The European deal market’s fast rebound

It was a challenging year for new transactions in the region which nonetheless went out with a bang.

It was truly a remarkable year for private debt deals in Europe, as illustrated by a new survey which shows the rapid progression from slump to boom.

The latest figures from Deloitte’s Alternative Lender Deal Tracker, which gathers data on European mid-market deals, show there were 155 deals in Q4 2020, a fourth-quarter record and 2 percent higher than the previous record set in Q4 2019.

If it seems hard to believe that such a level of deal activity could be reached after one of the most traumatic years in modern history, it should also be noted that the second and third quarters of 2020 were very different – scarred by the outbreak of the pandemic and widespread economic shutdowns, which saw many transactions canned or delayed.

Indeed, the second quarter saw just 52 deals completed, the lowest figure in a single quarter since Q2 2014. A small recovery in the third quarter saw 77 deals done, but this was less than half the 159 seen in Q3 2019.

All the more remarkable, then, that the fourth quarter took on record-breaking proportions. Experiences in European countries were markedly different however. In the UK, 2020 turned out to be very similar to the previous year, with deal volumes down just 3 percent from H2 2019 to H1 2020. Germany saw a larger, but still relatively modest decline.

But in hard-hit France, the fall over the same period was 57 percent compared with the European average of 26 percent. France has traditionally been a larger private debt market than Germany but it was notable that, in both the third and fourth quarters of last year, Germany had the higher transaction total.

So, following such a strong fourth quarter, should it be assumed that Europe’s private debt deal market is set for a period of growth? Not necessarily, according to the report. It concluded that the ‘mini-boom’ may simply have reflected pent-up demand from the previous three quarters and that relying on a return to business as usual may be a little optimistic.