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Expecting the unexpected seems to have become the new normal, as evidenced by the resilience of the M&A market in the second half of 2025. In the European leveraged finance market, sponsors are often holding assets for longer periods than they would have expected to, and there was a strong wave of refinancings in 2025 and into 2026.
Against this backdrop, portability provisions, which allow debt to remain in place on a change of control, have been a developing trend. Corporate-backed strategic acquisitions are happening in a fragmented market, largely reflecting wider geopolitical trends such as energy transition and AI development, and are often marked by complexity of deal structures and documents.
Portability provisions gain renewed traction
Portability has made a strong comeback in the European leveraged finance market over the last 12 months. These provisions allow sponsors to sell a controlling stake in a business without triggering a change-of-control event under the relevant debt documentation. The existing debt is instead ported and remains in place for the new owners. While historically more common in high-yield bonds, portability has increasingly featured in leveraged loans and private credit facilities, reflecting heightened competition among lenders and sponsors’ desire for greater exit flexibility.
Portability is most often seen in situations where a sponsor has owned an asset for a number of years and is planning an exit in the short to medium term. As a result, it is typically negotiated in connection with amend-and-extend transactions, re-pricings, add-on financings and refinancings, rather than being included at the time the original buy-out is financed. In these circumstances, portability can function as a strategic tool to preserve exit optionality while taking advantage of favourable financing conditions earlier in the hold period.
Portability has made a strong comeback in the European leveraged finance market over the last 12 months.
Advantages and limitations for sponsors and buyers
From a sponsor’s perspective, portability offers several clear advantages. It reduces execution risk on exit by ensuring that a preferred bidder has committed or available financing, even where debt markets are volatile or constrained. It also preserves access to favourable debt terms by insulating bidders from a deterioration in financing conditions between refinancing and exit. In addition, portability can improve the saleability and appeal of an asset by simplifying the acquisition process, lowering transaction and financing costs, and shortening deal timelines. Taken together, these benefits can enhance value certainty and, in some cases, support valuation.
Portability is most often leverage-based, meaning that the leverage within the business at the time of the sale must not exceed opening leverage, or sometimes a slightly higher agreed threshold. Other common limitations include restricting portability to a single use and requiring it to be exercised within a defined time period following the relevant refinancing. Buyers are often required to be either on an approved list of acquirers or to meet minimum assets-under-management thresholds. Additional conditions typically include the absence of any continuing event of default, a minimum equity-to-enterprise-value test (often in the range of 35–40%), and satisfactory completion of lender know-your-customer processes.
Alongside these overt portability provisions, some loan agreements can include more disguised portability, achieved through broader definitions of permitted holders or sponsor entities. While these are less common, lenders have become increasingly focused on ensuring that such definitions do not allow a change of control to occur by the back door.
While portability can be highly advantageous for sponsors, it is not universally preferred by buyers, some of whom may wish to arrange their own financing and implement a bespoke capital structure. Portability should therefore be viewed as a risk-management and optionality tool, rather than a substitute for a full refinancing strategy.
The demand for financing both acquisitions and capex spending will require creativity in terms of structuring the debt appropriately.
Increasing complexity in deal financing
We expect strategic corporate acquisitions to remain a feature of 2026, driven largely by the surge in focus on AI capabilities, energy transition and further consolidation in the financial institutions sector. We anticipate that the demand for financing both acquisitions and capex spending will require creativity in terms of structuring the debt appropriately. It will be interesting to see how the continued push of private capital into new structures and markets develops in this context.
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