UK sponsor-backed mid-market financing exercise elevated within the first quarter of 2024, with debt funds financing the overwhelming majority of offers.
New information from funding financial institution Houlihan Lokey confirmed that 47 transactions had been accomplished in the course of the interval, an 18 per cent improve from 41 transactions within the first quarter of final 12 months.
Nevertheless, there was an eight per cent quarter-on-quarter decline, reflecting the historically low-volume first quarter.
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Houlihan Lokey’s MidCapMonitor confirmed that debt funds performed a dominant function in financing these offers, equating to 77 per cent of accomplished transactions within the first quarter, whereas banks contributed to simply 23 per cent.
Debt funds’ share of transactions has elevated considerably from 48 per cent within the first quarter of 2023, which Houlihan Lokey attributed to funds coming underneath growing stress to deploy capital after a gradual 2023.
The report additionally famous a big rise in new LBO exercise, accounting for nearly half (48 per cent) of all financings within the first quarter, a four-year excessive.
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“We have now noticed a powerful stage of exercise within the UK this quarter in comparison with that of final 12 months, supported by the extent of M&A exercise and improved debt market situations, which is an encouraging signal for the remainder of 2024,” mentioned Charles Martin, director in Houlihan Lokey’s Capital Markets Group.
Patrick Schoennagel, managing director and head of sponsor finance, Europe in Houlihan Lokey’s Capital Markets Group mentioned that the info suggests an increase in deal stream exercise because the 12 months progresses.
“As we look forward to Q2 2024, a promising M&A pipeline suggests a possible resurgence in deal stream exercise within the second half of the 12 months, bolstered additional by anticipated BoE rate of interest cuts in the summertime,” he mentioned.
“Regardless of a cautious strategy to leverage multiples, each banks and debt funds show openness to high quality property, portray a constructive outlook for the rest of the 12 months.”
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