Doubling the number of mid-market deals in the third quarter 2013, private equity firms have ramped up their lending for buyouts since the summer.
Private debt funds — or non-bank lenders, which raise money from investors for deals — completed a total of 24 mid-market deals in the third quarter of the year, compared with 11 deals in the second quarter and seven in the first quarter, according to research by Deloitte released on Tuesday.
A total of 55 mid-market deals were completed by non-bank lenders over the past 12 months, with nearly 85% of those deals involving a private equity sponsor.
Investors have been piling into the non-bank lending space in the past year as they look for better yields amid low interest rates. Earlier this week, Financial News reported that the proportion of debt that private equity firms are using to fund buyout deals is at its highest level since 2007, driven by the easy availability of cheap credit from banks as well as the arrival of non-bank lenders on the scene.
“We’re now seeing alternative [non-bank] lenders become increasingly mainstream in mid-market buyouts,” said Fenton Burgin, head of UK debt advisory at Deloitte. “Sponsors are finding the combination of greater flexibility, higher speed of doing deals and large hold levels a compelling proposition.”
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