Private Credit Prepares for Growth in Anticipation of M&A Surge
Private credit lenders are gearing up for a significant shift in the market as they prepare to scale their operations in anticipation of a surge in mergers and acquisitions. Executives from Blackstone Inc. and Blue Owl Capital Inc. highlighted the importance of achieving scale in the coming year, emphasizing the need to offer clients a wide range of credit solutions.
Michael Zawadzki, the global chief investment officer at Blackstone’s credit and insurance unit, BXCI, stressed the significance of having scale to meet the evolving needs of clients in various credit sectors. He highlighted the upcoming wave of M&A activity as a key driver for the expansion of private credit opportunities.
As private credit expands into new areas such as investment-grade direct lending and asset-based finance, the ability to provide a comprehensive range of services will be crucial for success. Zawadzki pointed out that the recent years have seen historic lows in M&A volume as a percentage of nominal GDP, but he expects this trend to reverse as market conditions improve.
Consolidation in the private credit industry, like BlackRock Inc.’s acquisition of HPS Investment Partners, underscores the importance of achieving scale in a competitive market. Jonathan Lamm, the CFO of Blue Owl’s business development companies, highlighted the necessity for firms to position themselves as industry leaders to thrive in the evolving landscape.
Looking ahead, BXCI is eyeing opportunities in investment-grade debt, data centers, energy transition, equipment finance, homeowner lending, and consumer finance. Zawadzki emphasized that investors are seeking higher returns without added risk, making private credit an attractive option in the current environment.
Overall, the shift towards achieving scale in private credit is seen as a strategic move to capitalize on the anticipated increase in M&A activity and meet the growing demands of clients in a rapidly changing market. The focus on providing a wide range of credit solutions and expanding into new sectors positions lenders for success in the evolving landscape of the finance industry.
