International survey reveals expectation that the 2021 level of deals will not be repeated this year but private credit remains a growth market
Deal volume in the private credit market is expected to decline from the record highs of 2021 according to a new survey.
While several headwinds are seen for the market, it is not economic or geopolitical matters that are the biggest challenge but competition. It was named by 89% of respondents as a top 3 issue and is the leading challenge overall.
Survey respondents also cited high transaction multiples and a lack of quality assets in the market as the expected biggest challenges in the months ahead.
The findings are part of the new edition of the annual Private Credit Survey from international law firm Proskauer, which also reveals that Canada is expected to maintain its increasing interest in private credit.
“There has been a growing interest in private credit from both lenders and borrowers over the past decade. As the public markets have had dramatic swings in recent years, new entrants – both lenders and borrowers – have moved into the space, drawn by the industry’s resilience,” said Stephen A. Boyko, co-chair of Private Credit at Proskauer. “As the macro economic environment continues to change, the syndicated markets remains volatile, we expect to see more interest in private credit than ever before, especially in the U.S., UK, Mainland Europe, Canada and Asia.”
Most of the poll respondents hold senior roles in the private credit market, typically and manage funds of at least US$10 billion.
Optimism
Despite the challenges highlighted by the survey, there is optimism, although those in Europe were more so than their North American peers.
The most-cited reason for optimism was the availability of dry powder followed by sponsors seeking realisations and industry-specific trends.
Industry-based investing is expected to grow this year with North American respondents more likely to opt for consumer/retail, construction, and transportation and logistics.
Pricing unchanged
Most respondents (55%) expect pricing to remain unchanged this year compared to 2021.
While 28% expect prices to decrease, just 17% expect increases.
