German banks and debt funds split LBO market share in Q3 – survey

The survey records mid-market LBOs with a credit volume of €20-500m. Of the 22 such deals completed in Q3 2020, banks and debt funds each backed 11 transactions, signalling banks' continuing recovery in sentiment and activity following the initial shock from the pandemic.

In Q1 2020, a period largely unaffected by the coronavirus crisis, debt funds backed 60% of LBOs, compared with 52% in Q4 2019. In H1 2020 overall, debt funds financed 71% of LBOs in the market.

From Q1-Q3 2020, debt funds backed 61% of LBOs covered by the survey, compared with 69% of deals in H1 2020.

The survey also reveals that the amount of new primary and secondary financing deals increased in Q3 2020 in comparison with H1 2020. From Q1 to Q3 2020, 53% of deals were for new financing, whereas new financing made up 41% of deals in H1 2020. Add-on financing, re-caps and refinancings comprised 48% of the market from Q1 to Q3 2020, compared with 58% in H1 2020.

GCA expects sponsors to continue to focus on non-cyclical assets for the next 6-12 months. The firm also continues to anticipate a wave of covenant resets and restructurings for the remainder of 2020 and in H1 2021, particularly given the restrictions under Germany's current coronavirus lockdown.

In the European market overall, the survey recorded 53 completed LBOs in Q3 2020, marking an increase of 23% compared with Q2 2020.

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