The 2024 recovery, confirmed

The 2023 slowdown is over. European private-debt deal flow bottomed at 263 completions in the first half of 2023 before rebounding 25% in the second, and UK mid-cap transactions entered 2024 around 18% ahead of the same quarter a year earlier. Debt funds re-extended their lead to 77% of UK activity in Q1 2024. For a company considering new debt or a refinancing, the window is open, though pricing remains firmly above the 2021 low.

The 2022–23 rate cycle compressed deal flow across the private-debt market. The European unitranche market hit a trough of 62 transactions in Q2 2023, less than half the pace of the 2021 record run, before recovering sharply into Q3 and Q4 of the same year. The Deloitte Private Debt Deal Tracker captured the wider picture: 593 European private-debt completions in the trailing twelve months to the Spring 2024 edition, off the 2022 peak but well above the post-Covid low of 385. The direction of travel has reversed.

Where did the recovery come from?

H2 2023 was the pivot. Deloitte’s Spring 2024 edition reported 330 completions in the second half of 2023, against 263 in the first half: a 25% acceleration within a single calendar year. The LBO share of activity, which had compressed to 33% in 2023 as sponsors sat on their hands, remained lower than the 40–45% of the boom years, but the total deal count grew. Refinancing and bolt-on acquisition activity made up the difference.

The pattern is characteristic of a rate-shock recovery: sponsors and corporates defer discretionary activity when cost-of-debt moves sharply, then begin to adapt once rates feel stable rather than rising. By H2 2023, Bank Rate had been at 5.25% for several months, and the question of how much higher it would go had been answered. A market that can price risk around a stable rate, even a high one, is a functioning market.

Who is doing the lending?

The short answer is: debt funds, decisively. The 2023 data showed banks temporarily recapturing some UK mid-cap market share: lenders who had sat out the most expensive vintages of 2022–23 came back into the market as conditions stabilised. That proved to be the exception: by Q1 2024, Houlihan Lokey’s tracker showed debt funds accounting for 77% of UK mid-cap total transactions, back to the elevated levels of 2021–22 and well above the FY2023 read.

The practical consequence for a lower-mid-market borrower is the same as it has been for several years, only more pronounced: if you start a debt process by calling one clearing bank, you have reached roughly 23% of the active market. The other three-quarters sit in funds, challenger banks and specialist lenders whose participation depends on being explicitly invited into a competitive process.

What borrowers should take from this

The recovery favours the prepared. When deal flow is rising after a trough, lenders are actively competing for good credits. The bid is real, and covenants are more negotiable than at the 2022 peak, when lenders could afford to be selective. That dynamic is most valuable to a borrower who has their credit story current, their financials audited and a clear view of their forward plan. A lender who receives a tight, credible package in a market that is reopening is more likely to compete hard on structure and price.

The rate caveat stands: Bank Rate at 5.25% means all-in costs are a long way from 2021, and any deal completed now will reflect that. The question for a borrower is not whether it is cheaper than the zero-rate era (it is not) but whether the business case for raising or refinancing stacks up at the current price of debt. For those facing a 2026 maturity, the clock is the argument: conditions are workable, lenders are competitive, and the alternative is to refinance under time pressure in 2025 when lender capacity may be stretched by the wall of contemporaneous maturities.