Study: European direct lending grows over 100% y-o-y

A record number of deals were signed by alternative lenders in the third quarter, according to Deloitte

Deloitte’s Alternative Lender Deal Tracker reported an increase of 109 percent year-on-year in the number of deals done in the third quarter, up to 73 from 35 in the same period of 2013. The figure is also the largest number of deals executed by non-bank lenders in Europe, as recorded by the advisory firm.

The Deloitte deal tracker records lending activity in the European mid-market by alternative lenders.

“The outlook for alternative lenders is strong for 2015, based on significant capital raised this year. Other factors such as changing investor appetite in a low-yield environment and the improving economic activity in the UK and US economies will only boost this activity,” said Fenton Burgin, head of UK debt advisory at Deloitte in a statement.

The deal tracker also confirms that the geographic spread of executed transactions is diversifying. The UK is the jurisdiction where non-bank lenders are strongest in terms of doing deals but the UK’s share of third quarter deals fell to 37 percent from 71 percent last year, according to Deloitte.

In the second quarter of 2014, the tracker reported that the UK was the source of 48 percent of deals, with France second at 25 percent and Germany third at 12 percent, as reported by PEI's sister title Private Debt Investor.

Deloitte also estimates that European direct lending funds currently have €50 billion of committed capital, including dry powder and capital deployed, and are seeking to raise another €15 billion over the next 12 months.

M&A activity remains the strongest driver of non-bank lending, according to the tracker.

“Alternative lenders are increasingly unlocking M&A transactions for management/founder owned businesses looking for a viable alternative to equity when requiring growth capital,” said Floris Hovingh, head of alternative lender coverage at Deloitte, adding that some non-bank lenders are starting to team up on larger transactions.