Ares, Apollo, Blackstone, and KKR collectively invested $162 billion between April and June, with Apollo contributing over 40% of this amount. Executives from these firms are anticipating a rise in buyout and merger activities as the US Federal Reserve approaches potential interest rate cuts.
Scott Nuttall, co-head of KKR, stated, “The deal market is back. This year, we not only have an open market, but we also have a pent-up supply of deals coming to markets. So we are optimistic.” Private equity firms currently hold over $2 trillion in “dry powder” — committed but undeployed capital, according to Preqin.
The aggressive interest rate hikes by the Federal Reserve over the past 18 months have led to a slowdown in dealmaking, making it difficult for firms to sell existing investments and return cash to investors.
However, there are indications that this dealmaking hiatus is ending. Buyout activity has increased by 28% this year, reaching $471 billion, according to LSEG. Although this is still below the peak years of 2021 and 2022, the tepid market for pure private equity deals has driven major alternative asset managers to invest more in credit and infrastructure.
For instance, Apollo deployed $70 billion in the quarter, including $11 billion for Intel’s chip manufacturing plant in Ireland. Blackstone invested $34 billion, with 13% used to support a $7.5 billion debt financing package for technology company CoreWeave. Despite the quarter ending in June, several high-profile buyouts have since occurred.