Last year 785 direct lending deals were completed – an increase of 89% from 415 deals in 2020 – the highest number since Deloitte began tracking private debt markets in 2012.
According to the latest Alternative Lender Deal Tracker, leveraged buyouts continue to be the “main driver” of deal activity, accounting for 41% of deals across 2021. Meanwhile bolt-on M&A and Refinancing were also identified as motivations for 24% and 21% of deals respectively in the final quarter of 2021.
Deloitte said the UK remains the “epicentre” for European direct lending, accounting for 35% of all deals in 2021. This is down slightly on the 37% observed in 2020, reflecting “warmer attitudes” from continental European borrowers to non-bank lending solutions.
In the UK alone, business, infrastructure and professional services regained top spot for deal activity in 2021 accounting for 29% of transactions, while TMT took a 20% share. Direct lenders consist of a wide range of non-bank institutions that lend directly into corporates at senior secured levels of the capital structure.
However, technology, media and telecommunications (TMT) remained the “most active industry” for direct lending across Europe, accounting for nearly a quarter of deals across 2021.
The firm concluded the total number of alternative lending deals in Europe for the past ten years has now reached 3,534.
Robert Connold, head of alternative lending in debt advisory at Deloitte, said: “The past 10 years have seen the non-bank lenders fundamentally reshape the market. Capital continues to be deployed at record rates into the private debt market, and strong borrower appetite for new debt looks here to stay.
“2021 was a remarkable year for direct lending, boosted by deployment of dry capital built up in 2020. The extraordinary number of transactions came off the back of a roaring M&A landscape – despite concerns over wider economic recovery and the prospect of rate hikes in early 2022.”
He added: “Looking ahead for the rest of the year, I would expect prevailing inflationary, interest rate and supply chain concerns, coupled with the consequences of Russia’s invasion of Ukraine to drive volatility in the number of the deals completed.”