Private Credit and the Modern Deal Economy: How Alternative Lenders Are Reshaping M&A and Private Equity

By: Cole Hammel, Class of 2028

Overview

Over the past decade, what was once a niche corner of finance, non-bank lending to private companies, has transformed into a central driver of modern mergers and acquisitions (“M&A”) and private equity (“PE”) transactions. The rise of private credit reflects a structural shift in how deals are financed, as regulatory constraints on traditional banks, abundant institutional capital, and sponsor demand for flexibility have converged to reshape the lending landscape.[1] For dealmakers and advisors, private credit is no longer an alternative; it is increasingly the default financing mechanism in many middle-market and large-cap transactions.[2]

This shift matters because financing structure directly influences deal timing, valuation, certainty, and execution risk, all of which frequently determine whether a transaction closes at all. As financing certainty becomes a competitive differentiator, private credit increasingly shapes not only how deals are funded, but which bids ultimately prevail.

Recent market data highlights the scale of this transformation. By 2023, the U.S. private credit market alone had grown to approximately $1 trillion, with global estimates exceeding $2 trillion and forecasts projecting continued expansion over the coming decade.[3] Industry observers increasingly describe private credit as a permanent fixture of the deal ecosystem rather than a cyclical substitute for bank lending.[4] As private credit continues to mature, its influence extends beyond capital availability to affect deal timing, leverage, risk allocation, and the role of legal and financial advisors.[5]

Structural Drivers Behind the Growth of Private Credit

The expansion of private credit is rooted in structural changes to the banking system following the 2008 financial crisis. Heightened regulatory requirements, particularly capital, liquidity, and risk-weighting rules, have constrained banks’ ability to underwrite leveraged loans, especially for middle-market borrowers and other complex transactions.[6] While banks remain active lenders, their appetite for risk-adjusted returns has narrowed, creating space for non-bank lenders to step in.[7]

Private credit funds, unconstrained by many of the regulatory burdens imposed on banks, have been able to offer flexible and customized financing solutions.[8] At the same time, pension funds, insurers, and endowments have increasingly invested in private credit as an alternative to traditional fixed-income investments that no longer provide comparable returns.[9] These forces have reinforced one another, producing a self-sustaining ecosystem in which private credit funds raise significant capital and deploy it directly into acquisition and refinancing transactions.[10]

For sponsors and acquirers, this regulatory divergence has practical consequences: financing availability is no longer uniform across lenders, and deal teams must evaluate not only pricing but also regulatory friction, balance-sheet risk, and execution certainty at the outset of a transaction. The financing strategy has thus become inseparable from the overall deal strategy.

Emerging Regulatory and Legislative Scrutiny of Private Credit

As private credit has expanded in scale and systemic importance, regulators have increasingly turned their attention to the risks posed by large-scale non-bank lending operating outside the traditional banking framework. United States and international regulators, including the Financial Stability Oversight Council (“FSOC”), Securities and Exchange Commission (“SEC”), and the International Monetary Fund (“IMF”), have repeatedly warned that the rapid growth of private credit may generate opacity, leverage concentration, and interconnected risk beyond the reach of conventional prudential regulation.[11] These concerns stem in part from limited disclosure obligations, covenant-lite lending practices, and the increasing role of private credit in financing highly leveraged transactions. [12]

Currently, no comprehensive statutory regime governs private credit lending as a discrete category comparable to bank regulation under the Bank Holding Company Act or the Dodd-Frank Act. However, the absence of a regulatory framework should not be mistaken for regulatory indifference. Rather, recent initiatives reflect a functional and incremental approach to oversight, signaling a broader shift toward supervisory engagement with private markets rather than categorical lender-based regulation.[13]

