The full array of financing options is finally available again for financial sponsors
Financing new deals will take centre stage as M&A markets show signs of recovery
Sponsors will curate bespoke loan packages to maximise flexibility and pricing
Sponsors will capitalise on opportunities to bring down financing costs across their portfolios
Private equity sponsors enter 2025 with a strong appetite to strike deals and take advantage of fully functioning debt markets.
The pause in buyout deal activity has created a backlog of unexited assets, which are sitting in portfolios as sponsors wait for market conditions to improve.
The post-pandemic cycle of high inflation and rising interest rates caused private equity and broader M&A deal activity to wane. As a result, a valuation gap has emerged—vendors have been reluctant to sell assets during the downturn, while bidders remain cautious about overpaying in an uncertain economic environment.
Europe recorded two years of rapidly declining private buyout dealmaking in 2022 and 2023, according to Mergermarket. Although activity has improved in 2024—the aggregate value of all private equity M&A in EMEA in 2024 (€268 billion) was up by approximately a third year-on-year from 2023’s total (€201.6 billion)—there is still a lot of ground to make up, particularly in terms of deal volume.
The pause in buyout deal activity has created a backlog of unexited assets, which are sitting in portfolios as sponsors wait for market conditions to improve. According to Bain & Co, buyout sponsors are holding approximately US$3.2 trillion of unsold assets in their portfolios, a record high.
Pent-up demand to spur sponsors and lenders
Dealmakers are increasingly optimistic about a rebound in European buyout activity in 2025, propelled by pent-up demand, falling interest rates and, crucially, more stable valuations.
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According to Dealsuite, the average European mid-market EBITDA multiple moved up for the first time in two years during H1 2024, supporting a corresponding uptick in M&A activity, which was especially pronounced in Q2 2024. As momentum builds, sponsors will take advantage of the reopened debt markets to negotiate optimal financing packages for new transactions.
Europe’s cycle of rising interest rates between July 2022 and September 2023 effectively shuttered broadly syndicated loan (BSL) markets, forcing sponsors to rely on private credit and alternative solutions, such as NAV loans, to finance deals and portfolios.
However, confidence returned to the BSL markets and high yield in 2024, offering sponsors a broad array of financing options besides private credit and fund finance. Overall, both European syndicated loan issuance and high yield bond issuance nearly doubled year-on-year in 2024. Combined issuance for buyout deals also improved, reaching €40.5 billion, surpassing the total logged in 2023 (€21.5 billion), though still far below pre-pandemic levels.
Financing tailored to fit
With all the financing channels reopened, sponsors are focussing on aligning deals with optimal funding sources.
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High-quality borrowers requiring a substantial amount of debt will often find the best fit in the BSL and high yield bond markets, which can efficiently handle large-scale financings. Meanwhile, more complex or higher-risk borrowers—whether due to their higher levels of leverage or operational complexity—might prefer private credit, where lenders undertake more detailed due diligence (and can do so in relatively compressed timeframes) and are prepared to price in additional risk.
Sponsors will also increasingly blend different sources of debt to optimise capital structures. For example, in a BSL, a sponsor-backed borrower/issuer could raise euro-denominated debt in public markets and rely on private lenders to pick up sizeable tickets in any sterling-denominated debt they may require.
As sponsors select ideal structures for deals, competition among lenders will intensify. The BSL markets are sharpening execution and offer more flexibility, while private credit players are tightening their margins and offering increasingly flexible covenants to win over borrowers.
Portfolio priorities
Kickstarting buyout deal activity will be the primary objective of sponsors in 2025, but private equity firms are also keeping a close eye on existing portfolios. As interest rates continue to fall in Europe, refinancing or repricing borrowings at more favourable rates is high on the agenda.
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European loan refinancing and repricing deal flow surged in 2024, driven by lenders’ willingness to put money to work, even at tighter margins compared to the prior year. During the past 12 months, sponsors have increasingly pivoted from more costly private credit facilities towards lower-margin BSL products, and have leveraged falling interest rates to negotiate coupon discounts with incumbent private credit providers.
One can expect sponsors to continue seizing opportunities to cut borrowing costs as market conditions improve. After more than two years of relatively limited financing options, sponsors are eager to get back to striking deals and maximising their portfolio companies’ value. Debt markets are well equipped to support those ambitions in 2025.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
Cornell University administrator Warren Petrofsky will serve as the Faculty of Arts and Sciences’ new dean of administration and finance, charged with spearheading efforts to shore up the school’s finances as it faces a hefty budget deficit.
Petrofsky’s appointment, announced in a Friday email from FAS Dean Hopi E. Hoekstra to FAS affiliates, will begin April 20 — nearly a year after former FAS dean of administration and finance Scott A. Jordan stepped down. Petrofsky will replace interim dean Mary Ann Bradley, who helped shape the early stages of FAS cost-cutting initiatives.
Petrofsky currently serves as associate dean of administration at Cornell University’s College of Arts and Sciences.
As dean, he oversaw a budget cut of nearly $11 million to the institution’s College of Arts and Sciences after the federal government slashed at least $250 million in stop-work orders and frozen grants, according to the Cornell Daily Sun.
He also serves on a work group established in November 2025 to streamline the school’s administrative systems.
