Private debt's share of buyout financing hits decade high - S&P Global

Private debt has achieved unprecedented dominance in leveraged buyout financing, capturing 77% of global LBO funding in 2024—the highest share since at least 2015. Banks, historically the primary source of acquisition financing, funded only 23% of LBO transactions in 2024, marking their weakest performance over the same period. This structural shift has accelerated sharply into 2025, with private debt financing 83% of the 53 leveraged buyouts announced through January 22, according to S&P Global and Preqin data. The trend reflects a fundamental realignment in the LBO financing landscape, where nonbank lenders have systematically displaced traditional bank syndicates as the primary capital providers.

The retreat of banks from LBO markets stems from two principal factors: regulatory constraints and economics. Increased regulatory pressure has limited banks' ability to deploy their full balance sheets to support leveraged finance transactions. Additionally, middle-market deals have become economically unattractive for banks due to high capital charges and compressed profitability relative to the operational costs of maintaining large, specialized teams. Nicolas Nedelec, a partner at asset manager Eurazeo SE, noted that "it's very expensive to maintain large teams being active in this segment, and you don't have a lot of profitability for it." Nick Holman, partner and head of UK and Ireland at Kartesia, underscored the regulatory dimension, stating that "increased regulatory pressure" prevents banks from "us[ing] the full weight of their balance sheets to support leveraged finance."

Private debt providers are filling this vacuum by offering operational advantages that traditional bank syndicates cannot match. Direct lenders exhibit greater speed and execution certainty in loan transactions, with less dependence on market conditions and syndication capacity. Oliver Baker, member of management for private credit at Partners Group, noted that "investment banks that underwrite syndicated loans are sensitive to broader market conditions and their perceived ability to offload the risk," whereas direct lenders operate with greater autonomy and flexibility. This agility has resonated with PE sponsors seeking certainty in LBO execution, particularly in middle-market and complex transactions where bank syndication timelines are extended.

The growth trajectory extends beyond buyout financing. The global private credit market has expanded tenfold since 2007 and is projected to reach $3.5 trillion by 2028, according to BNY Mellon analysis. India alone recorded $9 billion in private credit investments during H1 2025, representing a 53% year-over-year increase, with large deals exceeding $100 million representing 18% of deal volume. As public-sector banks and traditional lenders retreat from large-ticket exposures, private credit funds are systematically capturing funding gaps across structured and event-driven opportunities, establishing private debt as the dominant capital source for institutional acquisition financing.