Sponsor-backed financing exercise elevated within the UK in the course of the second quarter of the yr, due to a marked rise in leveraged buyout (LBO) financings, new analysis has revealed.
In line with knowledge from Houlihan Lokey’s newest MidCapMonitor, LBO financings accounted for nearly half of al transactions within the first half of 2024, in contrast with simply 29 per cent throughout the identical interval in 2023.
In the meantime, debt funds performed a dominant function in lending, accounting for the overwhelming majority of offers.
“Enhancing market situations have laid a stable basis for sustained momentum in financing exercise that’s marked by a lower in pricing and enhance in leverage attributable to heightened liquidity and competitors,” stated Patrick Schoennagel, managing director in Houlihan Lokey’s capital markets group and head of sponsor finance, Europe.
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“The numerous uptick in LBO exercise emerges as a very encouraging sign of market optimism and a mirrored image of the willingness of debt funds to deploy capital following a stoop in exercise in 2023.
“Looking forward to the second half of 2024, a strong M&A pipeline alerts the potential for a continued resurgence in deal exercise, a development that may solely be bolstered ought to the Financial institution of England lower rates of interest once more later this yr”.
Houlihan Lokey’s MidCapMonitor recorded 55 accomplished transactions in the course of the second quarter of this yr, representing a two per cent enhance year-on-year and a 20 per cent rise quarter-on-quarter. This means that UK deal circulation exercise has picked up and debt market situations are enhancing, the funding financial institution stated.
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77 per cent of those offers had been financed by debt, whereas banks contributed just below 1 / 4 (23 per cent).
The share of transactions by debt funds surged by 47 per cent in the course of the first half of the yr, in comparison with the identical interval final yr, whereas the variety of financial institution transactions decreased by 44 per cent.
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