Most notably, in 2023, the SEC adopted sweeping private fund adviser rules to enhance transparency, standardize reporting, and strengthen investor protections across PE, hedge funds, and private credit funds.[14] Although these rules do not directly regulate lending activity, they materially affect private credit by imposing enhanced disclosure obligations relating to fees, expenses, performance metrics, and preferential treatment among investors. In doing so, the SEC has implicitly rejected the view that private credit operates as a series of isolated bilateral lending relationships and has instead treated private credit funds as systemically relevant private market intermediaries subject to heightened supervisory expectations.[15]

At the macroprudential level, FSOC and international regulators have increasingly framed private credit as part of a broader “shadow banking” or non-bank financial intermediation ecosystem.[16] Regulatory commentary has focused in particular on the growing interconnections between private credit funds and regulated financial institutions, including banks and insurance companies, through warehouse facilities, subscription and net asset value financing, and risk-transfer mechanisms.[17] Parallel developments in Europe, including expanded oversight of loan-originating funds under the revised Alternative Investment Fund Managers Directive (“AFIMD II”), further suggest that global regulators are converging on the view that private credit warrants closer scrutiny as a functional substitute for traditional bank lending.[18]

Taken together, these developments indicate that private credit regulation is emerging not through a single legislative intervention, but through layered supervisory mechanisms targeting transparency, leverage, liquidity, and interconnectedness. For dealmakers and advisors, this evolving regulatory posture carries meaningful implications. Regulatory risk, once largely peripheral in private credit transactions, may increasingly factor into financing diligence, lender selection, covenant negotiation, and transaction structuring. As private credit continues to displace banks as the dominant source of acquisition financing, regulatory considerations are poised to become an integral component of modern M&A and PE practice rather than a distant policy concern.[19]

How Private Credit Is Reshaping M&A and Private Equity Transactions

Private credit has become particularly attractive to PE sponsors and corporate acquirers because it offers speed, certainty, and structural flexibility that traditional bank syndicates often cannot match. Unlike broadly syndicated loans, private credit transactions typically involve a small group of lenders, allowing deals to be underwritten and closed on compressed timelines.[20] This speed can be decisive in competitive auctions or carve-out transactions where financing certainty is a differentiating factor.[21]

From a structural standpoint, private credit enables financing arrangements that are increasingly common in today’s deal market, including unitranche facilities, covenant-lite structures, delayed-draw term loans, and floating-rate instruments.[22] These features allow sponsors to optimize leverage and preserve operational flexibility, while also reducing execution risk at signing.[23] As a result, private credit has become a critical tool not only for closing deals but for shaping valuation outcomes and competitive positioning.[24]

Recent Deal Examples: Private Credit at Scale

Recent transactions illustrate how private credit is already operating as a primary financing source in large-scale deals. In 2023, Thomas Bravo completed the sale of Adenza to Nasdaq, a transaction valued at approximately $10.5 billion, one of the largest technology acquisitions of the year, against a backdrop of volatility in traditional syndicated loan and high-yield debt markets.[25] The transaction reflects broader shifts in acquisition financing as sponsors and buyers navigate constrained public credit conditions.

Similarly, in 2024, Vista Equity Partners relied heavily on private credit financing to support its acquisition of certain Finastra assets, utilizing a unitranche structure that consolidated senior and junior debt into a single facility and significantly reduced execution risk associated with multi-lender syndication.[26] By replacing a traditional bank-led process with a streamlined direct-lending structure, the transaction enabled rapid execution, simplified lender coordination, and provided greater certainty of close in a complex, multi-billion-dollar financing.

More broadly, sponsors have increasingly cited speed, flexibility, and certainty of close as decisive factors in selecting private credit over traditional bank underwriting, particularly during periods of market dislocation.[27] Unlike syndicated loans or high-yield offerings, which require broad market distribution, ratings processes, and market-facing price discovery, private credit transactions can be negotiated bilaterally or within a small lender group, allowing sponsors to lock in terms and funding commitments early in the deal timeline.[28] This dynamic is evident in the proposed take-private acquisition of Electronic Arts, a transaction valued at $50-55 billion and poised to be among the largest leveraged buyouts ever announced.[29] The scale of the contemplated financing underscores that private credit is no longer confined to middle-market transactions, but is increasingly capable of supporting complex, multi-billion-dollar acquisitions.

