The State of the Game
The private credit arms race has taken the industry landscape by storm, with Ken Moelis citing the shift as the “greatest change in the history of transactional finance.”[1] Already enjoying years of measured growth, when banks and the broadly syndicated loan market stepped back from lending in 2023 due to market volatility, private credit stepped up, cementing private credit’s position as a force in financing markets. This has created a very active M&A and joint-venture market that does not seem to be slowing anytime soon.
BlackRock made headlines in late 2024 through the firm’s acquisition of HPS Investment Partners, backed by their expectation that the private debt market will more than double to $4.5 trillion by 2030.[2] While BlackRock’s acquisition dominated the news cycle, other firms have already made it their prerogative to jump into the private credit pool. In late 2024, Wendel Group acquired a majority stake in Monroe Capital, and Third Point (Dan Loeb’s hedge fund) acquired AS Birch Grove. In late 2023, TPG bought Angelo Gordon, and going even further back, Eldridge Industries acquired a majority stake of Maranon Capital in 2019. Eldridge recently announced a rebrand of its combined private credit vehicles, including Maranon and Stonebriar Commercial Finance, as “Eldridge Corporate Credit.”
The sector has become extremely attractive for investors, with LPs and asset managers pouring money into private credit.
Banks have also taken the plunge to offer product and garner revenue lost within their traditional lending and leveraged finance practices (most notably broadly syndicated loans or “BSL”). Wells Fargo and Centerbridge Partners joined forces in late 2023, PNC and TCW Group followed suit, and then in September 2024, Citibank and Apollo created a direct lending program with a goal of financing “approximately $25 billion of debt opportunities over the next several years, encompassing both corporate and financial sponsor transactions.” [3]
Consolidation Drivers
What is driving the push towards consolidation and bank / private credit partnerships occurring in the market? The sector has become extremely attractive for investors, with LPs and asset managers pouring money into private credit. It has even been a more favored asset class over private equity in the last few years (though the markets are intertwined). Fundraising for private credit reached $207B through Q3 of 2024, an increase from $193B over the same period in 2023, while average vehicle size approached $1.2B, marking 2024 as the first year for average vehicle size to eclipse $1B.[4] Meanwhile private equity was on pace for its lowest annual fundraising total since 2020, having raised only $234B through September.5
Additionally, private credit is increasingly competitive against (and in some instances more attractive than) BSLs. From 2022 through 2024, private-credit-financed buyouts outnumbered BSL financed deals 6 to 1. To compete against the BSL market, private credit needed significant size and scale, and the sector has done just that — 40%+ of private debt capital raised was for funds over $5B, while five years ago, only 20% of capital was for funds over $5B.[5]
Conflicts of interest, particularly arising from JVs between banks and private credit, could also create tension.
Lastly, the dearth of overall M&A activity over the last 12 – 24 months has provided the perfect environment for dealmaking at the fund level. A respite offered by relatively slower activity and deployment caused managers to explore and execute on transformational initiatives such as acquisition(s) for scale and / or Joint Venture(s) to broaden offerings.
The Good, the Bad and the Ugly
Regarding the upside for borrowers, the primary benefit is that investment in the market means more capital, which results in more competition and better terms. Additionally, the upper end of the market will be deeper than it has been historically.
The bad? The shift could result in a turnover in deal teams, specifically regarding who covers the deal. The team that closes a deal may not necessarily manage the relationship going forward.
Conflicts of interest, particularly arising from JVs between banks and private credit, could also create tension. These nascent alliances will require a delicate balance between investment banking divisions, leveraged finance departments, commercial and corporate lending, sales and trading desks, ancillary banking offerings (e.g., hedging, treasury), fund financing, and more. In an ultimate downside scenario, could this lead to a Volcker Rule 2.0? The original legislation, of course, limited banking entities’ relationships with private equity funds.
In addition to the aforementioned dynamics, rapid evolution means sponsors and borrowers face an increasingly difficult task with lender coverage.
Additionally, the traditional capital directed towards the middle market may get lighter. Private credit, which used to focus on smaller deals, has moved upward to compete in the BSL universe. Funds are moving up market for $100 – 200M minimum check sizes, leaving a shrinking number of players in the $30 – 75M size range.
Lastly — the ugly. As with any deal, not all of them are successful. Unfortunately, some mergers and JVs have significant integration issues and could leave borrowers scrambling for the next step. Onex’s 2020 purchase of Falcon Investment Advisors lasted less than four years, as Onex divested its majority stake of the ~$4B AUM credit fund in Q3 2024.[6] Similarly, Voya divested Czech Asset Management less than three years after acquiring the ~$5B AUM direct lender. Although the Onex/Falcon separation was due to synergies across the remainder of Onex platforms failing to materialize (and no rationale has yet been provided for Voya / Czech), other “break-ups” could be much worse and have a spillover effect for borrowers.
Considering the Above
While it’s an exciting time for participants in the private credit market with increased activity and interest, there are, of course, factors that may affect sponsors and borrowers. In addition to the aforementioned dynamics, rapid evolution means sponsors and borrowers face an increasingly difficult task with lender coverage — which in turn lends itself to better terms and best execution. With new funds forming, investment parameters shifting, and consistent lender velocity, broad coverage of the lender universe will require more investment of time and attention.
About the Author
James Bardenwerper is a Director at Configure Partners, where he joined in 2018 as an Associate. Before joining Configure Partners, he was at Genuine Parts Company, supporting merger and acquisition efforts and strategic planning. He began his career as an Analyst at SunTrust Robinson Humphrey (now Truist Securities), where he spent three years advising clients on debt and equity capital raises across various industries.
James received a bachelor’s in finance from the University of Kentucky. He is a FINRA General Securities Registered Representative (Series 79, 63).
Footnotes:
1 – Ken Moelis, Unplugged in New York
2 – BlackRock to Acquire HPS Investment Partners to Deliver Integrated Solutions Across Public and Private Markets
3 – Citi and Apollo Announce $25 Billion Private Credit, Direct Lending Program
4 – Private Debt Investor Fundraising Report Q3 2024
5 – Pitchbook Q3 2024 US PE Breakdown, Configure Partners Private Credit Quarterly
6 – Onex Hands Control of Private Credit Unit Falcon Back to Its Managers
© 2025 Private Equity Professional | January 9, 2025
