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Debt activity reported in this survey ramped up throughout the first half of 2024, back to levels observed in 2022. While interest rates/bond yields have remained high through H1 in general, rate reduction expectations, in combination with more stable forward-looking interest rate curves, have supported a slight pick-up in investor appetite to deploy capital, with more expected in H2.
These expectations have started to crystalise with recent cuts in both Europe and the UK, which should pave the way for increased deal activity and improved access to credit. Reignition of M&A and enhanced macro stability post-elections should continue to support this momentum, further driving LBO and add-on activity.
The 21st edition of the biannual AlixPartners' Mid-Market Debt Report covers more than 75 bank and non-bank lenders active in the UK and European mid-market (debt transactions valued up to €400m).
AT A GLANCE:
- Leveraged transactions increased by 25%, with both banks and funds increasing activity, although banks reversed the recent trend of losing market share to funds. Banks increased their share of leveraged transactions, participating in 46% of transactions in this report, up from an average of 32% over the last 3 years.
- Q1 started slowly from an M&A perspective, however momentum started to build in Q2. LBO and add-on activity recovered by 21% across the first half of 2024, in line with the general uptick in M&A activity. Sponsors have held onto assets longer than usual due to economic uncertainty and valuation divergence between buyers and sellers. This led to an increase in maturities with sponsors needing to refinance and defer exits, however, we expect that M&A activity should continue to build as these uncertainties ease.
28% of deal activity in H1 2023 involved super senior, IDF, and ABL facilities. However, this reduced to 22% in H1 2024, which is more in line with the levels reported in 2021 and 2022. This indicates that lenders' concerns about cash flows may have started to ease, albeit potentially with reduced debt capacity.