Implications for Deal Lawyers and Client Advisors

The rise of private credit carries significant implications for transactional attorneys and advisors. Financing documentation has become more complex, with greater emphasis on intercreditor arrangements, covenant design, and downside protections.[30] The speed associated with private credit transactions can also compress diligence timelines, placing greater pressure on deal teams to identify and address risks earlier in the process.

From a client-service perspective, advisors must understand not only the legal terms of private credit facilities, but also the business pressures driving financing decisions. Private credit can enhance deal certainty and flexibility, but it may also introduce heightened exposure to interest-rate volatility, leverage-related stress, and refinancing risk.[31] Lawyers who can anticipate these downstream issues and communicate them effectively to clients are better positioned to provide holistic, commercially grounded advice.[32]

Looking Ahead: Private Credit as a Permanent Feature of Deal Finance

Looking forward, several structural factors suggest that private credit will remain a durable and influential component of M&A and private equity financing. Regulatory constraints on traditional banking, including heightened capital requirements and balance sheet limitations imposed in the wake of the global financial crisis, continue to limit banks’ willingness and ability to underwrite large or complex leveraged transactions.[33] At the same time, institutional demand for private credit has grown substantially, as pension funds, insurers, and asset managers seek yield, floating-rate exposure, and diversification amid volatile public markets.[34] Sponsors have increasingly emphasized the execution certainty and structural flexibility offered by private credit, particularly in an environment characterized by macroeconomic uncertainty and fluctuating interest rates.[35]

Private credit has also expanded well beyond its historical focus on middle-market leveraged buyouts into adjacent areas such as infrastructure finance, growth capital, and large-scale corporate refinancings.[36] As private credit funds deploy capital across a broader range of transaction types and asset classes, commentators have observed a growing convergence between private markets and traditional capital markets, with private lenders increasingly performing roles once dominated by banks and public debt investors.[37] This evolution suggests that private credit is no longer a cyclical substitute for bank financing, but rather a structural feature reshaping how transactions are structured and financed across industries.

Conclusion

Private credit’s evolution reflects more than a shift in financing preference; it signals a reconfiguration of the institutional architecture underlying modern dealmaking. As non-bank lenders increasingly shape transaction timing, risk allocation, and regulatory exposure, private credit has become embedded in the mechanics of M&A and private equity rather than merely supplementing them. In my view, this integration is not a temporary market response but a structural development that is likely to persist even as interest rates and credit cycles change. For deal participants, the central question is no longer whether private credit will remain relevant, but how its continued integration into the deal economy will reshape legal practice, market structure, and regulatory oversight in the years ahead. As this shift continues, practitioners and regulators alike will need to adapt to a deal environment in which non-bank capital is no longer peripheral, but foundational.

[1] See McKinsey & Co., The Next Era of Private Credit (2024), https://www.mckinsey.com/industries/private-capital/our-insights/the-next-era-of-private-credit

[2] See PwC, Private Credit: The Rise of Non-Bank Lending (2023), https://www.pwc.com/us/en/industries/financial-services/library/private-credit.html

[3] See Fed. Rsrv. Bank of Bos., Could the Growth of Private Credit Pose a Risk to Financial System Stability? (2025), https://www.bostonfed.org/publications/current-policy-perspectives/2025/could-the-growth-of-private-credit-pose-a-risk-to-financial-system-stability.aspx; see also McKinsey & Co., supra note 1; see also PwC, supra note 2.

