UK sponsor-backed financing activity saw an uptick in the final quarter of 2024, driven by improving debt conditions and increasing M&A activity, according to global investment bank Houlihan Lokey’s data.
With 71 transactions completed during the period, the report found a 51% increase in UK mid-cap deals compared to Q3 2024 (47 transactions). On an annual basis, 223 deals were closed in 2024, a 13% rise from 198 in 2023, underscoring a sustained resurgence in debt market activity. However, despite this growth, volumes remain below the record highs of 252 deals in 2021 and 232 in 2022.
The data also highlighted the continued dominance of credit funds in the UK lending market, accounting for 70% of 2024 transactions. This marked a reversal from last year, according to the data, when banks expanded their market share, completing 32% of deals in FY23 versus the 30% they hold this year. The trend highlighted a renewed appetite from credit funds, which, according to the data provider, have regained confidence and strengthened their market position following a challenging 2023.
UK debt market softens in Q3 as credit funds dominate
New leveraged buyout (LBO) financings remained the primary driver of UK deal activity, accounting for 40% of deal volume in 2024—reflecting a rebound in M&A activity compared to the previous year. Add-on financings comprised 34% of total deals, while refinancings accounted for 26% of transactions. Improving debt market conditions are expected to drive an increase in refinancing activity in the coming quarters as borrowers look to take advantage of greater capital availability.
Patrick Schoennagel, managing director in Houlihan Lokey’s Capital Markets Group and head of sponsor finance, Europe, commented: “The sustained resurgence in UK sponsor-backed financing activity demonstrated throughout 2024 signals a recalibration of market dynamics, characterised by improving credit conditions and a steady rebound in M&A activity. While overall deal volumes remain below prior peaks, sentiment in the UK debt markets is positive for 2025, underpinned by strong liquidity and an appetite, particularly from private credit funds, to deploy capital and finance much-needed growth in the UK.”
