Private Credit vs Banks: The Sponsor Financing Share Battle

Introduction

Most sponsor financing is never contested. A buyout of a company earning $25 million a year usually goes to a direct lender, because the broadly syndicated loan (BSL) market, where banks arrange loans and sell them to collateralized loan obligations (CLOs) and loan funds, needs loans large enough to be rated and traded. The contest between private credit and the banks runs in the band above, from the upper middle market to multi-billion-dollar take-privates, where either market can fund the deal. That band is where the share has swung: toward direct lenders from 2022, when banks pulled back from underwriting, and back toward syndication in the first half of 2026. Which way it moves decides which fees a financing pays a bank.

The middle market settled its question years ago. LSEG LPC, the loan data service of the London Stock Exchange Group, shows direct lenders going from about a third of middle-market buyout activity in 2014 to roughly nine-tenths after 2023, and Bain & Company's 84% of middle-market loans in 2023 appears in the account of the 2022 and 2023 rate reset. The obstacle there is scale, not price: few CLOs will buy a loan too small to trade. Above that size the share is cyclical, and the unit counted changes the answer.

LBO Financing Market Share

The portion of leveraged buyouts (LBOs) in a period financed by one market, such as direct lending or broadly syndicated loans, measured by number of deals or by loan volume on one data provider's definitions. Count and volume shares can name different winners for the same period.

Large Buyouts: A Pendulum Since 2022

PitchBook's Leveraged Commentary & Data (LCD) unit tracks how buyouts above $1 billion in the US and Europe were financed, by count, in its July 2026 US Private Credit Monitor. Read from the chart, direct lending financed under a tenth of those deals each year from 2015 to 2018 and under a fifth from 2019 to 2021, with syndicated loans taking most of the rest. Its share jumped to about a third in 2022 and passed half in 2023, slipped below half in 2024 and 2025, and fell further in the first half of 2026, when plain syndicated loans financed more of these buyouts than direct lenders for the first time since 2021.

Count Against Volume in the US

By deal count, direct lenders financed more US LBOs than the syndicated market in every quarter since 2020, even as their count fell to its lowest since the third quarter of 2023. By new-issue volume, direct lending led most quarters from mid-2022 through 2025, then syndication moved ahead in both quarters of 2026. Private credit winning most deals while banks arrange most dollars is a contest decided by deal size:

So "banks are winning back share" is true for the large band and the dollar total, and false for the number of buyouts financed.

Three conditions moved the large band, and price was the weakest. The first was private credit's own strain: redemption requests and stress among software borrowers made direct lenders slower to commit, as covered in the redemption and valuation strain in private credit and, for the build-up, the asset class's growth and first stress signals.

The second was syndicated demand for large, cash-generative credits. Banks led by JPMorgan sold more than $18 billion of loans and bonds for the Electronic Arts take-private in March 2026, and Private Equity Wire's report on the sale notes that the final bond tranche drew more than $45 billion of orders and that the banks shifted the mix toward loans so the company could repay early. One financing of that size can move a half-year's volume share, so the syndicated majority among the first-half loan market readings reflects a few jumbo deals more than the typical buyout.

Private Credit Spread Premium

The extra margin a direct loan pays over a broadly syndicated loan to a comparable borrower, quoted in basis points over the Secured Overnight Financing Rate (SOFR). It prices certainty and a small lender group, narrowing when direct lenders compete and widening when they ration capital.

The third condition, pricing, pointed the other way: LCD shows the gap between direct lending and syndicated spreads on US buyouts at 146 basis points in 2026 through July, the narrowest since 2019 (its direct lending data added private sources from 2026, so the comparison is approximate).

A buyout's first lender is rarely its last, and LCD's quarterly series shows the direction of traffic tracking the cycle. In 2023 it ran almost entirely one way, with direct lenders refinancing syndicated loans. Early in 2024 it reversed as reopened loan markets took out private debt, and loans have crossed both ways every quarter since, reaching $34.1 billion into syndication and $36.9 billion out of it in 2025. In 2026 both flows shrank, with direct lenders taking out more syndicated debt than they lost each quarter.

Takeout Refinancing

The repayment of a loan from one lending market with a new loan from another, such as a syndicated term loan replacing a direct lender's unitranche. Takeouts move market share without any new buyout, and each one is a fresh arranging or lending mandate.

Borrowers moving into syndication were mostly single-B credits seeking the lower spreads LCD reports, and some paired the takeout with a payout: EQT-owned Arcwood Environmental refinanced private debt and funded a shareholder distribution with one syndicated loan.

Banks regained ground in two ways: by winning large buyouts back for syndication, and by putting their own capital inside private credit, so a share loss for the loan market need not be a lost client.

Lending From Inside Private Credit

JPMorgan's $50 billion direct lending allocation of February 2025 set the template. Bank of America followed in February 2026 with $25 billion, run from global capital markets by an executive who kept the role of head of Americas leveraged finance, according to Alternative Credit Investor's report on the commitment, so one desk can quote a syndicated and a private option to the same sponsor. Bank-affiliated private credit funds also sit inside lender groups: LCD lists Goldman Sachs Private Credit on a $3.5 billion direct loan to Permira and Warburg Pincus-backed Clearwater Analytics that replaced syndicated debt. Partnerships and back leverage to direct lending funds complete the bank response to private credit's rise.

What Each Outcome Pays the Bank

The balance sets the fee mix a bank's financial sponsors group (FSG) can expect from a financing. When syndication wins a large buyout, the arrangers earn underwriting fees and carry the market risk until the loan is sold. When a direct lender wins, the bank's take narrows to the revolver, hedging, returns on its own fund and any referral economics, while an advisory-only bank may earn a debt advisory fee for running both processes. Takeouts add a third stream in either direction.

Whether the large band stays with syndication depends on CLO demand, private credit redemptions and the rate path, the variables in the forward view of sponsor activity; markets outside the US run their own balance, compared in the review of Japan, Europe and the Gulf.

Neither market can win outright, because each one's loan book is the other's pipeline. A private loan written at a wide margin while banks were cautious becomes a syndicated refinancing once spreads tighten, and a syndicated loan to a borrower that stumbles becomes a private one. The share figures LCD publishes each quarter record loans already scheduled to cross: the debt each market wrote at the last turn sets the direction of the next.