[4] See Morgan Stanley, Private Credit Outlook and Considerations (2024), https://www.morganstanley.com/ideas/private-credit-outlook-considerations

[5] See BlackRock Inv. Inst., Today’s Private Credit Opportunity (2024), https://www.blackrock.com/corporate/insights/global-insights/todays-private-credit-opportunity

[6] See Basel Comm. on Banking Supervision, Basel III: Finalising Post-Crisis Reforms (2017), https://www.bis.org/bcbs/publ/d424.htm

[7] See Int’l Monetary Fund, Fast-Growing Private Credit Markets Warrant Closer Watch (Apr. 8, 2024), https://www.imf.org/en/Blogs/Articles/2024/04/08/fast-growing-usd2-trillion-private-credit-market-warrants-closer-watch

[8] See Freshfields Bruckhaus Deringer, Private Credit in the Loan Market: A New Era of Financing (2024), https://transactions.freshfields.com/post/102kyjo/private-credit-in-the-loan-market-a-new-era-of-financing-for-corporates

[9] See Cambridge Assocs., Private Credit Markets Are Growing in Size and Opportunity (2023), https://www.cambridgeassociates.com/insight/private-credit-markets-are-growing-in-size-and-opportunity/

[10] See McKinsey & Co., supra note 1.

[11] See Fin. Stability Oversight Council, 2024 Annual Report (Dec. 2024), https://home.treasury.gov/system/files/261/FSOC2024AnnualReport.pdf

[12] See Duke L. Ctr. on L. & Mkts., The Promise and Perils of Private Credit (2024), https://law.duke.edu/news/promise-and-perils-private-credit/

[13] See Cong. Rsch. Serv., R48512, Nonbank Financial Intermediation: Overview and Policy Issues (2024), https://www.congress.gov/crs-product/R48512

[14] See Private Fund Adviser; Documentation of Registered Investment Adviser Compliance Reviews, Securities Act Release No. 11,132, 88 Fed. Reg. 56,936 (Aug. 23, 2023), https://www.sec.gov/files/rules/final/2023/ia-6383.pdf

[15] Id. at 56,942–50.

[16] See Fin. Stability Bd., Global Monitoring Report on Non-Bank Financial Intermediation 7–15 (2023), https://www.fsb.org/2023/12/global-monitoring-report-on-non-bank-financial-intermediation-2023/  

[17] See Bd. of Governors of the Fed. Rsrv. Sys., Bank Lending to Private Credit: Size, Characteristics, and Financial Stability Implications (FEDS Notes, May 23, 2025), https://www.federalreserve.gov/econres/notes/feds-notes/bank-lending-to-private-credit-size-characteristics-and-financial-stability-implications-20250523.html

[18] See Directive (EU) 2024/2811 of the European Parliament and of the Council amending Directive 2011/61/EU on Alt. Inv. Fund Managers (AIFMD II), art. 1, ¶¶ 15–27, 2024 O.J. (L 2811), https://eur-lex.europa.eu/eli/dir/2024/2811/oj 

[19] See Fed. Rsrv. Bank of Bos., supra note 3.

[20] See S&P Glob. Mkt. Intel., Private Debt’s Share of Buyout Financing Hits Decade High (2025), https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/2/private-debts-share-of-buyout-financing-hits-decade-high-87373500

[21] See Bloomberg, Private Credit Fuels Competitive M&A Auctions (2025), https://www.bloomberg.com/news/articles/2025-12-18/private-credit-s-secret-weapon-for-deals-is-buying-up-bank-loans

[22] See Glob. Legal Insights, Private Credit Laws and Regulations: Overview (2024), https://www.globallegalinsights.com/practice-areas/private-credit-laws-and-regulations/overview-and-comparison-of-the-broadly-syndicated-loan-and-private-credit-markets/

[23] See Ropes & Gray LLP, U.S. Private Equity Market Recap (2025), https://www.ropesgray.com/en/insights/alerts/2025/09/2-us-pe-market-recap  

[24] See Dechert LLP, The Cred: Private Credit’s Expanding Toolkit (2025), https://www.dechert.com/knowledge/the-cred/2025/11/from-direct-lending-to-abs--private-credit-s--3t-toolkit-fuels-p.html

