The most recent direct lending data shows a boost in the deal count and estimated volume in the European market, including the first direct-lending takeout of a broadly syndicated loan since the third quarter of 2025, as well as renewed support for lending to the software sector. The data is also beginning to indicate some spread widening and a migration of borrowers to the broadly syndicated loan market, with BSL refinancing activity jumping to the second-highest quarterly reading since LCD began tracking this data, according to the latest European Private Credit Monitor. The direct lending deal count rose to 35 in the last three months to the end of July, while the estimated volume increased to €9.8 billion — from 32 and €8.5 billion in the second quarter, respectively.
Meanwhile, PE-backed estimated direct lending volume grew to the highest level since the end of 2025 on the three-month measure. However, the estimated volume and count for direct lending deals in the year to end-July still lag the rate tracked in 2025, with these measures trailing by 29% and 19%, respectively. The trend is the same for sponsor-backed deals, which are running 24% lower for estimated volume and 19% lower by number of transactions.
Along with the general recent uptick in activity, interactions between the BSL and DL markets have seen a boost over the past three months, with the direct lending market demonstrating support for software companies despite general market nervousness over this sector. Dutch enterprise software company Unit4, for example, refinanced its syndicated term loan B via a club of direct lenders including Arcmont, according to sources. Unit4's term loan B due June 2028 dated from a facility priced in 2021 to support TA Associates' acquisition of the firm from Advent, and stood at €875 million following a 2024 upsize.
In secondary, the loan fell into the mid-90s during the software sell-off in February, before recovering to trade around par by the end of April. Big dealsThis transaction — along with direct lenders supporting syndicated borrower Cegid's acquisition of Shine with a €1.1 billion facility in June — shows a resurgence in bigger transactions across the year so far. Cegid's loan was shown to early birds but never formally launched, shifting instead to direct lenders following the sell-off in software credits from late January.
Illustrating this resurgence, the share of deals sized in the €1 billion or more category has risen to 18% in the YTD, from 14% in 2025, while the €100-349 million category, which saw a huge increase in its share to 57% in 2025, fell to 45% in the YTD. That said, the 'mega deals' of the past few years have been absent in 2026, with none of the transactions tracked so far in 2026 making the top 10 list in terms of deal size. In addition to the return of bigger deals, the data supports the staying power of direct lending to software companies in Europe.
The broad Professional & Business Services category is still the most active sector in Europe in the YTD, with a 25% share of deals. Drilling down on a more granular basis, the Software and Data Integration category is still in the lead with a 22% share, with Business Services taking a 20% slice. Price premiumMarket participants say European direct lenders are charging a premium to finance software buyouts, as AI disruption concerns and a shrinking pool of willing lenders reshape pricing in the sector.
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