Unitranche is now the majority UK mid-market structure
By 2023, unitranche — the debt-fund instrument — was the majority structure in UK private-debt deals, and debt funds wrote most of the UK's sponsored unitranche financings. The bank-comeback narrative of that year was real but partial, and the structural penetration held.
- Dated
- 12 October 2023
- Desk note
- Dated to the data
- Reading
- 6 min
Managing Director
Unitranche, the debt-fund instrument, is now the majority structure in UK private-debt deals, and in the sponsored mid-market debt funds — not banks — write most of the unitranche financings. That penetration had been building since at least 2020 and held through the rate shock of 2022–23. For a borrower whose process starts and ends with the high-street bank, the implication is uncomfortable: you are searching a shrinking part of the market.
How did debt funds get here?
The shift pre-dates 2023. Through the boom of 2021 and 2022, the Deloitte tracker recorded nearly 900 European private-debt deals in the trailing twelve months by Autumn 2022, a figure built almost entirely by funds deploying into acquisition finance. Banks participated, but the product most associated with them, the plain vanilla term loan, was steadily displaced by the unitranche: a single-tranche instrument that blends senior and mezzanine risk into one facility and is overwhelmingly the domain of debt funds rather than clearing banks.
The rate shock of 2022–23 did what every rate shock does to volume: the trailing-twelve-month deal count fell from a peak of 871 (Autumn 2022) to 600 (Autumn 2023). But the lender mix within that lower volume did not reverse. Funds that had deployed through the 2020 trough continued deploying; banks that had been losing share did not regain it materially. The 2023 slowdown was a cyclical dip in volume, not a structural reversal of who was winning the deals.
The deal pace stepped back from the 2022 record, but remained well above the post-Covid trough.
| Edition | Deals (TTM) |
|---|---|
| '21.2916666666667 | 385 |
| '21.7916666666667 | 578 |
| '22.2916666666667 | 785 |
| '22.7916666666667 | 871 |
| '23.7916666666667 | 600 |
- Private-debt deals, trailing twelve months
Trailing-twelve-month count of European private-debt deals from each Deloitte ALDT/PDDT edition. The Spring 2021 trough (385) reflects the post-Covid lull before a record 2021-22 run. All points hard, lifted from the edition's headline figure. Spring 2023 omitted: that edition did not report a clean TTM total.
Source · Deloitte Private Debt Deal Tracker (Europe), Autumn 2023 and prior editions
600
European private-debt deals in the year to Autumn 2023: down from the 2022 record of 871, but still well above the post-Covid trough of 385 in Spring 2021.
Source · Deloitte Private Debt Deal Tracker, Autumn 2023
What does the structure of deals tell us?
There are two ways to read fund penetration of the UK mid-market. The direct one is a lender-type split: Houlihan Lokey’s MidCapMonitor breaks out debt-fund versus bank transactions per country, and its Q1 2023 edition put debt funds at 62% of UK sponsored unitranche financings against banks’ 38%. That is a narrow, PE-sponsored measure. The broader one is the structure mix in the Deloitte tracker: unitranche, the instrument that only debt funds practically deploy in this segment, has held between 58% and 70% of all UK private-debt structures throughout 2020 to 2023. A market where unitranche is the majority structure is, almost by definition, a market where debt funds are setting the terms.
Unitranche, the debt-fund structure, has been the majority UK instrument throughout the cycle.
| Edition | Unitranche share (%) |
|---|---|
| Spr '20 | 58% |
| Aut '20 | 64% |
| Spr '21 | 63% |
| Aut '21 | 70% |
| Spr '22 | 61% |
| Aut '22 | 58% |
| Aut '23 | 58% |
- UK unitranche share (peak 2021)
UK unitranche share of total UK private-debt structures as reported in each Deloitte ALDT/PDDT edition. Unitranche is the signature structure of debt funds rather than banks. All points hard, lifted from the structure-section of each edition.
