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2025 Highlights
Our Midwest offices delivered strong performance in 2025. Notable activity included two direct new senior borrowers, two mezzanine transactions (one sponsored and one direct) as well as a mezzanine exit and large club deal out of Wisconsin.
Deal flow was driven primarily by direct calling efforts rather than participation in syndicated processes. Activity slowed in Q2 due to the tariff impacts related to Liberation Day, and the summer remained relatively quiet. However, deal activity gained momentum in Q3 as companies began to digest ongoing market and tariff uncertainty, a trend we expect will continue into 2026.
Private Placements
Private placement activity remained healthy across both new and existing borrowers. In terms of new issuers, the Chicago office closed two shelf facilities with new partners, one direct mezzanine transaction, and one sponsor led mezzanine investment with a new sponsor relationship, and the Minneapolis office added one new partner with a shelf facility to their portfolio. All remaining capital deployed was to existing portfolio companies.
Activity was largely a mix of refinancing, growth, and acquisition financing. Industry trends were broad-based, consistent with our generalist approach, though we saw heightened activity among food-related businesses.
Financing opportunities for sponsor led platform acquisitions were relatively light, as private equity firms focused on supporting existing portfolios and pursuing smaller add-ons. As the M&A market improves and exit activity resumes, we expect sponsors to recycle capital into new platforms, which should support both mezzanine and direct lending activity.
Shelf facilities continue to be a key differentiator for companies looking for quick access to long-term strategic financing, and we consistently see strong renewal activity as issuers recognize their effectiveness in supporting multi-year capital planning.
Direct Lending
Market trends impacting direct lending activity last year centered largely around tariffs. Tariff imposition and the uncertainty surrounding them disproportionately affected businesses that rely on imports. For example, in the Midwest, many of our sponsors focus on industrial companies, which frequently rely on imported parts or raw materials, even when final assembly occurs in the U.S. As a result, tariffs had a material impact on this manufacturing-oriented geography.
Across the broader market, M&A activity declined, driving a sharp drop in new-money LBOs and a shift toward refinancings and dividend recaps. Still, there is strong optimism for 2026. We had several meaningful wins in the last year, including our first fund close and an add-on financing for one of our largest sponsorless direct lending deals out of our Minneapolis office. Overall, our activity remains strong compared to the broader market.
Outlook for 2026
We remain cautiously optimistic for 2026. While M&A has been subdued for an extended period, it’s unlikely to remain so indefinitely, especially as LPs prioritize cash returns. Companies appear increasingly focused on growth, and many are prepared to re-engage as broader conditions stabilize. We anticipate this, combined with expectations of lower or steady rates, should support increased activity throughout 2026.
On the cautious side, geopolitical risk and other unpredictable macro variables continue to affect the overall economic environment. However, most companies will likely begin actively factoring in the potential impact of these risks when strategizing their growth initiatives for the coming year, meaning that we can expect activity to continue despite prolonged market volatility.
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