Middle Market Growth Conversations
A 2025 Lending Outlook with WhiteHorse Capital
Jan 31, 2025
Stuart Aronson, CEO of WhiteHorse U.S., and Pankaj Gupta, President and global head of originations, dive into the future of lending as we approach 2025. They discuss how interest rates and private equity will influence acquisition activity, highlighting a cautiously optimistic outlook. The duo also analyzes shifts in underwriting standards, potential economic challenges, and emerging credit structures in sponsor vs. non-sponsor markets. Their insights reveal a dynamic landscape with evolving risks and opportunities for investors.
30:24
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Quick takeaways
- The lending environment is expected to open up in 2025, with decreasing interest rates likely driving increased M&A activity and deal-making optimism.
- Underwriting standards are experiencing a relaxed approach in the upper middle market, raising concerns about loan quality and potential risks in economic downturns.
Deep dives
Lending Environment and M&A Activity
The lending environment for the lower and middle market is showing signs of thawing, with expectations of increased M&A activity in 2025. Interest rates have decreased, which is fostering optimism among private equity firms and business owners, likely contributing to a more active deal market. The overall economic conditions remain supportive, with private equity firms under pressure to realize returns, suggesting a willingness to pay higher multiples for stable businesses. Companies with cyclical or complex credit stories, however, are seeing more realistic valuation adjustments, reflecting a differentiation in market behavior across segments.
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