Pitchbook | European Banks Claw Back Mid-market Share as Funds Chase Big Deals

Aug 2023

Originally posted by Pitchbook on July 28, 2023.

The private debt market has grown exponentially over the past few years. In the current economic environment with rising debt costs and a declining leverage appetite, sponsors are noticing a more competitive offering from bank clubs. Bank lending, which had decreased during the private credit market boom, is coming back strong as private credit funds are becoming expensive and more selective due to higher margins and base rates.

Private credit funds haven’t slowed down, but the funds have directed their attention to filling funding gaps in the upper part of the market.

Sophie Pollitt, Director in Lincoln’s Capital Advisory Group, commented, “As mid-market credit firms raise larger funds, their ticket sizes are increasing, and they are therefore looking to do larger deals, as smaller deals involve the same amount of work (if not more), and would require a greater volume to deploy the fund. Due to this, more and more fund managers have shifted their focus to swallow large deals either bilaterally or as part of a club.”

This change has caused private credit funds to be less reliable as they are more selective in the traditional middle market except for core sectors such as healthcare, business services, industrial technology, software, etc. Private credit funds are also being more cautious as they have seen an increase in covenant breaches in their portfolios.

Banks have an increased risk appetite to underwrite deals from their own books. Many of these deals will likely have some sort of debt component.

One of the largest bank-funded deals this year in Italy was the refinancing of Bubbles Bidco, which Lincoln International advised on. The financing totaled €495 million and consisted of a €440 million term loan and a €55 million revolving credit facility.

While the market is taking a cautious approach to leverage and is looking for solutions for debt serviceability, the gap between fund and bank structures is closing.

Sophie added, “A bank club is looking more favorable in today’s market as borrowers have become increasingly focused on the cost of debt.”

Banks also are realizing they can be more competitive because certain components are geared in their favor.

“We are definitely having more bank clubs lined up as potential options on deals now, which may have been just a fund play last year, Sophie said.

View additional insights in the original article.


  • Sophie Pollitt, Director in Lincoln’s Capital Advisory Group, recently shared with Pitchbook that bank lending is coming back strong and is providing borrowers with another funding option.

  • Sign up to receive Lincoln's perspectives


Meet Professionals with Complementary Expertise

Related Perspectives

Lincoln International adds Carlos Candil as Managing Director

Lincoln International, a global investment banking advisory firm, is pleased to announce that Carlos Candil has joined the London office as a Managing Director in the firm’s Energy, Power &… Read More

“Leader to Leader” Series

The Leader to Leader video series turns up the dial on rich conversations with prominent leaders – from business owners and entrepreneurs to investors and CEOs – highlighting their stories… Read More

Dividend Recapitalizations: Hit the Market Before M&A Activity Rebounds

Private debt funds have increased their dry power to $506.2 billion and acquisition-related private debt volume has reached all-time lows. As a result, private debt investors have become more aggressive… Read More

Citywire | PE Firm Permira Seeks to Up Evelyn’s Debt to Pay Shareholder Dividends

Originally posted by Citywire on February 15, 2024. The majority shareholder of Permira, Evelyn, wants to increase its debt through a dividend recapitalization to pay itself and other shareholders. Private… Read More