Americas Private Credit 2026 Outlook: The Year of Maturity: Private Credit Goes Mainstream as 2021 Loans Come Due This Year

Although it is too soon to call 2026 the M&A rebound year the market has been patiently awaiting, positive trends from late 2025 are carrying over into the first quarter as dealmakers express enthusiasm for their pipelines.

According to Octus’ FY 2025 Direct Lending Analytics, large-cap deal activity surged 37% last year while middle-market deal flow increased 14% compared with 2024. After first-half volume declined as a result of new tariff policies, 2025 “ended on a high note with activity increasing in the last quarter following a steady pace in the prior three quarters,” the report said.

The central driver of expectations for a strong M&A market this year is, of course, the persistent anthem that private equity firms need to exit portfolio companies that are now stretching unnaturally into six- and seven-year hold times.

“The bid-ask valuation gap is narrowing. We saw a great Q4 and we’re seeing that continue in 2026. And (competitive) financing will help unlock that more,” said Kelli Marti, senior managing director and head of CLO management at Churchill Asset Management.

Lender competition – the key theme last year, as detailed in Octus’ Private Credit 2025 Review – will be even fiercer this year, with the broadly syndicated market looking to take back market share after U.S. federal regulators relaxed leveraged-loan guidelines for banks in December.

As a result, large-cap borrowers are enjoying their pick of the litter regarding best terms and lowest spreads. Meanwhile, in the middle and lower middle markets, lenders Octus spoke to reported (and cautioned against) an emerging trend toward looser covenants as a way to win mandates.

Against this backdrop, Octus data shows that spreads tightened across the board in the fourth quarter of 2025, dropping to an average of approximately SOFR+300 bps for broadly syndicated loans and approximately SOFR+480 bps and SOFR+500 bps for large cap and middle market direct loans, respectively.

According to Octus’ FY 2025 U.S. Direct Lending Rankings, Blackstone Credit maintained its position as the most active lender last year, closing 225 deals and holding a 5.4% share of market deal volume. Antares Capital and Churchill Asset Management followed with 189 deals and 187 deals, respectively.

Heated competition among lenders is also breathing fire into alternative private credit investments, such as the secondary market, asset-based lending, infrastructure and real estate.

Regarding stress in the market, 2026 is widely anticipated to be an opportunity year for turnaround advisory services as many loans that priced in the low-interest-rate environment of 2021 come to maturity. In today’s slow M&A environment, fewer borrowers have desirable exit options and are, therefore, fueling demand for new loans, even at higher prices.

“Where we have seen spreads widening relative to historic observations is in below single-B rated risk, where the spread data we observe has widened 200 to 250 bps,” said Vinod Chandiramani, head of the capital advisory group at Solomon Partners. “We also believe there will be a growing opportunity set of middle market issuers that will evaluate liability management transactions.”

Overall, as the private credit asset class matures in real time, private lenders are cementing their position at the table – not as an alternative option to the broadly syndicated loan market but rather as a mainstream financing solution for borrowers of all sizes.

The booming growth of private credit continuation vehicles and the secondary market – as commonly seen in the private equity landscape – is yet another marker of a maturing asset class.

Multiple stakeholders Octus spoke to predicted that the secondary market would see significant growth in 2026. David Colla, head of Capital Solutions at CPP Investments (the parent company of Antares Capital), estimated it could grow by 50% or more.

This month, Crescent Capital Group announced it completed a $3.2 billion private credit continuation vehicle, claiming it is one of the largest single-fund portfolio transactions completed in the private credit secondaries market. The buyer group was led by Pantheon and co-led by Allianz Global Investors, alongside investments from Hamilton Lane, Dawson Partners, Ares Credit Secondaries and Antares Capital.

“In terms of the stage we’re in, it feels like the private credit secondary market is moving from its early growth phase into a more established and nuanced phase, where transactions are not just about simple portfolio sales but increasingly about structuring solutions to manage risk-adjusted returns, realign investment horizons and create liquidity optionality for sellers,” said Joseph Weissglass, managing director at Configure Partners, a middle-market credit advisory firm.

The expansion of the secondary market is being driven by a market environment of limited exit options for portfolio companies as large direct-lending funds reach mid-to-late life stages. For buyers, continuation vehicles offer an opportunity to grab a piece of the private credit growth story, possibly even a discount to reported fair values.

“For buyers, these structures provide a pathway to access private credit portfolios that might otherwise be difficult to purchase or replicate similar risk-adjusted returns in the primary market,” said Corey Dietrich, a partner at law firm Weil, Gotshal & Manges who focuses on secondary transactions.

