The Deloitte Alternative Lender Deal Tracker covers 47 leading Alternative Lenders, with whom we track primary mid-market deals across Europe.

This twelfth issue covers data for the second quarter of 2016 that closed with 67 deals completing, representing a 3% increase in deal flow in comparison with the previous year (Year-on-Year).

Key highlights

  • The number of deals covered has increased to 784 transactions over the past 15 quarters
  • This issue covers data for the second quarter of 2016 that closed with 67 deals completing with a combined value of approximately €3.5bn, representing a 3% increase in deal flow in comparison with the previous year (Year-on-Year)
  • Increasingly, we see the direct lending market becoming an attractive option for larger debt transactions. Despite market uncertainty, in this quarter we have seen the largest direct lending transaction completed to date, overcoming the $1bn watermark for a unitranche debt transaction in the US.

Themes influencing alternative lending

Brexit bounce-back

According to the latest Alternative Lender Deal Tracker, which covers data for the second quarter of 2016, the market experienced significant volatility immediately after the Brexit vote, with the depreciation of Sterling, a devaluation of equities and restraint in the debt markets. However, in the weeks following the vote, negative sentiment has largely proven to be short lived and financial markets have staged a remarkable comeback, with many reaching levels higher than before the crisis. Current deal numbers show continued growth.

Although market uncertainty is causing some to hit the pause button on M&A and investment, or at least hover over it as they await politicians to deliver clarity on Brexit, the domestic mid-market has remained robust and volumes are largely consistent with prior years. Deals are still getting done, and attractive, strategically important acquisitions are still demanding premium valuations.

Overcoming the $1bn threshold

From starting as a mid-market lending product, Direct Lending continues to evolve and now often competes with traditional debt capital market solutions as deal sizes continue to increase. In 2016, we have seen the largest Direct Lending transactions completed to date, overcoming the $1bn threshold for a unitranche debt transaction in the US.
Ares announced in June 2016 that it is supporting Thoma Bravo's buyout of QLIK Technologies with a $1.075bn unitranche. At the same time, here in Europe GSO underwrote the €625m unitranche for the merger of Polynt with Reichhold Inc. Increasingly, we see the Direct Lending market becoming an attractive option for larger debt transactions.

Background

The Alternative Lender community is becoming increasingly relevant for European mid-market companies. In 2013 we saw activity strengthening from Alternative Lenders, in particular with the success of the unitranche product. As expected, this trend continued through 2014 and 2015 and into 2016.

Our Debt Advisory team has been in active dialogue with the leading European Alternative Lenders to set up a quarterly database, which monitors the primary European mid-market deal activity involving these lenders. 47 alternative debt funds currently participate in the Deloitte Alternative Lender Deal Tracker and the results are released to interested parties on a quarterly basis in a public version of the tracker.

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