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Most would agree that having a lot of money isn’t a bad problem to have. However, what do you do when you’re sitting on substantial capital in a slow M&A environment, with LPs closely scrutinising how their commitments are being deployed?

Well, Ares clearly has confidence in private credit deal flow. It announced a €30bn close for Ares Capital Europe VI (ACE VI), which secured €17.1bn in investor commitments (the remainder was formed of associated vehicles and leverage).

Ares stated that it has deployed some €6.4bn across 50 investments through ACE VI. Those figures suggest an average investment ticket of €128m so far. Even in a sluggish M&A market, Ares has said that it is finding opportunities aplenty.

“Our existing portfolio is an important source of differentiated deal flow, which is why we had strong deployment last year even though global M&A volumes were down,” a spokesperson for the company told 9fin.

Logically, with vast amounts of capital to put to work the most straight-forward route to take would be to invest in as many upper middle-market deals as possible. But Ares is not ruling out smaller positions for its fund with the lender noting that it can support companies with EBITDA above €10m.

The European private credit transactions completed by Ares in Q4 highlight that the lender has been active in the lower mid-market, providing financing to companies with EBITDA between €9m and €20m.

For instance, last month, Ares provided a €72.5m private debt package, levered at 5x, to support Fremman Capital’s buyout of outpatient rehabilitation provider Rehaneo. The deal was based on Rehaneo’s €14.5m EBITDA. For a list of recent Ares European private credit transactions, see here.

However, Ares’ core focus is the middle market. Michael Dennis, co-head of European credit at Ares, told 9finthat the firm has a flexible approach and will continue to focus on middle market companies, while also backing a growing number of larger borrowers.

“We have plenty of capacity to finance larger deals,” he said. “However, the bank syndication market has largely reopened, so at this stage there are fewer needs and opportunities in this market segment.”

With Ares typically taking on the role of sole, or lead lender on its transactions it’s not holding an ACE of clubs, but it sure does have a good hand with $30bn of firepower.

Leaders of the pack

One of the themes of 2024 was that LPs were becoming more selective, choosing to invest in larger, more established private credit funds rather than spreading their capital across smaller players.

ACE VI is the largest European direct lending fund in Ares’s history, surpassing the €15bn raised for its predecessor in 2021.

This milestone follows ICG’s Q3 2024 close of its Senior Debt Partners Fund 5 (SDP 5), with the asset manager raising €15.2bn for SDP 5, exceeding the initial target of €11bn–€12bn. This total, which includes equity commitments, borrowings, and co-investment vehicles, far outpaced its predecessor, which closed at €8.1bn in 2021.

“I don't think there really is any room in this market now for small independent players,” said Anthony Fobel of Arcmont at a roundtable event last year.

Arcmont is also seeking to capitalise on this trend, aiming to raise at least €12bn for a new European direct lending fund. This marks the fifth fund in its flagship strategy, following the €10bn fund raised in January 2024.

Other managers are making moves into private credit in 2025 with the BlackRock/HPS combo expected to make waves. And King Street Capital is also in the queue with reports last week that it has teamed up with Generali Investments to launch a new private credit fund.

“All of the large integrated asset management firms — they're all desperate to have private credit. As I told my wife: for the first time in my entire life, I’ve been the good-looking guy at the disco,” added Fobel at the roundtable.

Who’s next?

As a self-proclaimed pure mid-market investor, it will be interesting to track funds such as Eurazeo. The firm demonstrated strong momentum for its EPD VII fund, raising more than €1.4bn in nine months. It has been particularly active in 2024 through till the end of September, with 47 deals completed, according to 9fin’s Q3 2024 European Private Credit Review.

Another name to follow is Goldman Sachs. In Q3 2024, it announced that it has raised over €1bn for its open ended European private credit strategy, less than a year after the strategy’s launch.

European private credit pipeline

All eyes remain on the progress of Trackunit as “every lender and their mother” are tracking the deal. The latest development revealed is that Goldman Sachs is preparing a private debt package as part of advanced talks to acquire Danish telematics firm Trackunit.

Goldman is looking for around €550m of debt to finance the deal, suggesting an EBITDA valuation and leverage ratio in the high end of the €60m-€70m and 7.0x-7.5x range previously reported. Pricing is expected to come in tight at 475bps-500bps.

Elsewhere, investment management firm Barings is looking to stay on as sole lender to Germany’s Westbridge Advisory after a portability clause was triggered in connection with the sale of the company to Permira.

Don’t forget to register for 9fin’s latest webinar in partnership with DealCatalyst. Our host Synne Johnsson will be joined by Cécile Mayer-Levi, head of private debt at Tikehau Capital, Nicholas Nedelec, partner at Eurazeo, and Andreas Botterbusch, senior credit officer, structured finance/primary at Moody's Ratings to discuss the future of private credit CLOs in Europe

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