International Debt Finance Intelligence Report 2025
What did 2024 deliver?
Mixed results. The M&A and private equity market faced challenges due to ongoing geopolitical instability around the world, plus 2024 was "the year of the election". Add in the higher for longer inflationary pressures and interest rates, and perhaps it was inevitable that market participants would be cautious.
Generally, while M&A activity remained subdued in the first three quarters of 2024, we saw a bit of a year-end frenzy in the final quarter. The borrowing/lending market was overall positive, but selective. With the elections in the rear-view mirror (although it's accepted that the full impact of some of these have yet to be seen), and hopes of inflation and interest rates reducing, the indicators for a pick-up in M&A deal activity for 2025 seem as positive as they've been for some time.
Our International Debt Finance Intelligence Report 2025 delivers expanded content on topics including:
- Market evolution – a look back at 2024
- Deal economics
- Venture and growth: Ready, steady, grow
- Understanding delayed draw term loans
- Five key trends in mid-market sustainability-linked loans
- Regions under the spotlight: Norway, Sweden, South Africa and Australia
- Convergence in credit? Banks and private credit compared
- Let's talk: Restructuring activity
- Let's talk: Infrastructure finance
- Innovative financing solutions: PIK Holdco financings
- Fund finance: Beyond traditional sublines
- Trading out: Transferability provisions in focus
- What lies ahead?
Market evolution – a look back at 2024
Club deals in a minority
In 2024, we've seen sponsored and non-sponsored borrowers have been predominantly using solo traditional bank lenders (34% of deals) and unitranche structures where the majority of the debt is provided by an alternative lender (32% of deals). What's clear from the data is that club deals are in a minority, indicating that sponsors and corporate borrowers are favouring an exclusive lending relationship.
“We've observed fewer club deals in France over the past few years….however, there was a notable increase in club deals in Q3 2024, with even more in Q4.”
Market share swings in favour of credit funds
Despite the continued challenges of a higher interest rate environment, across our UK and European deals we've seen sponsors and borrowers turn to alternative lenders in 2024 for deals with a debt size over EUR100 million.
“Private credit funds are increasingly active…, offering tailored solutions and stepping in where traditional lenders retreat due to risk aversion or capital constraints.”
Deal economics
PIK toggles
Our data shows us that the prevalence of PIK toggle across our UK and European unitranche deals has dipped slightly in 2024, although it's clearly still a common tool for sponsors and borrowers to ease cashflow pressures.
If PIK elections are made, our PIK toggle data indicates that the amounts to be refinanced in the coming years has the potential to be significantly inflated. Of our UK and European unitranche deals that include PIK toggle flexibilities, the majority (35% of deals) are due to mature in 2030.
Maturity wall: 2021-2024 unitranche deals with PIK toggles
"Sponsors achieve funding certainty for their investment strategy implementation requirements, and lenders deploy additional capital into an existing credit. One hand washes the other."
Max Mayer, Partner, The Netherlands
Convergence in credit? Banks and private credit compared
Exceptional items
A trend we've seen in 2024 has been the shift towards greater scrutiny and transparency in relation to exceptional items – being extraordinary, non-recurring and unusual costs, expenses and losses that may be added back to EBITDA. While sponsors are looking for maximum flexibility and creativity, lenders seek clarity and a clear focus on the exceptional nature of such cost items.
Exceptional items: 2024 sponsor-backed deals
So what sort of deals include this greater scrutiny?
- Lenders: traditional bank lenders and funds are using controls in equal measures, with 50% being bank-led deals and 50% fund deals.
- What are banks doing? While we have seen some jurisdictional difference, bank lenders have typically exercised greater control over the deals with a debt size of below EUR50 million. The majority of deals have been controlled by way of an exceptional items only cap; typically controlled by way of a soft-cap at 10% to 20% of EBITDA.
- What are funds doing? Funds have imposed controls over deals of all sizes – there is no one-size-fits-all and controls often depend on the fund lender as well as the sponsor. The majority of deals that do feature controlled exceptional items do so by including them in the total cap on synergies and the typical soft-cap is 20% of EBITDA.
What lies ahead?
"With large amounts of capital waiting to be deployed, it will be imperative that lenders continue to provide competitive terms to win mandates. Knowing what's market will be key."
Matt Christmas, Partner, UK
