Permira Credit sees pick-up in market activity
European private credit market activity picked up in the third quarter as investors gained more confidence in the economy, Permira Credit research has suggested.
The alternative asset manager’s third-quarter update said that a recovery is underway across major advanced European economies, with central banks lowering rates as inflation returns close to target.
The firm said that this improvement in the macroeconomic backdrop has had a knock-on effect on the private credit market, as investors have gained more confidence that assets will achieve the valuations they are looking for.
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It cited Capital Economics and PitchBook data which found that new loan volumes in Europe totaled €81bn (£62.4bn) in the first three quarters of 2024, making it the busiest period for loans since the first three quarters of 2021.
“Deal volumes should continue to grow from here,” the report said.
“With lower levels of activity in 2023, European-focused buyout funds still have vast amounts of capital waiting to be deployed. But more importantly, diminishing uncertainty around the outlook for growth across Europe will be a larger driver of activity.
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“While further policy rate cuts should help spur sales processes, increased dealmaking has more to do with expectations for economic performance over the next few years. Investors need to be confident that the businesses they are buying and selling have the potential to grow. Investors are still waiting to see what’s going to happen – including around the outcome of the US election in November and the conflict in the Middle East – before there’s a big catalyst of activity. The more confidence there is that economies are not going to fall back into recessions, the more confidence investors will have to sell businesses and achieve valuations that they are looking for.”
Permira Credit highlighted particular sweet spots in Europe’s private credit market. It noted opportunities in the Nordic region, which is home to many strong mid-market companies in resilient sectors such as technology, business services and healthcare.
Read more: Private credit demand growing faster than inflows
However, it expects the UK to remain the dominant market in Europe for private credit, thanks to its legal framework and focus on non-cyclical services.
The firm also sees opportunities in Germany and France, despite macroeconomic headwinds.
