Mid-market private equity in Germany posted a strong first half of 2017, rising 46 per cent on a like-for-like basis.

GCA Altium’s latest MidCapMonitor reveals that there were 41 transactions with a credit volume of between €20m and €500m in the first six months of the year, a significant increase on H1 2016. A growing proportion (30 per cent) of these were secondary buyouts.

Notable transactions in H1 2017 included Advent International and Bain Capital’s investment in Concardis, Emeram’s purchase of Frostkrone and Alpha Private Equity’s acquisition of Europart.

“The steep rise in transactions shows that today’s attractive price levels in the M&A market along with very aggressive financing markets have triggered an intensive sales push by private equity firms,” said Norbert Schmitz, managing director in the Frankfurt office of GCA Altium.

Furthermore, the report reveals that alternative lenders are capturing an increasing portion of the acquisition finance market, reversing what was until now a downward trend.

Debt funds accounted for around 30 per cent of all deals in H1 2017, compared to just 18 per cent for the whole of 2016. There were also more unitranche arrangements in the first quarter of the year (44) than in the previous 12 months.

However, much of this activity has been in the form of first-out/ second-out structures, and GCA Altium has questioned the sustainability of this position.

“In past quarters, banks made life particularly hard in the German LBO market for debt funds with very aggressive structures. The funds have responded and have sharply reduced their average interest margin rates by including favourable senior tranches held by banks,” said Johannes Schmittat, another managing director in the firm’s Frankfurt office.

“It will be interesting to see whether the debt funds will be able to defend this high market share throughout 2017,” Schmitz said.