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UK debt market activity increases amid strengthening M&A pipeline

UK mid-market financing activity significantly increased in Q1 2024, compared to the same period in 2023, driven by a strengthening M&A market and robust debt fund activity, according to the latest data by global investment bank Houlihan Lokey.

With 47 transactions completed during the period, the report finds there was a substantial 18% increase in UK mid-cap deals compared to Q1 2023 (40 transactions). Although there was a slight 8% decline from Q4 2023 (51 transactions), this is typical for the traditionally low-volume first quarter.

The data reveals that debt funds played a dominant role in the activity this quarter, financing the vast majority (77%) of completed deals in Q1, while banks contributed to under a quarter (23%). The increase in debt funds’ share of transactions represents a significant 48% increase from Q1 2023, suggesting that funds are under increasing pressure to deploy capital after a slow 2023.

Additionally, the report highlights a shift in the nature of financings in the first quarter, charting a marked rise in new LBO activity, which accounted for almost half (48%) of all transactions, returning to levels not seen since Q1 2020. This reflects the uptick in M&A activity in the region this year.

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