Private Credit Outlook for 2024: Record Dry Powder and Mid-Market Lending on the Rise

Private credit is set to thrive this year, with European-focused buyout funds holding a record $292 billion in dry powder. According to Permira Credit, there will be a return to mid-market lending as demand for financing from companies with revenues between €20m and €50m rises. An AI-driven productivity uplift and a recovering economy are also expected to boost appetite for private credit.

The market update from Permira Credit highlights the significant amount of M&A activity ready to take place, as the capital needs to be spent. With inflation decelerating and interest rate cuts on the horizon, there is growing pressure on sponsors to monetize their portfolios and deploy their dry powder.

Despite a tentative return to economic normality, the report notes that the euro-zone economy will remain close to recession until the second half of the year. However, there is more certainty now than a year ago. Permira has seen a significant increase in new direct lending commitments in the first half of 2024 compared to the same period in 2023, indicating improving market conditions.

While competition for high-quality assets remains intense, Permira believes that 2024 will see a return to the mid-market as activity normalizes at all size levels. Strong sponsor relationships, speed of execution, and transaction flexibility will be key to successful deployment in the private credit market.