European private credit deal count returned to earth in Q1 2025, dropping from its surge the previous quarter. However, average deal size ballooned out.

Marcoeconomic volatility was a factor in both. Rumblings of a global trade war between the US and other geographies certainly dampened deal activity. But the shutdown of the syndicated market in response to this volatility made larger deals available to private credit.

9fin tracked 172 private credit deals in Q1 2025, a 39% decline from the previous quarter. Meanwhile, average deal size rose 12% to €206m.

Macroeconomics in Q1 2025 were characterised by a series of trade tariffs imposed by the US and uncertainty about the path forward.

Many of the companies typically financed by private credit have seen their markets and supply chains caught up in the tit for tat tariffs and unpredictability in US trade policy. The added uncertainty on top of weak macroeconomic growth has chilled M&A activity on the continent and likely dampened lender appetite for new issuers.

The result was the steepest quarterly decline in overall dealmaking since at least Q2 2023, when markets were still shrugging off a global inflationary spike and assessing the fallout from the collapse of Silicon Valley Bank.

The backdrop of volatility in public markets, however, has presented opportunities for direct lenders to remind borrowers and sponsors of their ability to execute on choppy terrain. A late-quarter shutdown of syndicated markets, with banks unable to sell down underwritten debt to wary investors, presented openings for direct lenders that have otherwise faced stringent competition from them over the past year.

This supported the 12% quarter-on-quarter recovery in average deal size. However, at €206m, deals still do not match their average size the last time the syndicated market shut in Q2 2024. In this period, average deal size was €252.2m.

(Historical data in this report has in some cases been revised as more information comes to light.)

2024’s late LBO boomlet busts

Underlying the decline in deal count was a dearth of LBOs. The number of private credit-financed LBOs was 51, the lowest quarterly total since — again — Q2 2023. It also represents a 45% quarter-on-quarter decline, cutting short the buyout boomlet of Q4. Meanwhile, the year-on-year decline was 14%.

After spending much of 2024 anticipating a buyout return in 2025, it appears the market will continue waiting. While the pipeline of potential LBOs we’re tacking remains robust, the gathering clouds are also holding up sales processes that had initially drawn plenty of bidder attention.

UK tour operator Audley Travel, German dermatology chain Medermis and UK pet food manufacturer MPM are among the ongoing Q1 sales processes recently shelved amid the volatility, while others have faced delays and heightened scrutiny from investors.

At the end of April, there were 113 potential European LBOs in the market, some of which would likely land with private credit in an eventual deal but others which lenders will vie with the syndicated market to finance.

As direct lenders peek through the clouds to this pipeline, they may benefit from their insulation from seesawing public markets. When buyout deals can get done by private equity sponsors in a volatile environment, private credit can have a leg up on banks due to the latter’s uncertainty around successfully syndicating debt in wary public markets.

This was most recently on display in early Q2 with Swedish consumer health brand Karo Healthcare’s buyout by KKR. After pitching a PIK tranche alongside committed bank financing for the buyout of the €200m-EBITDA firm — a prime candidate for syndication — direct lenders are now poised to take on the bulk of the debt with a €1.1bn unitranche.

Refinancings keep capital flowing

While private credit-financed LBOs declined both in absolute terms and as a proportion of deals, refinancings made up a greater proportion of deal flow over the quarter.

The only €1bn+ private credit deals were refinancings, including the largest deal of the quarter, a £1.3bn unitranche from Apollo, KKR, HPS Investment Partners and Hayfin for UK automotive marketplace Constellation Automotive Group.

That deal was the tip of a larger trend: Refinancings and capitalisations made up nearly one-quarter of all deals during the first three months of the year, the highest level in recent quarters.

Refinancings in Q1 helped lenders make up some of the deal flow lost to sluggish M&A. Yet the refinancing activity also reflects the defensive position of direct lenders this quarter and their willingness to cut margins to stay on existing credits or finance out incumbent lenders.

