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Highest ever number of European non-bank deals recorded in Q4 2020, ending a subdued year

09 April 2021

- 155 direct lender deals recorded in Q4 2020
- 232 direct lender deals in H2 2020, making 385 for the whole of 2020

Non-bank or direct lending recorded the highest number of deals ever in the final quarter of 2020, according to Deloitte’s latest Alternative Lender Deal Tracker. Deal count had dramatically slowed earlier in 2020 resulting in an overall decrease of 25% in the annual total of 385 deals, compared to 2019’s total of 512 deals. Direct lenders consist of a wide range of non-bank institutions that lend directly into corporates at senior secured levels of the capital structure.

The UK still led the European market, with 143 deals in 2020, 91 of which fell in the second half of 2020.

By sector, technology, media & telecommunications (TMT), professional, and financial services continued to dominate the direct lending market in the second half of 2020, accounting for over 60% of European deals in that period.

Robert Connold, head of alternative lending in debt advisory at Deloitte commented: “Non-cyclical sectors such as professional services and TMT are being viewed as a safe haven for the direct lenders to deploy their cash. Meanwhile ongoing uncertainty presents further opportunities for this market which is typically less risk averse than traditional lenders. That said, even if a sector is seen as a safe haven the direct lenders continue to require robust due diligence.”

Dave Sharman, a partner leading value creation services at Deloitte added: “We have seen an increase in borrowers across all sectors getting themselves ‘match fit’ ahead of a refinancing event, potentially via these lenders.”

Analysing last year’s deals by purpose - growth capital deals saw the biggest decline in percentage volume in the second half of 2020 compared to the same period in 2019, of 53%. The second-biggest fall was in refinancings with 43% fewer deals, followed by dividend recaps with 23%, leveraged buyouts with 22%, and bolt-on M&A with 13% fewer.

Connold concluded: “While the final quarter of 2020 was a strong one, we expect activity to drop off somewhat for the first quarter of 2021. However, there is no denying the momentum that is now powering the non-bank lending market, especially with so much dry powder or unallocated capital yet to be deployed.”

Ends

About the research

Deloitte’s Alternative Lender Deal Tracker covers 63 major alternative lenders across Europe, covering the period up until end of Dec 2020.

Direct lenders provide structural flexibility across a number of terms including access to non-amortising, bullets loans and higher leverage in return for a higher yield (e.g. target margin of 6-8% over Libor.

About Deloitte

In this press release references to “Deloitte” are references to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”) a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity.

Please see deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms.

Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.

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

For more information, please visit www.deloitte.co.uk

Member of Deloitte Touche Tohmatsu Limited

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