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Earlier, at the University of Pennsylvania, Petrofsky managed capital initiatives and organizational redesigns in a number of administrative roles.
Petrofsky is poised to lead similar efforts at the FAS, which relaunched its Resources Committee in spring 2025 and created a committee to consolidate staff positions amid massive federal funding cuts.
As part of its planning process, the committee has quietly brought on external help. Over several months, consultants from McKinsey & Company have been interviewing dozens of administrators and staff across the FAS.
Petrofsky will also likely have a hand in other cost-cutting measures across the FAS, which is facing a $365 million budget deficit. The school has already announced it will keep spending flat for the 2026 fiscal year, and it has dramatically reduced Ph.D. admissions.
In her email, Hoekstra praised Petrofsky’s performance across his career.
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“Warren has emphasized transparency, clarity in communication, and investment in staff development,” she wrote. “He approaches change with steadiness and purpose, and with deep respect for the mission that unites our faculty, researchers, staff, and students. I am confident that he will be a strong partner to me and to our community.”
—Staff writer Amann S. Mahajan can be reached at [email protected] and on Signal at amannsm.38. Follow her on X @amannmahajan.
My spreadsheet reviewed a WalletHub ranking of financial distress for the residents of 100 U.S. cities, including 17 in California. The analysis compared local credit scores, late bill payments, bankruptcy filings and online searches for debt or loans to quantify where individuals had the largest money challenges.
When California cities were divided into three geographic regions – Southern California, the Bay Area, and anything inland – the most challenges were often found far from the coast.
The average national ranking of the six inland cities was 39th worst for distress, the most troubled grade among the state’s slices.
Bakersfield received the inland region’s worst score, ranking No. 24 highest nationally for financial distress. That was followed by Sacramento (30th), San Bernardino (39th), Stockton (43rd), Fresno (45th), and Riverside (52nd).
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Southern California’s seven cities overall fared better, with an average national ranking of 56th largest financial problems.
However, Los Angeles had the state’s ugliest grade, ranking fifth-worst nationally for monetary distress. Then came San Diego at 22nd-worst, then Long Beach (48th), Irvine (70th), Anaheim (71st), Santa Ana (85th), and Chula Vista (89th).
Monetary challenges were limited in the Bay Area. Its four cities average rank was 69th worst nationally.
San Jose had the region’s most distressed finances, with a No. 50 worst ranking. That was followed by Oakland (69th), San Francisco (72nd), and Fremont (83rd).
The results remind us that inland California’s affordability – it’s home to the state’s cheapest housing, for example – doesn’t fully compensate for wages that typically decline the farther one works from the Pacific Ocean.
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A peek inside the scorecard’s grades shows where trouble exists within California.
Credit scores were the lowest inland, with little difference elsewhere. Late payments were also more common inland. Tardy bills were most difficult to find in Northern California.
Bankruptcy problems also were bubbling inland, but grew the slowest in Southern California. And worrisome online searches were more frequent inland, while varying only slightly closer to the Pacific.
Note: Across the state’s 17 cities in the study, the No. 53 average rank is a middle-of-the-pack grade on the 100-city national scale for monetary woes.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
The up-and-coming fintech scored a pair of fourth-quarter beats.
Diversified fintech Chime Financial(CHYM +12.88%) was playing a satisfying tune to investors on Thursday. The company’s stock flew almost 14% higher that trading session, thanks mostly to a fourth quarter that featured notably higher-than-expected revenue guidance.
Sweet music
Chime published its fourth-quarter and full-year 2025 results just after market close on Wednesday. For the former period, the company’s revenue was $596 million, bettering the same quarter of 2024 by 25%. The company’s strongest revenue stream, payments, rose 17% to $396 million. Its take from platform-related activity rose more precipitously, advancing 47% to $200 million.
Image source: Getty Images.
Meanwhile, Chime’s net loss under generally accepted accounting principles (GAAP) more than doubled. It was $45 million, or $0.12 per share, compared with a fourth-quarter 2024 deficit of $19.6 million.
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On average, analysts tracking the stock were modeling revenue below $578 million and a deeper bottom-line loss of $0.20 per share.
In its earnings release, Chime pointed to the take-up of its Chime Card as a particular catalyst for growth. Regarding the product, the company said, “Among new member cohorts, over half are adopting Chime Card, and those members are putting over 70% of their Chime spend on the product, which earns materially higher take rates compared to debit.”
Today’s Change
(12.88%) $2.72
Current Price
$23.83
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Key Data Points
Market Cap
$7.9B
Day’s Range
$22.30 – $24.63
52wk Range
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$16.17 – $44.94
Volume
562K
Avg Vol
3.3M
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Gross Margin
86.34%
Double-digit growth expected
Chime management proffered revenue and non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for full-year 2026. The company expects to post a top line of $627 million to $637 million, which would represent at least 21% growth over the 2024 result. Adjusted EBITDA should be $380 million to $400 million. No net income forecasts were provided in the earnings release.
It isn’t easy to find a niche in the financial industry, which is crowded with companies offering every imaginable type of service to clients. Yet Chime seems to be achieving that, as the Chime Card is clearly a hit among the company’s target demographic of clientele underserved by mainstream banks. This growth stock is definitely worth considering as a buy.
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