Over the next few quarters, experts said, market observers can expect to see more private credit-focused advisory and law firms beef up their expertise via new hires that specialize in secondary transactions.

Large-cap deal activity is off to a fast start, and a string of billion-dollar transactions is signaling momentum at the top end of the market.

In the fourth quarter of 2025, leveraged buyout financings above $500 million hit a record high with 189 deals, up from 118 in the same period of 2024, according to Octus data.

Setting the tone for 2026 are large-cap lenders lining up financing for deals such as Hg Capital’s $6.4 billion take-private of OneStream, TPG’s acquisition of Conservice, Warburg Pincus’ acquisition of school safety software developer Raptor Technologies and a $3 billion unitranche facility to refinance animal health tech company Covetrus.

Blackstone President and COO Jonathan Gray observed on a Jan. 29 earnings call that IPO and M&A activity “are accelerating, deal sizes are increasing, and sponsor activity is picking up.” All are early signs of a deal cycle starting to materialize, he noted.

Greasing the wheels of an upcycle are the easing of feelings around last year’s new tariff policies, which halted the market nine months ago on “Liberation Day.” Time to digest the shift, reassess valuations and evaluate market risk have left lenders and sponsors feeling more confident in their ability to forecast performance.

“There is much more certainty now than there was throughout 2025, which is why we think we’ll see an M&A increase,” CPP Investments’ Colla said.

Private credit cemented its ability to underwrite multibillion-dollar deals in 2025, such as with the $4 billion debt financing to back Thoma Bravo’s carve-out of Boeing’s Jeppesen navigation unit.

“We’ve seen some names last year that went to the syndicated markets but couldn’t put an attractive deal together, and in certain cases pivoted into private credit because that just became a more compelling alternative to what the public markets would offer,” said Michele Cousins, global head of leveraged capital markets at UBS at a recent roundtable, noting how trading dynamics played a role in this.

Peter Sluka, global co-chair of Latham & Watkins’ hybrid capital practice, said capacity exists for $10 billion private credit transactions when the right sponsor, structure and market conditions align. While competition with the BSL market remains a hurdle, he noted, “If there is market dislocation and a strong business, for example, the stars could align for a transaction of that size.”

Meanwhile, competition means spreads are grinding tighter. By the fourth quarter of 2025, average pricing on large-cap deals were roughly SOFR+500 bps, nearly 20 bps tighter than the first quarter, according to Octus’ data. Top-tier credits cleared below that level, as seen in Avent’s LBO financing, which priced at SOFR+475 bps, for its acquisition of insurance software business Sapiens International Corp. in August.

A strong financing environment, declining cost of capital and an improving IPO market, along with full banker pipelines and record private equity backlogs, are all setting the stage “for a broad-based recovery [in middle-market M&A] in 2026,” said Rich Harding, head of the U.S. private equity solutions group at Moelis & Co.

Harding said he expects activity to broaden across sectors such as technology, healthcare, industrials and media. After staunch demand for top-tier assets, he said he also foresees a re-emerging appetite for second-tier and third-tier businesses.

Matthew Harvey, head of direct lending at PGIM Private Capital, reported a rise in M&A financing opportunities starting in the fourth quarter of 2025. The uptick is “very tangible,” Harvey said, adding, “Industry participants, ourselves included, are optimistic about supply pipelines.”

According to Octus data, direct lending transactions backing LBO buyouts rose to 57% in the fourth quarter of 2025, while debt pricing declined slightly to SOFR+ 507.06 bps.

As dealmaker confidence rises, the market has already seen a flurry of companies laying the groundwork for sale processes in 2026. In January alone, Octus reported on dozens of middle-market companies across a broad range of sectors that are either running auctions or preparing to launch them later this year, including in-home health provider PromptCare, electronics manufacturer MTK Electronics and prepared meals company Custom Made Meals.

Multiple sell-side advisors Octus spoke to said 2026 is shaping up to be a strong year for exits; one noted that “our deal pipeline list is longer than it’s been in years.”

Meanwhile, market participants say they expect hybrid financing options, which blend debt and equity, to remain a fixture in 2026. A cohort of 2020 and 2021 vintage deals facing capital structure challenges this year are expected to turn to hybrid solutions to realign their balance sheets, according to Sluka at Latham.

Hybrid financing gained traction last year as sponsors navigated a difficult M&A backdrop. With deals clearing at attractive multiples, hybrid instruments “allow for additional firepower on purchase price and in managing equity check size,” said Sluka.

According to Octus Data, healthcare led the way for private credit last year, accounting for 19% of all 2025 direct lending deals. The sector, which is a longtime favorite of private credit, was also the only industry to not see significant year-over-year price tightening, with spreads landing at an average of about SOFR+500 bps in the fourth quarter, according to Octus data.