Pressure on pricing has also been exacerbated by the uptick in deal size, as lenders are often willing to trim margins and add turns of leverage to land the largest credits:

And despite the late-quarter shutdown of the syndicated market, competition has also remained a drag on private credit margins so far this year.

A wave of repricings in the syndicated market prior to all the volatility propelled leveraged loan volumes to record levels but cut margins nearly 50bps, from an average 403bps overall in 2024 to 354bps over the first quarter.

Moreover, the record syndicated volume to start the year included a fair share of refinancings from private credit, including the refinancings of private credit debt for UK live entertainment group ATG Entertainment and Swiss dentistry network Colosseum Dental Group, both over €1bn in size.

All of this has placed pressure on private credit margins. The average margin on first lien and unitranche instruments in Q1 was 570bps, a decline from 596bps on average in 2024 and 661bps in 2023.

Consolidation continues

Early data on 2025 fundraising shows the 2024 trend of consolidation among private credit funds continuing at an even quicker pace.

Total global fundraising volumes were flat between 2023 and 2024. However, the average fundraise doubled in the same period. In 2024, this same volume was achieved with half the number of funds.

Although based on only eight direct lending funds closing through the first two months of the year, data from Preqin show average fundraise so far more than doubling again in 2025 to $2.6bn.

The recent consolidation of capital among fewer funds has translated to a relatively high concentration of deals among lenders, especially deals involving large-cap borrowers (defined as issuers with €50m or more in EBITDA or debt deals of €250m or more).

Over the last twelve months, the five lenders most active in large-cap private credit deals tracked by 9fin — Goldman Sachs, Blackstone, Apollo, SMBC and Park Square — have accounted for a majority of deals. (See our full lender league tables here.)

The top 10 lenders — the firms above along with Hayfin, Ares, KKR, CVC and MV Credit — combined for nearly three-quarters of activity. Adding Carlyle, CDPQ, Macquarie, Pemberton and Barings, 15 firms accounted for nearly 90% of large-cap deals.

Sector and regional trends

Private credit deals so far this year have shifted away from sectors that have typically accounted for the most activity, with IT and industrials (which also includes business services) at or near their lowest deal shares since at least 2023.

While no sector was spared in absolute terms from the quarterly decline, financials rose as a proportion of private credit deals due to comparatively steady activity in the sector, possibly because of its insulation from the tariff uncertainty that has rattled other industries.

Shifting to the regional focus of deals, the UK and France accounted for a majority of European private credit activity over the quarter, as they did for much of last year. However, similar to the sector trends, no region experienced absolute growth in deal count.

In the UK and Ireland, deal count fell to 45, down from 97 last quarter and 56 in Q1 2024. The region saw two of the largest deals of the quarter: Constellation Automotive Group and the £1bn refinancing of UK accounting service Azets by incumbent lenders CDPQ, Deutsche Bank, Hayfin, Permira and MV Credit.

Deal count in France declined to 31, down from 55 last quarter and 35 in Q1 2024. The country’s largest deal in Q1 was a €770m refinancing of French pharmaceutical firm Nemera’s syndicated debt by a club of direct lenders led by CDPQ, GIC, Goldman Sachs and Permira.

Nordic deal count fell to 13 from 15 last quarter but was up from 8 in Q1 2024. While modest as a share of the overall market, the region saw one of the largest deals of the quarter in Norwegian software provider Cyncly’s €1.3bn-equivalent refinancing by Ares, Arcmont and Golub Capital.

Elsewhere on the continent, deals in the DACH region fell to 25 from 47 last quarter but were up from 21 year on year; the Benelux region saw 17 deals, compared with 24 last quarter and 15 in Q1 2024; Southern Europe saw 28 deals, down from 30 last quarter but up from only 11 a year ago; and deals in Eastern Europe stood at 13, flat both quarter on quarter and year on year.

For more more detail on how lenders stacked up in these regions, sectors and overall, see our private credit league tables.