As we wrap up our series on direct lending in Europe, let’s examine the supply/demand dynamic we expect to drive deal activity for providers and users of private debt.

As our Chart of the Week shows, European funds have almost $30 billion in dry powder available to support loans. On the supply side, private equity firms have $140 billion available to deploy for investments. That would seem to give direct lenders plenty of opportunity to put money to work.

But the total annual volume of new issue leveraged loans in Europe is a fraction of the activity in the US. Last year, according to S&P Capital IQ, there was just under $45 billion in new institutional European deals. That compares to over $257 billion in the US for the same period, or almost six times as much.

Plus, as we’ve discussed, banks in Europe have been aggressive about defending their market share, particularly with relationship sponsors. That has pushed direct lenders to offer unitranche financings as well as more risky lower-in-the-capital stack solutions. While volume information on this activity is not readily available, Preqin estimates that 233 European private equity deals have been closed in the past twelve months with a total valuation of $90 billion.