Private credit’s consolidation season
Partner and co-chair of Herrick's Corporate Department, Morris DeFeo, was quoted in Alternative Credit Investor in an article discussing the uptick of M&A activity in the private credit sector.
“Similar to other industries that have experienced boom cycles, we can expect to see significant consolidation among asset managers to achieve scale and market penetration rapidly,” said Morris. “We also will likely see an increase in consortiums, joint ventures and other strategic alliances, as well as the emergence of new technologies — all of which are common characteristics of a rapidly-growing and evolving industry.”
Morris stated that he sees M&A "as a natural result from the mismatch between the number of private credit firms and the sheer amount of investors seeking exposure, which he expects will lead to 'significant competition' for deal flow and funding." The article further notes that asset managers are inclined to sign off these transactions, as they can be much less expensive and less time-consuming than "organically creating their own private debt brands from scratch."
Morris noted that he sees M&A as inevitable for any growth strategy in the space, but warned of prioritizing speed instead of organic growth: “There is no ‘best way’ – however, an ill-conceived or poorly executed M&A strategy can be disastrous.”
Read the full article in Alternative Credit Investor here. Access may require a subscription.