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.
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
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.
Reader question: My spouse has little interest in our financial position. As we age, this concerns me. I try to share some basic information (income, spending, account balances, debt, and so on) each month but rarely get a response. I think graphs or charts might be of more interest to her than a bunch of numbers. What recommendations would you have for illustrating our financial position so that I am not the only person aware of how we are situated? Thanks!
Answer: Your situation is pretty common. Most couples I know develop a division of labor over time, where one person is in charge of financial matters and the other person is less involved. That’s definitely the case for my husband and me. He’s in charge of paying all the monthly bills and preparing our tax returns, but the financial planning and investment decisions are up to me. This type of arrangement might work well for a long time, but can become less sustainable with age, particularly if the “finance person” in the relationship dies or develops a major health issue.
Online tools and mind maps
Illustrating your financial situation with charts and graphs is a great idea that might help your spouse become a little more involved. Morningstar’s Portfolio X-Ray tool includes a variety of images that help illustrate your financial situation. Websites for most major brokerage firms also include some visual tools. Schwab, for example, offers a Portfolio Checkup and a bar graph illustrating your account’s monthly income from dividends and interest income. Vanguard has a Portfolio Watch tool and a variety of performance illustrations, tools, and calculators.
A mind map, which we used with clients when I worked for a financial advisory firm, can be another way to picture your entire financial situation on one page. There are various softwaretemplates for drawing a mind map, or you can simply sketch it out with a large sheet of paper and a pencil. Start with your names at the center of the page. Then draw spokes connecting to various categories, such as names of other family members; investment accounts; real estate and other assets, insurance policies, estate plans, key goals and values, and contact information for accountants, estate planners, and other professionals. It can be helpful to go through the mind map together and make any updates needed at least once a year.
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Other ways to communicate about money
A few other ideas—though not related to charts and graphs—might also be useful.
I like the idea of putting together a net worth statement that itemizes cash, taxable accounts, real estate, retirement accounts, and debt for each member of the couple as well as items owned jointly. It’s a good idea to update this document at least once a year and discuss it as a couple. If you set up the document as a spreadsheet, you can include columns with additional information such as account numbers, what each account is used for, which accounts are subject to required minimum distributions, or tax issues like potential capital gains.
Many couples also put together a binder (sometimes humorously called a “Doomsday Book”) that contains information about where to find important paperwork, insurance policies, how bills are paid, what each account is for, steps the surviving spouse will need to take, final wishes, and any other critical information.
A well-qualified financial adviser can bridge the information gap
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Finally, you could consider working with a good financial adviser, who can help involve your spouse in financial matters while you’re still living and step in to fully manage investments and personal finance decisions if you pass away before your spouse. Make sure the adviser holds the Certified Financial Planner designation and charges fees that are reasonable. Although a 1% fee is still the industry standard for accounts of $1 million or less, it’s possible to find advisers who charge significantly less, including a few who price their services based on hours worked instead of a percentage of assets under management.
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This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-finance.
Amy C. Arnott, CFA, is a portfolio strategist for Morningstar and co-host of The Long View podcast.
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Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
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If you have ever taken out a mortgage, you’ll know there are a lot of requirements to meet. You may need to put down a certain amount and have a debt-to-income ratio below a certain threshold. You may also run into limits on how much you can borrow or what sources of income the lender will count.
These rules do not apply to all mortgages — just to conforming mortgages, which is what the majority of borrowers take out. However, mortgage lenders are increasingly offering what are known as nonconforming loans, or mortgages that do not “comply with every one of the strict standards put in place after the housing crisis,” said The Wall Street Journal. While “still a small portion,” the “share of mortgages using alternative lending practices” has “doubled in size over the past three years.”
What are nonconforming loans?
A nonconforming mortgage is a “type of home loan that doesn’t meet some or all of the guidelines that make them eligible for purchase by Fannie Mae and Freddie Mac,” said Bankrate. These are the government-sponsored entities that “support much of the secondary mortgage market in the U.S.,” meaning they often purchase resold mortgages.
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Fannie Mae and Freddie Mac have “federal rules that limit the purchase of loans deemed relatively risk-free,” said Investopedia. Loans that meet these guidelines are conforming loans; loans that do not are nonconforming. To be a conforming loan, a mortgage must fall under a certain loan amount, and the borrower must meet specific criteria when it comes to their credit score, debt-to-income ratio and loan-to-value ratio.
Effectively, any home loan that does not align with these stipulations is considered nonconforming. Examples include jumbo loans, government-backed loans, bridge loans and interest-only loans.
Why do people get them?
There are a wide range of reasons people may opt for a nonconforming mortgage. For one, “you may have no choice but to choose a nonconforming jumbo loan if you want to buy an expensive property,” said Rocket Mortgage. These loans can also provide more flexibility when it comes to the type of property you purchase, your credit score and your down payment amount.
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Nonconforming loans additionally “offer an opportunity for home buyers who might not otherwise qualify for traditional loans because they are self-employed or hold their wealth in assets such as real estate,” said the Journal.
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What are the drawbacks?
For starters, there are fewer lenders offering them “since they pose a higher risk to the bank or mortgage lender,” said Yahoo Finance. That said, availability can vary depending on the specific type, as “some nonconforming loans (like FHA mortgages) are common, while others (like USDA loans) can be harder to find.”
Nonconforming loans also “generally carry a higher interest rate for the borrower,” said the Journal, given the increased risk to the lender. Still, this can vary by loan type. For instance, “FHA, VA and USDA loans usually have lower interest rates,” while “less common nonconforming loans, such as bridge loans, often have higher interest rates,” said Yahoo Finance. There is also the possibility that a nonconforming loan “could have an unusual repayment schedule or other features that make it harder to repay,” said Bankrate.
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