DLA Piper releases its European Acquisition Finance Debt Report for 2013

Bolstered by strong balance sheets and the availability of cheap finance, the market saw more deals completed last year compared with 2011. According to four out of five respondents to our fourth annual survey, there was sufficient liquidity to get mid-market deals financed, although fewer transactions values exceeded the £150m mark. Adverse conditions clearly continued to restrict the debt market from realising a stronger growth rate, with lenders determined to focus on the right deal.

2012 was defined by the eurozone crisis, increased regulatory constraints and a greater focus on risk. Since the start of the financial crisis, banks have been forced to shrink their balance sheets and rein in issuance, and now their long-held position as the most popular source of finance has become subject to challenge. With this trend set to continue in 2013, a growing percentage of borrowers are likely to explore alternative sources of funding, presenting non-bank lenders with an opportunity to gain a larger share of the debt market.

Many corporations and sponsors will continue to rely on bank loans for financing acquisitions, but our 2013 Report reveals the extent to which we may now be witnessing a more profound structural change in the acquisition finance market. As commercial banks continue to be challenged by the ongoing need to repair balance sheets and comply with new capital requirements, new non-bank players are stepping up to bridge the liquidity gap. The US market has of course had these characteristics for some years now…

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