KKR’s credit outlook points to several upsides for middle market M&A lending. The firm’s own participation in five unitranche deals weighing in at $1+ billion underscores the depth of direct lending opportunities. And the trend could continue. Lenders are increasingly providing credit structures across subordinated, convertible and preferred securities.

“The lending market has shifted to be more agile with capital solutions more oriented towards engineering the right structure for the borrower and capital structure versus a one-size fits all approach,” reads the firm’s 4Q credit letter. “This trend has been especially visible in the growing technology sector.”

Indeed, Francisco Partners raised $2.2 billion for Francisco Credit Partners II, clocking in at nearly twice its $1.25 billion target as the latest sign of investor interest in debt. The firm plans to offer structured solutions for companies that are flexible and scalable, differentiating Francisco Partners from lenders with more standardized offerings, managing director Scott Eisenberg told us after the raise.

That bespoke deal customization is a sign of the times, when pricing power and flexibility converge such that “the best relative value is for both borrower and lender,” the KKR note says. That trend could continue as lenders increasingly cater to a diverse cast of players seeking funding for M&A.

Another tech player, Vista Credit Partners, took in $2.3 billion for its third fund, announced in October, while H.I.G. Capital and Ares Management among many others have also raised credit funds this year.

The vibrance of M&A credit markets could further fuel activity.

Brandon Zero