UK debt market hits record heights in first half of 2021

20th September 2021

New research by GCA Altium has indicated that the UK debt market hit record heights in the first half of 2021.

The research showed that a record number of refinancings and recapitalisations were completed in the first half of 2021 in the UK. Data provided by the firm’s MidCapMonitor identified that over the course of H1 2021, 114 transactions were completed in the UK, resulting in the most active first half to a year since the company started the publication in 2016.

The report, which analyses debt transactions across several major European markets, found that in comparison, during the same period 70 deals were completed in France, and 60 were finalised in Germany. A further 12 transactions were completed in Switzerland while just three were reported in the Beneleux region.

However, quarter on quarter activity in the UK dropped by 38 per cent between quarters one and two – with 44 transactions finalised compared to 71 – highlighting the reopening of the deal markets as the Covid-19 vaccine rollout began, as well as an urgency to close deals before the potential capital gains tax rate (CGT) hike in March. Q2 performance was three times more than the same period in 2020.

The investment bank’s research detailed how direct lending funds have taken a significant market share from banks, completing 71 per cent of deals during the first half of 2021 as banks remain cautious. Private equity has also continued to prove a viable source of funding for businesses that have been resilient throughout the last 18 months, with bolt-on acquisitions accounting for almost a quarter of debt deals completed in H1 2021 in the UK.

Simon Chambers, GCA Altium Managing Director, said “The number of debt deals completed in the first six months of the year represents a positive return to performance following a sustained period of uncertainty for the markets.”

“Our latest MidCapMonitor is an accurate reflection of what we are witnessing in the market today. direct lending funds continue to play a key role in the financing of M&A transactions which indicates their resilience, while debt fund appetite for follow-on capital investments continues to be strong.”

“This level of deal activity is expected to remain in a similar position as the pipeline of assets looks robust and the level of committed debt capital in the credit funds remains high.”