Source · Deloitte Alternative Lender / Private Debt Deal Tracker, biannual editions 2020–2023
The peak, at 70% of UK structures in Autumn 2021, marked the apex of the availability cycle. The 2023 reading of 58% is a moderation, partly because the rate environment made the all-in cost of unitranche less attractive relative to a bifurcated senior-plus-mez structure. It is not a departure from majority status. A unitranche share above 55% means that, across the whole of the UK private-debt market, more than half of all facilities completed were fund deals rather than bank deals. In this segment, the fund is now the default and the bank the alternative.
Unitranche has held between 58% and 70% of UK private-debt structures across 2020 to 2023 — the majority, throughout.
What does this mean if your bank is still in the room?
The 2023 narrative about banks “coming back” to the mid-market is not false; it is partial. Within the banking sector, the structural shift had already happened: challenger and specialist banks passed the big-five in 2021 and held above 50% of gross UK SME bank lending through 2022. So even the “bank” side of the market had already fragmented. The clearing bank relationship your company has held since inception is, statistically, now the minority of the banking market as well as the minority of the debt market.
Within the banking sector itself, challenger and specialist banks have already passed the big five.
| Year | Challenger & specialist share (%) |
|---|---|
| '14 | 37% |
| '16 | 41% |
| '18 | 45% |
| '20 | 32% |
| '21 | 51% |
| '22 | 55% |
- Challenger & specialist banks
Share of gross BANK lending to smaller UK businesses: challenger and specialist banks vs the big-five high-street banks. 2020–2022 are text-confirmed BBB SBFM figures. The 2014 anchor (37%) is a chart-read estimate from Figure B.54 of the BBB SBFM 2022/23 report, not a quoted statistic, and is shown dashed. The 2016 and 2018 points are illustrative reconstructions of the pre-Covid rise described in the BBB's narrative, also dashed; the hard series resumes at the 2020 scheme-year dip, when Covid-scheme volume was routed through the big-five. This is a bank-only split; it does not include private-credit funds.
Source · British Business Bank, Small Business Finance Markets 2022/23
The challenger-bank chart covers bank-to-bank competition only: it compares challenger and specialist banks against the big-five high-street banks. It does not include private-credit funds, which are a separate and growing pool of capital. Together the two charts describe the same fragmentation from two angles: unitranche dominance within private debt, challenger dominance within banking.
What should a CFO take from this?
Three things. First, the process has to canvass the funds as seriously as the banks; on the structure evidence they are setting the terms in this segment. A CFO who approaches three clearing banks and one fund has the weights backwards. Second, the unitranche majority means that the structure question is no longer exotic: it is the majority UK private-debt structure, so a borrower who has never seen one should understand it before they meet the first fund that proposes it. Third, the 2023 dip in deal volume means lenders are competing harder for the good credits that are in the market. A well-prepared credit story, at a moment of lower volume, commands disproportionate attention.
None of this requires a CFO to have an opinion on whether a fund or a bank is inherently better. The question is simpler: in a market where the fund structure sets the terms, the process that reflects that reality will consistently outperform the one that doesn’t.
Questions a CFO asks
Common questions
- Do debt funds lend to companies that are not PE-backed?
- Yes, and increasingly so. The Deloitte tracker consistently shows that around 30% of private-debt deals do not involve a private equity sponsor, and that share has been growing. For a founder-led or family-owned business at the £3–15m facility level, the lender set is the same field a sponsor would access. The credit story just has to do more of the work that a fund brand would otherwise do.
- Are debt funds more expensive than banks for a lower-mid-market borrower?
- Usually, yes. Pricing rises as you move from clearing bank to challenger to fund; fund capital is the expensive end of the market. What a fund sells is structure and certainty a cheaper lender may not offer: more leverage, lighter amortisation, a single tranche. It is the right answer when the cheaper sources decline the credit or cannot do the structure, not before. And whatever the lender type, a competitive process moves the price more than the label does.
- If debt funds now lead, why does my bank still say it can finance me?
- Because it often can. The bank is not wrong, and the market is not zero-sum. But a bank quoting without competition has no reason to offer its best terms, its widest covenants or its longest tenor. Debt funds in the same process force it to. The argument is not for choosing a fund over a bank; it is for running the kind of process where both are competing, so you find out which is actually better for your deal.