astonishing scale and speed; despite recent equity market volatility and a slowdown in Chinese economic growth that have impacted the bond markets. Alternative lenders have continued to deploy capital across a wider range of transactions, with market liquidity driving flexibility on terms and structures that would not have been achieved last year.
“Looking ahead, we expect the US and European markets to diverge. In the US, when interest rates go up we anticipate some market tightening in 2016. Conversely, in Europe, with the ECB continuing its quantitative easing programme, we see market conditions remaining very strong for borrowers.”
In the past twelve months, 19% of Alternative Lender transactions were concluded with family and founder owned businesses without a majority private equity owner, such as with TM Lewin. This underscores the strong expansion of alternative lenders into the private company market.
Floris Hovingh, head of alternative lender coverage at Deloitte, commented: “The alternative lenders are rapidly becoming an asset class of their own; having begun life primarily targeting private equity owned businesses. Alternative lenders can offer businesses the ability to finance acquisitions or expansion that would have been out of reach beforehand, without raising equity finance.”
Additionally, according to the tracker, 59% of transactions involved M&A. Despite recent equity market volatility (in H1 2015) European median leveraged buyout transaction EV multiples (EV/EBITDA) have remained at above 9x, very close to the 2014 record highs of 10x. Burgin comments: “With US corporates now holding record levels of cash overseas, the stronger US dollar will be a major factor stimulating UK M&A activity over the next six months as US purchasers perceive UK acquisitions offering greater value.”
While the UK remains the leading country for alternative lender deals, their take-up is spreading across France (21.6% of deals) and Germany (10.8%) followed by Spain (3.6%) for H1.
Hovingh concluded: “European private equity is rapidly expanding its use of alternative lenders, recognising that their flexibility and ability to take and hold larger loans (than banks) can be a game changer in a competitive M&A process. In short, the versatility that alternative lenders can provide is the key to their success.”
Notes to editors
Deloitte’s Alternative Lender Deal Tracker compiles data and information on a confidential basis from over 37 subscribing, leading alternative lenders. The deal tracker covers a total of 475 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.
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.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.