There was a sharp uptick in UK sponsor-backed financing activity in the fourth quarter of 2024, driven by improving debt conditions and increasing M&A activity.

According to the latest Houlihan Lokey MidCapMonitor, credit funds continue to dominate the market, providing financing for the vast majority of these transactions.

Credit funds represented 70 per cent of all transactions across 2024, as credit fund managers took market share away from banks in the UK lending space.

Read more: Private debt fundraising remains resilient despite market headwinds

New leveraged buyout financings remained the dominant driver of UK deal activity, accounting for 40 per cent of deal volume in 2024.

71 transactions were completed during the fourth quarter of the year, representing a 51 per cent increase in UK mid-cap deals compared to the previous quarter.

On an annual basis, 223 deals were closed in 2024, a 13 per cent rise from 198 in 2023. However, despite this growth, volumes remain below the record highs of 252 deals in 2021 and 232 in 2022.

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“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,” said Patrick Schoennagel, managing director in Houlihan Lokey’s capital markets group and head of sponsor finance, Europe.

“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.”

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