Consultancy.uk | 13 July 2017 

The alternative finance economy for mid-market players across Europe hit $9.1 billion in closed deals across the first quarter of 2017. Deal activity in the relatively new segment hit more than a 1000 accumulative deals this year, with the UK remaining out ahead in terms of closed deals – at almost 400. Fundraising for buyouts remains the driving force for turning to alternative lending platforms.

Attempts at leveraging digital technologies to achieve disruption is spreading into a host of industries, with the lending market no different. The phenomenon of ‘alternative lending’ platforms has grown in recent years, as smaller companies seek to access credit – which is often denied to them in the traditional capital markets – posing real competition to traditional bank funding, which has higher barriers.

In response to demand, marketplace lenders (MPLs) have sprung up – usually as online platforms – which, through a range of new mechanisms, offer an easy means for peer-to-peer lending across a range of segments – with low returns on other forms of assets continuing to entice investors to the market.

A number of prominent new incubators from top consultancies has also seen the sector grow, and the market is being closely monitored by a number of firms looking to tap into the flourishing economy. One of the firms tracking and measuring the rise of the alternative lending market is professional services firm Deloitte. The firm has released a number of surveys of the market, with the latest 'Alternative Lender Deal Tracker' edition involving 59 leading alternative lenders across mainland Europe and the UK in the mid-market segment.

See: The UK government invests £85 million in peer-to-peer lending sector where the watchdog has concerns

The study shows that deal activity has increased slightly from the previous quarter, and considerably on the same time last year. Q1 2017 recorded 79 deals, of which around 40% were in the UK, and around a quarter in France and Germany combined. Deal activity in the UK was at similar levels compared to the previous quarter, but considerably up on Q1 2016. Value too saw a considerable increase, hitting $9.1 billion in closed deals, nearly double the value of all of 2016 European fundraising.

European growth

In total around 1011 deals were completed in the past 18 quarters across the burgeoning market, with 612 of those in Europe and 399 in the UK – making the UK by far the largest contributor in terms of activity.

In the UK the most deals took place in the technology, media & communications segment, at 19% of all deals, followed by the business, infrastructure & professional services segments, at 18%. Human capital represented 6% of deals in the UK, while financial services firms accounted for 10% of closures.

In the rest of Europe, business, infrastructure & professional services mid-markets were the most active in the alternative market, followed by healthcare & life sciences. Technology, media & telecommunications came equal with manufacturing on 14% respectively. Human capital and financial services stood at 2% and 4% respectively.

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