Next up is the second of our five themes for the year ahead: “A busier market: Providers of creative and flexible capital solutions will find favor.” 

As a brightening macro picture releases pent-up demand for private capital dealmaking – there was $2.6 trillion of dry powder among global buyout and venture capital firms waiting in the wings at the end of H1 2024, per S&P Global – issuers and private equity firms will seek bespoke financings.

Private debt has consistently proven its capacity to achieve this. Over the past decade direct lending, for example, has taken a greater share of LBO acquisition finance. By the end of the first three quarters of 2024, it was the debt funding source of choice in 92% of US LBO deals, per LSEG LPC (See our Chart of the Week).

Institutional investors are planning to increase their commitments to private capital. A recent Private Debt Investor’s survey study found that 57% of LPs are expecting to invest more in private debt during 2025 than last year, the highest proportion since 2020. Our own survey tells a similar story: 65% of investors are planning to increase allocations to private debt this year. With more capital flowing to private debt, high quality issuers and sponsors should have plenty of options.