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M&A activity on fire in private credit despite overall M&A slowdown
by Kellie Ell
The M&A market has had a rough time in the past 12 to 18 months, with interest rates still high and valuations not where they once were. But there’s one area that’s bucking the trend: asset managers and large-scale financial firms are eager to snap up private credit specialists — and the momentum is unlikely to let up anytime soon.
Jess Larsen, founder and chief executive officer at Briarcliffe Credit Partners, a placement agent specialising in private credit, says traditional and alternative asset managers all want to work in private credit. “This is because private credit is going to be bigger than private equity.”
Global M&A activity was on a downward spiral from early 2022, falling 23% between 2022 and 2023, according to Mergermarket. The numbers have been better in 2024’s first half, but only rose 17% year-on-year, leaving them a long way from full recovery.
That said, it would be hard to tell by looking at the private credit space. During the same time period, Nuveen bought a controlling stake in European credit specialist Arcmont, PGIM scooped up US direct lender Deerpath Capital, BlackRock purchased European direct lender Kreos Capital, Australian alternative asset manager HMC Capital picked up debt specialist Payton Capital and First Sentier made a majority investment into European credit manager AlbaCore, among others.
Private credit is going to be bigger than private equity
Jess Larsen
Founder and CEO
Briarcliffe Credit Partners
At the same time, CEOs from the likes of Lazard, Nomura, Man Group and JP Morgan have revealed they are shopping for private credit firms of their own.
“It’s a lot easier to acquire a high-quality niche private credit-focused firm that has a good track record than it is to create one and build it organically,” said Ted Koenig, chairman and CEO of Monroe Capital.
Last summer, the Chicago-based direct lender bought Horizon Technology Finance Management, a venture debt platform, which is an area where Koenig expects to see continued growth.
Meanwhile, a handful of traditional lenders have shied away from outright acquisitions and chosen instead to test the waters by partnering with speciality credit players.
Examples include the Webster Bank and Marathon Asset Management tie-up; the Stifel Financial and Lord Abbett private credit venture; the PNC Financial Services Group and TCW Group partnership; AGL Credit Management and British bank Barclays’ credit platform; and Centerbridge Partners and Wells Fargo. Either way, the benefits are similar.
