The first quarter of 2025 has shown that while the European debt markets can absorb volatility, the pace of deal-making remains restrained – particularly in the Benelux region. For M&A professionals navigating this evolving environment, there are both warning signs and windows of opportunity.
This is reported by DC Advisory in their European Debt Market Monitor Q1, 2025 & Outlook.
European debt markets: A tale of two speeds
The European Broadly Syndicated Loan (BSL) market kicked off the year strongly, reaching 99.8billion euros in institutional volume – nearly double the figure for Q1 2024. However, it’s worth highlighting that 66 billion euros of this activity was due to extensions and repricings, not new issuance. Momentum tapered off in March, largely due to geopolitical noise, notably fears surrounding potential US tariffs.
Investors remained eager to deploy capital during more stable periods, which allowed many borrowers to renegotiate terms and reduce their cost of debt. Spread reductions averaged 66bps – an increase from 54bps in Q4 2024. Meanwhile, direct lenders also tightened pricing, with average spreads narrowing to 558bps.
Yet, despite these competitive dynamics, private credit deployment fell to 12.4 billion euros –down from 19.6 billion euros a year earlier – mirroring subdued M&A activity and growing competition from the BSL market.
M&A lending in retreat
Expectations for an M&A rebound in 2025 have not materialized. Loan issuance for M&A purposes fell to 9.4 billion euros in Q1, down from 12.2 billion euros in the prior quarter. Persistent valuation mismatches and macro instability – especially in March – have caused many sale processes to stall.
April saw the BSL market temporarily shut down after the US announced sweeping new tariffs. Both syndicated and private credit lenders hit pause, adopting a ‘wait-and-see’ approach. While recent weeks have shown signs of life returning to the market, activity remains cautious and highly selective.
Benelux lens: Global issues, local impact
By Paul de Hek & Robert Ruiter, Co-CEOs, DC Advisory Netherlands
For dealmakers in the Benelux, the story is one of deferred momentum. The year began with a solid pipeline but low transaction churn. Deal timelines have lengthened as political decisions in the US have shaken confidence, especially for internationally active businesses.
Benelux economies, heavily integrated into global trade and largely dependent on imported resources, are particularly exposed. Assets currently in market – or those preparing to launch – are facing increased scrutiny, especially if they operate along international supply chains.
However, it’s not all bleak. Top-tier assets still command strong interest and premium pricing. Businesses with a more domestic focus – such as local IT service providers – have proven more resilient, largely insulated from the global trade tensions now reshaping investor sentiment.
Refinancing: The interim theme
With exits delayed, refinancing has taken center stage. Falling interest rates are welcome, but rates remain well above the historic lows seen over the past decade. For borrowers still carrying older, cheaper debt, refinancing is a delicate balancing act.
Nonetheless, strong fundraising activity in 2024 has left lenders – especially in the private credit space – with ample dry powder. While they are deploying selectively, the capital is there for quality credits and strategic refinancings.
Outlook: Waiting for the post-summer window
Looking ahead, the Benelux M&A landscape may remain subdued through the summer. Current conditions point to a recovery window opening in late 2025 or early 2026. Until then, expect longer due diligence phases, increased caution from lenders, and fewer processes entering the market.
Still, moments of dislocation often present the best opportunities for agile investors. As private credit steps in to fill gaps left by the BSL market, those with strong balance sheets and local insight may find unexpected openings – particularly in sectors less vulnerable to geopolitical swings.
