The European middle-market's preference for sole-lender deals contrasts with the syndicated US market. This allows lenders to design their own tight credit agreements, preventing value leakage and prioritizing downside protection—the most critical factor for a capped-return loan product.

Sourcing lucrative non-sponsor deals in Europe is a challenge of access, not just analysis, as a "fly-in, fly-out" model fails. The effective strategy is partnering with firms like Lazard, which have centuries-old advisory relationships with target family-owned companies, providing essential boots-on-the-ground origination.

Companies are willing to pay a 150-200 basis point premium for private credit to gain a strategic partner who provides bespoke financing, governance, and expertise for complex needs like carve-outs. This partnership value proposition distinguishes it from transactional public markets.

While the US private credit market is saturated, Europe's middle-market offers higher spreads (north of 600 basis points) and lower leverage. This opportunity is most pronounced in non-sponsor deals, a segment where large banks and public markets are less active, creating a lucrative niche.

Corporations are increasingly shifting from asset-heavy to capital-light models, often through complex transactions like sale-leasebacks. This strategic trend creates bespoke financing needs that are better served by the flexible solutions of private credit providers than by rigid public markets.

A consistent 2-5% of Europe's public high-yield market restructures annually. The conspicuous absence of a parallel event in private markets, which often finance similar companies, suggests that opacity and mark-to-model valuations may be concealing significant, unacknowledged credit risk in private portfolios.

Unlike US firms focused on rapid exits, many multi-generational European family businesses prioritize stability and privacy. They actively dislike the anonymity and disclosure requirements of public markets, creating a strong, relationship-driven demand for tailored private lending solutions.

The two credit markets are converging, creating a symbiotic relationship beneficial to both borrowers and investors. Instead of competing, they serve different needs, and savvy investors should combine them opportunistically rather than pitting them against each other.

Large European banks are not absent from lending, but they prefer the simplicity and regulatory ease of large, portfolio-level financing over complex, single-company underwriting. This strategic focus leaves a significant funding gap in the €100-€400M facility size range for private credit funds to fill.