At the three-day event held at the Palais des Congrès, private credit appeared to be a tale of two stories.

“Either you are doing really well — I think and hope we are on that side — or it’s really tough,” said one direct lender. “Especially difficult for new funds, not necessarily smaller funds, but definitely newer funds.”

Indeed, fundraising remains at the top of the news for private credit: ICG announced this week it had raised a record-breaking $17bn for its latest European direct lending fund.

Across Europe, the M&A market has seen a handful of new deals launch as part of the back to school season — albeit some private credit professionals are still lamenting a somewhat “skinny pipeline”.

Here are some of the hottest topics discussed at IPEM.

Private credit goes clubbing

While clubbing is an established trend for large-cap deals in private credit, mid-market players are catching on too.

“There are more and more clubs happening — all the sponsors want to club,” said one direct lender. “It’s better for the sponsors to have several lenders and it also helps drive competition as they’re putting the lenders against each other, which means it’ll be a better deal for the sponsor.”

The fallout from the Barings exodus in the spring sent warning signs for what can happen when things go south with sole lenders. Club deals mean that multiple lenders have shared accountability and can take on larger loans than what they could do alone.

Among some notable recent examples, Macquarie, CDPQ, and Deutsche Bank are working together on the £250m financing for Dukes Education, 9fin reported. Additionally, CVC and Tikehau provided the debt package for Belgian home cleaning company BOMA, which was marketed off a €20m EBITDA.

Clubbing is not for everyone, though. Some LPs are said to be concerned about potential lack of diversification. Their worry is being exposed to the same deal two- or threefold as a result of the different GPs they’ve invested in.

“But as long as it doesn’t turn into a ten lender group, it is something we’re willing to live with,” said a UK-based direct lender about the segway to private credit clubs during a panel.

Are you invited?

Not all was rosy at the Palais. Over a few glasses of champagne, some lenders talked about the tough competition in the European private credit market at the moment and the hard fundraising environment.

“The reality today is that if you're a mainstream leading private credit manager financing in the core or the upper middle market, you have to have the ability to underwrite $500m, $1bn per transaction, and there are only handful of firms that can really do that,” said the CEO of a French financial institution during a panel.

The consensus was that 2024 has had a bit of an uptick in deal flow compared to the sluggish M&A market of last year and the return of the syndicated market has provided a healthy amount of competition for direct lenders. But LPs favorability and allocation of their capital has made it hard for new funds to make a name for themselves.

“The ability to provide capital at scale, grow with the company, and have the relationship with the sponsor as they're trying to pre-empt processes, differentiate themselves in a process is very, very important,” said another lender.

On top of this, relatively high valuations and the amount of dry powder that private equity needs to deploy has meant that buyers are willing to pay high prices — and lenders with deep pockets are meeting the mark.

“The market is so competitive right now. Sponsors don’t want broad processes, so they only go to a select few lenders, so a lot of work goes in to be among those,” said one private credit professional.

Confidence in 2025

The tagline of the conference was “forging confidence”, almost an attempt to convince the market that uncertainty “written on everyone’s faces last year” — as a CEO said during a panel — is gone.

And yet, future is far from being sure, with several sponsors and lenders mentioning that the pipeline for the rest of the year isn’t looking at all as healthy as they would have hoped.

“The pipeline is still rubbish to be honest. Everyone was talking about 2024 being the year M&A picked up, but it’s been slow and it still is. I don’t think we will see activity pick up significantly until 2025,” said one France-based lender.

Take Solo Group for example: French retail king Alain Milgrom has put the customisable clothing brand up for sale off an €105m EBITDA, l'Informé first reported. But the sale process isn’t likely to kick off until 2025, one source told 9fin.

ECB’s interest rates cut by a quarter percentage point to 3.5% on 12th September allows some optimist for future action. Lenders hope this might help unblock some of deals and deploy the colossal amount of dry powder in private equity.

“Our view is M&A will pick up, but when? We don’t see a gun being shot and everybody back to the races,” said a managing director at a US-based large-cap lender during a panel. “We're obviously intrinsically linked with private equity, and there's over $2trn in dry powder there, so it's a matter of when, not if.”

European private credit pipeline

Despite complaints for the thin pipeline, this week we have seen an intense flow of deals coming to the market — especially from France.

Bridgepoint is looking to sell Paris-based digital marketing firm Brevo, hoping to fetch about €1bn, 9fin reported. The process is expected to kick off later this year or early 2025, with an advisor yet to be appointed.

Abenex has prepped French software firm Edition et Développement Logiciels (EDL) for sale, 9fin reported .

In Switzerland, Equistone has reached out to debt providers, including private credit firms, to back a potential buyout of its Switzerland-based printing business Sihl. The sponsor is considering a sale of the company and has hired Baird to advise on the process, marketing Sihl off EBITDA of around €15m.

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