Private debt deal volumes in Europe rallied in the fourth quarter of last year, with particular pick-up in UK activity.
The latest Deloitte private debt deal tracker found that 189 deals were completed in the fourth quarter, a 34 per cent quarter-on-quarter increase and the second-highest quarter by volume since the second half of 2021.
“As previously predicted, these may be early indications of a more promising start to 2024 – partly due to improved investor sentiment around stabilising market conditions, but also further compounded by private equity sponsors looking to exit investments and recycle capital to LPs,” Deloitte said.
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The report also saw a recovery in activity in the UK market, where 58 deals were completed in the fourth quarter.
In comparison, only 100 deals were completed across the first three quarters of the year collectively.
The analysis showed that the UK made up almost a third of deal volumes in the fourth quarter for the first time, which Deloitte said reversed a declining trend.
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“The increase in relative prevalence of deal activity in the UK has come at the expense of flat growth in European regions such as Germany, Ireland and Benelux – as opposed to France (28 per cent) where volumes have shown significant resilience throughout 2023,” Deloitte added.
“Despite tentative signs of improved investor and lender sentiment throughout the UK market, it is important to note that 2023 was a strenuous year for deal-making, especially when compared with 2021 and 2022 volumes.”
Global trends
The Deloitte report showed that direct lending fundraising globally fell to $9.4bn (£7.4bn) in the fourth quarter of 2023, down from $43.5bn during a “strong” third quarter.
Despite the weak end to the year, 2023 was the third best year on record for direct lending fundraising.
North America continues to remain the preferred region for investors, accounting for around 68 per cent of 2023 fundraising across direct lending.
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“Investors remain keen to continue sticking with direct lending, as well as wider private debt strategies, underpinned by the relative reliability associated with its periodic income stream,” Deloitte said.
“Indeed, 90 per cent of investors find private debt strategies continue to meet their returns expectations; 45 per cent of investors expect it to perform better in the next 12 months.”
