Mid-Market Credit in 2025: Key Insights from the Smith Novak Conference

The Smith Novak Mid-Market Conference brought together leading lenders, sponsors, originators and advisors to explore how private credit, buy-and-build strategies and asset-backed finance are evolving in today’s environment. Across the panels, several clear themes emerged, highlighting both the opportunities and challenges in mid-market credit in 2025.

Direct Lending: High deployment, greater selectivity and shifting risk appetite

Despite a slower M&A environment, deployment remains strong. Refinancing needs, looming maturity walls and recapitalisations continue to drive activity, particularly among 2021 and 2022 vintages. A notable supply and demand imbalance is creating tighter spreads at the upper end of the market and weakening lender protections.

Competition is intense for top-tier credits, while weaker credits face a meaningful liquidity gap. This gap creates opportunities for structured and complex capital solutions. Defaults remain low, under two percent compared with roughly six percent across broader credit markets. Managers are focusing on resilient sectors such as software, healthcare and B2B services.

Banks are increasingly active as senior or revolving credit facility partners, while private lenders dominate term debt and unitranche solutions. Private credit penetration continues to rise in the UK, DACH, France and the Netherlands, with Southern Europe starting to catch up. Semi-liquid and evergreen private wealth channels are also growing, although investors are paying close attention to transparency and liquidity.

Alpha generation is shifting toward non-sponsored lending, smaller transactions, real estate-backed exposures and special situations where banks have stepped back.

Buy and Build: Integration quality and people strategy drive value

Buy-and-build strategies remain active across highly fragmented sectors including wealth management, IFAs, accountancy, insurance broking, fire safety and healthcare. One key insight is that multiple arbitrages alone no longer drive sustainable value.

Successful platforms combine organic growth, recurring revenue and disciplined integration. The optimal approach is light but purposeful. Insufficient integration limits exit outcomes, while overly heavy centralisation can damage brands, culture and local leadership.

People risk is central. Without aligned incentives for founders and key professionals, EBITDA performance can decline after a deal. Roll-ups often fail due to weak playbooks, misaligned bolt-ons, rushed pipelines, poor KPIs or no succession plan.

Lenders are focusing on documentation protections, DSCR-style covenants, step-up leverage models and closer scrutiny of EBITDA adjustments. Deferred consideration remains a key structural tool, including careful management of caps, contingencies and the proportion of consideration deferred.

AI is expected to materially reshape professional services including law, accountancy and wealth management. Future buy-and-build strategies must incorporate this technological shift into their long-term value creation plans.

Asset-Backed Finance: Greater sophistication and market divergence

Asset-backed finance is gaining traction as investors seek senior secured exposures with lower market beta. Originators are becoming increasingly sophisticated, even at smaller AUM levels, although access to capital remains a key barrier.

Banks are retreating from several asset classes due to capital constraints, creating opportunities in receivables finance, SME lending, trade finance and consumer credit. Private credit is stepping into these gaps, offering faster execution, more flexibility and higher loan-to-value appetite, albeit at higher pricing.

Back leverage is increasingly used to scale, but this also introduces additional risk. The ABF market is bifurcating into low-cost, highly regulated bank-style lending and higher-yield bespoke structures led by private credit.

New entrants face risks around counterparty quality, legal structuring, governance and reliance on complex synthetic structures. Real estate finance remains strong in Iberia due to housing shortages and pre-sales, while UK development lending remains constrained. Credit insurance is increasingly used to improve bank capital efficiency and mitigate counterparty risk. Long-term growth will require more genuine risk equity rather than heavily leveraged private credit structures.

Cross-panel insights: Technology, transparency and operational readiness

Supply and demand imbalances continue to shape the mid-market, making careful selectivity more important than ever. While banks remain active, they are increasingly moving up the capital structure and partnering strategically with private credit, leaving opportunities for nimble and well-prepared platforms. In this environment, technology and robust data infrastructure have become essential not only for winning deals but also for integrating acquisitions and attracting institutional capital.

Investors are also demanding greater transparency around portfolio performance, lender protections, valuations and liquidity, which places a premium on operational excellence. Yet operational integration and data quality remain persistent challenges, highlighting the advantage for platforms that prioritise clean data, efficient workflows and scalable infrastructure to deliver both confidence and growth.

Equipped’s role in a complex market

The mid-market credit landscape is evolving rapidly. For lenders, sponsors and originators, success will increasingly hinge on disciplined deployment, thoughtful integration and robust operational infrastructure. At Equipped, we transform how private credit managers manage data, monitor portfolios, and administer loans. Our flagship SaaS platform unifies portfolio data, documents, and workflows into a single intelligence layer, powered by AI that automates data ingestion and turns information into real-time insight.

If you’d like to discover how we help firms move faster, scale smarter, and achieve full visibility and control across their end-to-end investment workflows, get in touch with James Ferguson, Commercial Director, at: james.ferguson@equipped.ai