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Welcome to Taking the Credit, 9fin’s weekly observations on the issues affecting the European private credit market. Find out more about what we do for private credit.

Sub-zero temperatures, how we’ve missed thee. It might have been a chilly week in London, but the private credit market is plenty hot right now.

Grant Thornton UK has been on everyone’s radar (and perhaps wish list?) over the last months, and on Thursday (21 November), Cinven announced it has agreed to buy the audit firm, beating the other two remaining bidders, EQT and New Mountain Capital, to the finish line.

EQT and Cinven were in talks with direct lenders, and “all the big guys” were looking at the financing opportunity. In the end, Apollo had the edge and is leading the £500m financing alongside KKR’s direct lending arm.

“[Grant Thornton] shows that the BSL market doesn’t take absolutely everything — it’s not just down to pricing, but availability, speed, flexibility… Big sterling tranches like this are a great example of situations where sponsors will go with private credit.”

Accountancy and audit firms such as Grant Thornton have been riding high this year, with 10 European closed or in-market deals tracked by 9fin in 2024 — up from six in the same period in 2023. Read 9fin’s analysis of the sector here.

"They're phenomenally profitable businesses with very high margins, much like a law firm,” a lawyer told 9fin earlier this month. “And the playbook is easy — they're scalable businesses that benefit from buying smaller regional players and consolidating.”

That said, the sector is not without its challenges, with some direct lenders labelling it as “too much of a people business”.

“We don’t really like accountancy firms,” a direct lender said. “They rely too much on people and the partners — both in terms of business and reputation.”

Another source told 9fin earlier: "Their structure is not dissimilar to a law firm's partner model, but unlike a law firm they are mostly owned by local partners.

“So in the event of a sale you tend to get a bunch of local partners looking to cash out.”

By now, it’s clear that sponsors have the hots for PIK, and this week has been further proof.

Goldman Sachs, KKR and HPS are among the lenders looking to provide a HoldCo PIK for German pharmaceutical firm Stada, alongside the firm’s IPO-preparations or potential sale to GTCR.

And bidders for BC Partners’ Synthon are in talks with direct lenders for a €200m-€270m HoldCo PIK tranche, on top of a €780m TLB staple, 9fin reported this week.

Synthon is the latest example of how private credit and the public market can work together in harmony, a topic 9fin explored in July.

“There’s been a lot of ask from sponsors on junior PIK tranches on top of senior bank loans. If you’re a sponsor looking to maximise leverage, why wouldn’t you go for that?” one source said.

Another added: “When you do large transactions you need multiple sources of liquidity, that is where private credit and the syndicated market can come together.”

With the combination of a slower M&A market and several jumbo fundraises, it offers the opportunity to deploy more capital for lenders.

“Deployment is the main concern for all direct lenders right now,” a source said. “We have way more conversations about deployment than defaults, so doing these PIKs are a good way of deploying capital.”

If it goes through, Synthon will join a number of other transactions going down a similar route, including Opella, where Goldman Sachs lined up a circa €1.2bn HoldCo PIK to support CD&R’s acquisition of the firm.

This autumn we have also seen Goldman Sachs providing a €1bn PIK tranche for EQT’s takeover of Nord Anglia, and Cinven securing a second lien PIK tranche for Spanish firm Idealista.

As we’re getting closer and closer to Christmas, deals are starting to wrap up.

After a competitive financing process, KKR has secured a loan from CVC for its all-equity acquisition of Finnish software firm Accountor, leveraged at 4.75x, 9fin reported this week.

Private equity sponsors are preparing their bids for Danish telematics firm Trackunit. NBOs are due next week, and bidders include Apax, Cinven, CVC, EQT, Francisco Partners, Nordic Capital, and Thoma Bravo.

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