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Chart of the week

Private credit attractive to sponsors and investors

Private credit has become PE sponsors’ primary source of financing for LBOs and M&A activity as the asset class becomes increasingly mainstream.

April 19, 2024 | 2 minute read

Private credit major source of LBO/M&A financing

Column chart showing private credit represents well over 50% of LBO and M&A financing since 2019, but only a small percentage of refinancing activity.

Source: J.P. Morgan, Pitchbook. 

  • Private credit has seen massive growth over the last decade, representing well over $2.0 trillion in assets under management according to some estimates as it has transitioned from a niche asset class to an increasingly important source of capital for small and medium-sized borrowers.1
  • Growth in the asset class has been driven by private, non-bank lenders increasingly stepping in to fill the void left by banks as they pulled back from non-core lending activities and narrowed their focus to their core sectors and clients.
  • As the chart shows, private credit has become private equity sponsors’ major source of funding for leverage buyout (LBO) and merger and acquisition (M&A) activity, accounting for well over half of all LBO/M&A activity during the past five years.2
  • Private equity sponsors and portfolio companies have found private credit an increasingly attractive option to provide efficient, customized financing solutions compared to the syndicated loan markets while working with a single lender.
  • For their part, investors also have found private credit an attractive allocation, potentially helping deliver above-market yield and the potential for portfolio diversification.

  • Based on J.P. Morgan data, inclusive of Business Development Company (BDC) assets in the U.S.

  • J.P. Morgan, Pitchbook.

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