European direct lending contracted in the first quarter of 2025, as both a wider slowdown in the number of M&A transactions as well as a resurgent broadly syndicated loan (BSL) market impacted direct lending activity in the region, according to Debtwire‘s 1Q25 direct lender rankings report.

Direct lending volumes in Europe amounted to EUR 12.38bn across 162 deals in 1Q25, down from EUR 19.58bn spread across 199 deals in 1Q24, according to Debtwire data.

1Q25 deal count was down 20% from the prior year and far below the average quarterly deal count of 249 transactions in 2024, leaving direct lenders with a diminished pool of opportunities to deploy capital.

At the same time, a surge in institutional loan and high-yield bond issuances during the first quarter created additional competition for direct lenders on new deals and exerted downward pressure on margins as direct lenders strove to retain a competitive edge over the public debt markets.

Institutional loan and high-yield bond issuances jumped 42% to a record high of EUR 121.65bn in 1Q25, up from around EUR 85.4bn in issuances recorded in 1Q24.

Margins on direct-lending unitranches meanwhile tightened to 538bps above the reference rate in 1Q25, compared with an average margin of 650bps in 4Q24, partly as private credit providers looked to ward off heightened competition from the BSL market by offering more attractive pricing on their debt packages.

Still, fundraising proved to be a bright spot for the industry at the start of the year, with direct lenders collectively raising around EUR 21.3bn in 1Q25 alone, nearly half of the record EUR 44bn raised by direct lenders in all of 2024.

Among direct lenders, Ares and Eurazeo tied for the top spot in Debtwire’s 1Q25 European Direct Lender Rankings, with both funds reporting seven new deals accounting for roughly 6.67% of the market each. Barings, Hayfin and Muzinich followed closely behind in a three-way tie for third place, with six deals each and a market share of 5.71% apiece in 1Q25.

Including add-on financings, Ares likewise topped the charts in 1Q25, with 14 deals giving it a total market share of 8.33%. Eurazeo and Pemberton tied for second place with 10 deals and a market share of 5.95% each, followed by Barings, CIC Private Debt and Hayfin with 8 deals and a market share of 4.76% apiece.

In terms of ESG-linked deals, Eurazeo led the pack in 1Q25, with its seven transactions giving it a 33% share of the ESG market. Pemberton followed with four deals and an ESG market share of around 19%.

In the large cap space, Apollo and SMBC Private Credit tied for first place, with 4 deals and a 22.22% market share each. Ares and Hayfin were close behind with three deals and a 16.67% share of the large cap space apiece.

Ares and Eurazeo meanwhile led the rankings in the midmarket, with the two providers financing six deals each, giving them a respective 21.43% share of the midmarket. Muzinich and Pemberton tied for third place at four deals accounting for a 14.29% share of the market each.

In the small cap space, CVI topped the rankings with five deals accounting for a whopping 38.46% of the market. Muzinich, Oquendo Capital and Tresmares Capital landed in a three-way tie for second place, at two deals and a market share of 15.38% apiece.

Debtwire’s direct lender rankings highlight the key players in the private debt market. The report contains active direct lender fund rankings, along with market analysis.