Rising M&A tide to lift syndicated loan market in face of tech and private credit challenges

Bankers hope for an uptick in the syndicated loans market in 2026, after describing 2025 as subdued, with M&A struggling to take off after three years of floundering.

As of mid-November, total loan volumes in Europe were 4% higher, at nearly €1.4tr, than at the same point in 2024 according to Dealogic.

Respondents to GlobalCapital’s survey of the syndicated loan market said they were “cautiously optimistic” about the year ahead. While nearly 50% believe a big increase in M&A financing in the loan markets in EMEA is likely in 2026, some expressed scepticism, “Is the M&A calendar and pipeline really going to develop and play out the way we anticipate it will?” asked one senior banker.

More than 60% of respondents believe syndicated loan volumes will show an annual increase of between 5% and 20% in 2026.

“At this stage, it’s a more positive tone than it was six months ago,” said Nicholas Rabier, managing director and global head of investment grade syndicated loan markets at BNP Paribas. “But I think we’re all very hopeful and certainly seeing more opportunities for 2026 levels to increase.”.

Geopolitical uncertainty, especially around US tariff policy, took the blame for the market feeling subdued in 2025. Such an unpredictable backdrop makes it difficult for companies to commit to the level of M&A that generates financing activity in the loan market.

In Europe, syndicated loans used to finance M&A were down by 32% year on year at €110bn for the first 11 months of 2025, compared to €161bn for the same period in 2024, according to Dealogic.

Despite the turmoil caused by US President Trump’s announcement of his so-called “liberation day” tariffs on April 2, M&A activity has picked up since then, especially once the US reached agreements on tariffs with the UK and the EU.

Total loan volumes for April in Europe stood at €115bn, according to Dealogic. In May, that number ticked up a little to €122bn. By the end of September, the number for the year stood at €913bn.

With M&A tipped to be a major driver, bankers expect lending activity to rise in 2026. “I think it should be meaningful,” says Stan Hartman, head of high yield and leveraged loan syndicate at BNP Paribas of M&A’s contribution to lending activity.

“We believe corporates have the firepower and balance sheet strength to pursue an inorganic growth agenda to keep pace with competition,” says Dale Baxter, managing director of investment grade loan syndicate at MUFG.

Private credit’s incursion into investment grade lending also grew in 2025 and this is expected to continue in 2026, even if bankers are not yet publicly worrying about it taking a share of their business.

“We’ll see how the private debt markets will also influence the numbers,” says Carlo Fontana, head of global syndicate of UniCredit. “The big private credit lenders, for example, Blackstone, Apollo and KKR, all have a very clear investment grade lending strategy, and that can also influence the shape of the market in a positive way because you’re going to have more liquidity available beyond just the relationship liquidity coming from commercial banks.”

More than half of survey respondents say competition between banks and private credit increased slightly in 2025. However, private credit lenders are only dominating in some areas of lending.

Hartman sees more private credit activity in sectors where financing is perhaps more suited to private lenders because of their speculative nature and longer timelines, such as infrastructure. He believes the model for corporate borrowing in the investment grade loan market means banks can often come up with more competitive pricing.

Private credit’s dominance is “more the infra[structure] market, than it is the IG corporate loan market,” he says. “I think private credit could struggle to compete in Europe with bank loans from a corporate basis because of ancillary fee revenue that is generated, and the pricing on the bank market.”

European-based private market funds hold approximately $2.73bn assets under management, according to Ocorian, a provider of asset servicing for private markets and corporate and fiduciary administration. Around 19% of global assets in private market funds are in European-domiciled funds. These data indicate Europe’s particular strength in infrastructure funds, accounting for 38% of underlying infrastructure assets globally.

More than 45% of respondents to GlobalCapital’s survey say that margins in investment grade lending tightened because banks are still competing to lend. They expect this to continue in 2026.

Loan bankers believe a more stable economic and political backdrop following the initial disruption of US tariffs means more opportunities for lending will materialise in the coming year than in 2025.

Bankers see the technology sector, in particular, as a growth area for lending. “Tech is going to be a big theme, and within it in particular, the big debate around data centres, where lot of people want to put lots of money, though the business model remains to be proven,” says Fontana.

Meta’s announcement in December 2024 that it would build the largest data centre in the western hemisphere, measuring 4m square feet, in Louisiana is perhaps a sign of things to come.

The race to build data centres in Europe is also intensifying, with some market participants dubbing the key locations as FLAPD for Frankfurt, London, Amsterdam, Paris and Dublin.

Fontana highlights the speculation in the market about where the next data centres might be.

“Some of the topics out there verge on speculative where people are buying land with the expectation it will be bought and procured for AI and data centre development,” says Fontana, who also expects other sectors apart from technology to increase their lending activity.

“Opportunity in the subdued sectors will once again arise. Potentially, we’re going to see the chemical sector also turning, since it feels like we have bottomed out there. Other sectors that are very large like industrials and automotive will continue to be relevant,” he adds.

Baxter believes resets and refinancings will dominate loan desk activity in the coming year. “Refinancings are continually expected to be the bellwether behind loan volumes in 2026,” he says.

Refinancing volumes in Europe were strong in 2025. Deal value proceeds for refinancings and reset volumes for 2025 as of November 18, stood at nearly €680bn, up by 17% from €582bn for the same period in 2024, and €377bn in 2023.

“That pricing has remained competitive for high investment grade borrowers with large ancillary wallets who continue to command tight terms on their relationship defining facilities,” says Baxter. “Regulatory requirements, sector and currency remain key considerations for lenders.”