Article
European Direct Lending Deal Activity Marginally Up 4% YoY to 223 Deals; Buyouts and Refinancings Help Stabilize Deal Flow
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European Q1 2026 Direct Lending Analytics
European direct lending activity in the first quarter of 2026 totaled 223 deals – a 4% increase year over year, yet a significant 33% decline from the prior quarter (332 deals). This contraction reflects heightened market volatility and macroeconomic uncertainty, largely driven by escalating geopolitical disturbances, including the Iran war.
Buyouts emerged as the primary driver of deal activity, accounting for 29.1% market share in the first quarter of 2026. Bolt-on acquisitions followed closely with 25.6% of the total share. Notably, refinancing activity surged to third place with 23.8% share, representing a sharp increase to 53 deals in Q1’26 from 38 deals in Q1’25. This year M&A deal flow is likely to remain subdued, taking into account Q1 results and the projected second-quarter pipeline
Regionally, the UK & Ireland maintained its lead, capturing 27.8% (62 deals) of the market. The DACH region (19.7%, 44 deals) and France (14.8%, 33 deals) followed as the second and third most active hubs, respectively.
Unitranche financing remained the dominant structure, representing over 45% of all facilities closed in the first quarter of 2026. Highlighting the scale of private credit participation, the €3.37 billion club loan financed by direct lenders for International Schools Partnership stood as the year’s largest transaction to date.
From a sector perspective, software-related borrowers accounted for the largest portion of direct lending activity, with 42 deals completed in the first quarter of 2026. Consumer-related and industrial & materials issuers tied for second place, each recording 39 deals during the quarter.
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