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Where Private Credit Breaks (and Where You Win)
Good morning, ! Today we're covering private credit`s biggest vulnerabilities, diligence alpha in expert calls and panel surveys and how SaaS is eating Private Credit.
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MICROSURVEY
Private Credit’s Crowded Trade
Private credit spent the last decade as private markets’ favorite child: floating-rate yields, bank retrenchment, and enough dry powder to make everyone feel like Howard Marks with a Bloomberg terminal.
Now? Investors are starting to wonder if the industry’s biggest risk is simply…more private credit.
In PE150’s latest microsurvey, 30% of respondents flagged overcrowding / excess capital as the asset class’s top vulnerability, narrowly ahead of illiquidity in a downturn (27%) and weak underwriting standards (25%). Consultants were the most concerned, with 35% pointing to overcrowding — a polite way of saying too many lenders are chasing the same deals while pretending spreads still compensate for risk.
Meanwhile, PE sponsors were more focused on what happens when the music slows: refinancing pressure, defaults, and whether today’s “flexible capital” stays flexible in an actual downturn.
The irony is hard to miss. Private credit’s success story may now be creating the exact conditions investors once fled traditional leveraged finance to avoid. (More)
PRIVATE CREDIT CORNER
Software Eats Credit Underwriting
Direct lending to SaaS companies has scaled from $8B in 2015 to $538B in 2025, a near 70x expansion in a decade. What was once niche venture debt is now institutional capital flowing into recurring revenue models at scale.
The driver is structural. SaaS businesses offer predictable cash flows, high gross margins, and strong retention metrics, giving lenders confidence to underwrite against ARR instead of traditional EBITDA. As buyout activity slowed and banks pulled back, private credit stepped in, building a new playbook around revenue visibility rather than hard assets.
But growth at this speed changes behavior. Competition is compressing spreads, documentation is loosening, and lenders are increasingly relying on growth assumptions to justify leverage. The asset class looks stable until growth slows.
Strategic takeaway: SaaS has become private credit’s proving ground for modern underwriting. The opportunity is real, but so is the risk. The next cycle will test whether recurring revenue is truly defensive or just differently cyclical. (More)
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So whether you are pressure-testing a thesis, sizing a market, or validating a niche operator segment, you get cleaner inputs and a research process you can build on.
REGIONAL FOCUS
Germany’s Biotech Market Just Went From Quiet to Competitive
Germany’s biotech M&A market spent the last four years looking more like a venture hangover than a strategic battleground. Median deal size fell from $125M in 2020 to just $23.5M in 2023 as rising rates and risk aversion froze large cap life sciences transactions. Then came 2025.
Median German biotech deal size has now surged to $871.2M, a dramatic jump from $142.5M in 2024. The message is not simply that dealmaking returned. Buyers are writing bigger checks again for scaled platforms with differentiated science, manufacturing capabilities, and European market access.
Why Germany specifically? The country sits at the center of Europe’s biotech supply chain with deep research talent, strong industrial infrastructure, and increasing strategic importance as pharma companies diversify beyond the US and China.
For PE and healthcare investors, this changes the underwriting conversation. Germany is no longer just a sourcing market for smaller venture backed assets. It is becoming a credible arena for large scale biotech consolidation and cross border healthcare M&A.
DEAL OF THE WEEK
Blue Owl’s $30bn Data Center Exit Test
There are infrastructure deals. Then there are infrastructure deals that make every private equity CIO suddenly “very interested” in digital infrastructure again.
This week, Blue Owl Capital is reportedly exploring a sale of the Asia operations of Stack Infrastructure in a transaction that could top $30bn. That includes assets across Japan, Australia, and Malaysia — aka the holy trinity of “AI needs more power” real estate.
Why it matters: the timing is fascinating.
Blue Owl recently moved to limit withdrawals from certain funds amid elevated redemption requests, a reminder that private markets liquidity still feels a bit like airport WiFi: technically available, emotionally unreliable. Against that backdrop, selling premium data centre assets at a massive valuation would be one hell of a flex.
The bigger picture: sponsors keep hunting for exits, and buyers keep hunting for anything tied to AI, cloud computing, and long-duration infrastructure cash flows. Data centres currently sit in the rare overlap of those two circles.
The question now isn’t whether there’s appetite for digital infrastructure. It’s whether buyers still have the stomach for peak pricing. (More)
Expert Call Insights
Diligence Alpha Is Moving Upstream
We conducted an expert call with Justin Severidt, CEO of Exact Insights where he explained that private equity firms have long treated expert calls as a core underwriting input. But according to one expert call, that model is breaking under speed and scale pressures. The shift now is toward combining qualitative insight with rapid quantitative validation.
The traditional process leans heavily on small samples. A handful of operators can shape the entire narrative around pricing power, churn, or competitive positioning. The problem is not expertise. It is confirmation bias. When multiple experts agree, deal teams often treat consensus as fact rather than hypothesis.
The emerging model flips the sequence. Expert calls generate the story, then large scale customer or patient panels test whether that story holds in the real market. Surveys with 200 plus respondents can validate retention, willingness to pay, and product stickiness before capital is deployed.
Strategic takeaway: For private credit, underwriting risk is increasingly tied to diligence quality. Lenders backing growth oriented businesses cannot rely on narrative alone. The edge is shifting to those who can pressure test assumptions at scale before the term sheet is signed. (Read full Expert Call Insight)
"The best way to predict the future is to invent it."
Alan Kay