[25] See Thoma Bravo, Nasdaq Completes Acquisition of Adenza from Thoma Bravo (Nov. 1, 2023), https://www.thomabravo.com/press-releases/nasdaq-acquires-adenza-from-thoma-bravo; see also Nasdaq Agrees to Buy Adenza for $10.5 Billion, Investopedia (June 12, 2023), https://www.investopedia.com/nasdaq-buys-adenza-from-thoma-bravo-7510946; see also Peter Smith, Nasdaq Buys Adenza in $10.5bn Deal as Credit Markets Remain Volatile, Private Equity Wire (June 12, 2023), https://www.privateequitywire.co.uk/thoma-bravo-exits-adenza-105bn-nasdaq-sale

[26] See Vista-Owned Finastra Clinches Record-Topping $5.3B U.S. Private Credit Loan, ConnectMoney (Aug. 21, 2023), https://www.connectmoney.com/stories/vista-owned-finastra-clinches-record-topping-5-3b-us-private-credit-loan/

[27] See Lisa Rafter, Private Credit’s Speed Premium Powers Middle Market M&A Recovery, ABF J. (2025), https://www.abfjournal.com/private-credits-speed-premium-powers-middle-market-ma-recovery/; see also George Hay, Private Credit Steps In as Banks Pull Back, Reuters Breakingviews (Oct. 2023), https://www.reuters.com/commentary/breakingviews/private-credit-will-become-plain-old-credit-2025-12-30/

[28] See Rafter, supra note 27.

[29] See Peter Rudegeair & Ryan Davis, Electronic Arts to Go Private in $55 Billion Deal in Largest Buyout Ever, Wall St. J. (Sept. 29, 2025), https://www.wsj.com/business/deals/electronic-arts-to-go-private-in-55-billion-deal-a4a4479c; see also Michael Liedtke & Michelle Chapman, Electronic Arts to Be Acquired in $55 Billion Take-Private Deal, AP News (Oct. 1, 2025), https://www.apnews.com/article/ea-electronic-arts-video-game-silver-lake-pif-d17dc7dd3412a990d2c0a6758aaa6900

[30] See Troutman Pepper Locke LLP, Recent Trends in Private Credit Documentation (2024), https://www.troutman.com/insights/recent-trends-in-private-credit.html

[31] See Fed. Rsrv. Bank of Bos., Private Credit and Systemic Risk (2025), https://www.bostonfed.org/publications/six-hundred-atlantic/interviews/private-credit-risk.aspx

[32] See Duke L. Ctr. on L. & Mkts., supra note 12.

[33] See George Hay, Private Credit Steps In as Banks Pull Back, Reuters Breakingviews (Oct. 2023), https://www.reuters.com/commentary/breakingviews/private-credit-will-become-plain-old-credit-2025-12-30/

[34] See S&P Glob. Ratings, The Rise of Private Credit in Insurers’ Investment Portfolios (Oct. 12, 2025), https://www.spglobal.com/ratings/en/regulatory/article/the-rise-of-private-credit-in-insurers-investment-portfolios-s101643158; see also S&P Glob. Ratings, Private Credit Markets Are Growing in Breadth and Depth (2025), https://www.spglobal.com/ratings/en/research/private-markets/private-credit; see also M&G Buys Majority Stake in European Private Credit Firm, Fin. Times (Feb. 6, 2025), https://www.ft.com/content/501c71c9-fdae-41cf-b972-366538e792e4

[35] See Rafter, supra note 27.

[36] See Fin. Stability Bd., Global Monitoring Report on Non-Bank Financial Intermediation (2024), https://www.fsb.org/2024/12/global-monitoring-report-on-non-bank-financial-intermediation-2024/ 

[37] See PwC, Private Credit: Rewiring Credit in Capital Markets (May 29, 2025), https://www.pwc.com/us/en/industries/financial-services/library/private-credit.html