The Debt Came Back. The Senior Debt Did Not.
The story everyone repeats is that the rate shock closed the credit markets and buyers have been writing larger cheques ever since. The data says the first half of that ended some time ago.
Middle-market acquisition leverage has recovered. Transaction data across the middle market puts total debt coverage at 4.0 times trailing EBITDA at the 2021 peak, 3.6 times at the 2023 trough, and 3.9 times in the first quarter of 2026, which is above the 3.7 times historical average. Senior debt coverage went 3.3 times, down to 2.9, and is back at 3.3 times, exactly where it stood at the peak.
Equity did not run away either. It was 53.6 percent of platform deal value in 2021, reached a record 57.6 percent in 2025, and has already come back to 54.7 percent. That is a four point round trip, not a structural change.
So on the whole population, the market repaired itself. The interesting part is what happened underneath.
Platform deals tell a different story
Look only at platform transactions, where a buyer acquires a business as the foundation for something larger, and the recovery is uneven in a specific way.
Total debt on platform deals ran 3.7 times in 2021, fell to 3.2 at the 2025 low, and sits at 3.5 times now. Nearly recovered.
Senior debt on those same deals ran 2.9 times in 2021. It is 2.3 times today. Not recovered, and not close.
Both statements are true at once, which means the arithmetic has to reconcile somewhere. It reconciles in the junior layer.
The recovery came from a different pocket
Subtract senior from total and the picture is unambiguous. In 2021 the junior layer, meaning subordinated debt, mezzanine and the structures that sit between senior and equity, carried 0.8 turns. Today it carries 1.2 turns.
Senior contracted by 0.6 turns, about 21 percent. Junior expanded by 0.4 turns, about 50 percent.
On a platform acquisition of a business doing $5 million of EBITDA, that is $14.5 million of senior debt in 2021 against $11.5 million today, and $4 million of junior capital then against $6 million now. Three million dollars less from the senior lender, two million more from somewhere else, and a total that moved by only a million.
Which pocket does a buyer knock on first
Almost always the senior one. It is the cheapest, it is the relationship the business already has, and it is the one every acquisition conversation starts with.
It is also the layer that has recovered least.
A buyer who runs a process with one senior lender and sizes the deal against what comes back is measuring the market through the single window that has reopened the least, and then funding the shortfall with their own equity. The capital that actually returned is sitting one layer down, in a part of the stack that has grown by half and that most buyers have never approached directly.
Worth being plain about the cost, because junior capital is not a free substitute. It prices well above senior, and a stack carrying 1.2 turns of it is more expensive to service than one carrying 0.8. But that is the wrong comparison. The 0.6 turns of senior debt that did not come back are not available at any price on a platform deal, so the choice is not junior capital against cheaper senior. It is junior capital against writing the cheque yourself, and against equity it is inexpensive.
None of this reflects badly on senior lenders. Their behaviour is rational and their appetite has recovered on the broad population; it is specifically on platform transactions, which carry integration risk and an acquisitive plan, that they have stayed conservative. The junior market priced that same risk differently and took the space.
What it changes about how a deal gets financed
If the stack were unchanged, running one lender would cost a buyer speed and pricing. In a market where one layer has recovered and another has not, it costs capacity, and capacity is what determines whether a transaction happens at the agreed price.
The practical consequence is that a buyer sizing an acquisition off a single senior indication in 2026 is likely to conclude the deal needs more equity than it does. That conclusion feels like discipline. It is a measurement error.
How Thalos Capital Approaches This
Thalos Capital works borrower-side on acquisition and strategic debt from $50 thousand to $100 million and above, across the United States.
The work on a transaction is building the stack rather than requesting a loan: sizing what the senior layer supports on this specific business, then sizing the junior layer separately against the same cash flow, and running both to sources whose mandates cover them rather than asking one institution to cover the whole structure. Those are different lenders with different appetites, and in this market they are moving in different directions.
A buyer who assembles the stack rather than accepting a single answer is not being clever. They are simply measuring a market that no longer moves as one thing.
Most financing situations have more options than the borrower initially sees. A conversation is enough to map them. Submit your financing request at https://thaloscapital.com/contact.