Non-bank specialist lenders dominated activity, accounting for 19 deals out of 34, M&A consultants Livingstone found.
In August, Livingstone Partners told Specialist Lending Solutions the M&A market was likely to remain strong for the rest of the year.
The £868m take-private of Shawbrook Bank by Pollen Street Capital and BC Partners is the largest buyout in the specialist finance sector of the current market cycle.
High levels of confidence in wholesale funding and the increasing scale of non-bank players drove deals, Livingstone said.
Growth investment increased in terms of both numbers and scale during the period, with the average deal value rising to £55m.
Three companies – OakNorth Bank, Neyber and Atom Bank – raised over £100m each.
Strong wholesale funding markets
Nick Field, director at Livingstone said: “The growth and returns reported by quoted specialist lenders continue to demonstrate the attraction of differentiated business models.
“Despite news headlines regarding pressure on pricing, credit quality, and rising base rates, lenders in specialist verticals have generally continued to report robust interest margins and impairment performance.
“Supportive wholesale funding markets have resulted in particularly strong performance by non-bank lenders, whose average returns on equity and quoted valuations now exceed those of specialist banks.”
Specialist lenders’ loan books grew by an average of 29% with an average post-tax return on equity of 16%, Livingstone said.
And total advances by UK peer-to-peer lenders surpassed £10bn for the first time in the past 12 months.
However, 60% of specialist lenders reported an increase in impairment rates, although these generally remained at modest absolute levels, Livingstone added.
Field said: “We expect ongoing consolidation as the value of vertical expertise and differentiation continues to interplay with the efficiencies of scale inherent to balance sheet businesses.”