Looking ahead to 2026, market participants speaking at the J.P. Morgan Healthcare Conference in San Francisco in January were optimistic that healthcare M&A would remain strong in the first half of the year, and that this should provide ample underwriting opportunities for direct lenders.

“Our expectation is that we should have a solid start to the year in terms of M&A,” said Carey Davidson, partner, managing director and head of capital markets at Monroe Capital. “It’s hard to [gauge] the pipeline in the first weeks of the year, but from our conversations with sponsors and our general sense of the market, our expectation is this should be a strong quarter.”

Healthcare companies either exploring sales or preparing to launch them in 2026 include Westview Capital Partners-backed RSi, which Octus reported is aiming for an enterprise valuation of at least $400 million in the event of a sale. Other active or upcoming auctions in the sector include DW Healthcare portfolio company CareXM, Olympus Partners-backed Eye South Partners and 83bar.

The capital goods industry, which includes subsectors such as building products, aerospace and defense and transportation, saw a slight decrease in private credit deals in 2025. Octus data shows that direct lending volume in the sector dropped to about 13% from 15% in 2024.

However, one industry advisor pointed to aerospace, defense and government services as a bright spot for M&A, with a seemingly high volume of activity in the last few months of 2025.

Recent activity in the sector includes Boeing’s $4.7 billion acquisition of Spirit AeroSystems, which was completed in December, and Howmet Aerospace’s $1.8 billion acquisition of Consolidated Aerospace Manufacturing from Stanley Black & Decker.

In terms of future dealmaking, there seems to be strong interest in the technology that will be used for the Golden Dome for America, which is a federal effort to develop an integrated air and missile defense system, said an attendee at the 2025 ACG Aerospace & Defense Middle Market Leadership Forum in December.

Drone technology is another industry to watch this year as geopolitical tensions ramp up demand in the space. A recent report from advisory firm Capstone Partners states that drone warfare has initiated an “arms race” that is expected to further push M&A activity in the air, land, sea and space, or ALSS, market.

Drone companies that have tapped the M&A market in recent months include Razor’s Edge-backed BlackSea Technologies, which Octus reported was exploring a sale with Raymond James in October.

Other businesses exploring exits in the broader industrials sector include Arcline-backed Arxis, which is pursuing an initial public offering, and Wynnchurch Capital-backed Premier Forge Group, which is running an auction process with Lincoln International, according to Octus reporting.

Additional aerospace and defense companies to watch in 2026 include: Kittyhawk, a Trive Capital-backed metals processing company that has launched a sale process with KAL Capital; Integris Composites, an Agilitas Private Equity-backed defense engineering firm that is exploring a sale with Jefferies; Picogrid, a venture-stage defense technology company that is working with Baird to explore strategic options including a sale; and Blue Raven Solutions, an AE Industrial Partners-backed aerospace and defense supply-chain business that was working with Morgan Stanley to explore a potential sale.

2025 was a key year for borrowers to address upcoming debt maturities. Octus data shows that refinancings accounted for 28% of total direct lending activity for the year, up 29% from 2024. Meanwhile, private credit deals backing add-on acquisitions remained relatively flat, decreasing by 1% year over year to 743.

Private credit lenders have leaned on refinancings and add-ons during the prolonged M&A slowdown; market experts draw a clear link between weaker deal flow and elevated refinancing volume.

“If a company is not able to be sold and its credit facilities are coming up for maturity, owners do have to refinance the debt in the capital structure,” said Fred Chung, partner and head of underwriting at Adams Street Partners.

Looking ahead, Octus sources said tighter spreads and the indirect impact of the Federal Reserve’s rate cuts should largely boost refinancing activity in 2026.

“Generally speaking, private credit loans are floating-rate obligations, so movements in base rates alone wouldn’t drive refinancing activity. But if spreads continue to compress, you can see borrowers wanting to lock in lower borrowing rates, and that’s, frankly, what we’ve seen a lot of,” Chung said.

The software and healthcare sectors saw an aggressive wave of refinancing activity in the fourth quarter of 2025, reported by Octus. Human resources software developer Mitratech lined up a $2.2 billion private credit package priced at about SOFR+475 bps to refinance its existing broadly syndicated loan, while HPS led a more than $500 million private credit refinancing for healthcare company Cordis at about SOFR+450 to 500 bps.

That said, with boosted confidence that M&A deal flow will start to pull through in the first and second quarters of 2026, lenders see opportunities for both refinancings and new platform financings.

“At this point it’s hard to predict the activity levels for each one of those transaction types over [2026], but I would expect that in a normal course deal environment, you’ll see healthy volume from both of them,” Chung added.