Private capital groups deploy $160bn as they prepare for deal revival

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Four of the largest US private capital groups deployed more than $160bn in the latest quarter as they ramped up investment ahead of an expected full-throttle revival in dealmaking.

Ares, Apollo, Blackstone and KKR said they had invested a combined $162bn between April and June, with Apollo accounting for more than 40 per cent of the total.

Executives at the firms said they were readying for an increase in buyout and merger activity, as the US Federal Reserve edges closer to cutting interest rates.

“The deal market is back,” said Scott Nuttall, the co-head of KKR. “This year, we not only have an open market, we have pent-up supply of deals . . . coming to markets. So we are optimistic.”

Private equity firms are sitting on more than $2tn of dry powder — capital that has been committed, but not yet deployed in investments, according to data provider Preqin.

But an 18-month hiatus in dealmaking sparked by the Federal Reserve’s aggressive series of interest rate rises has also meant that firms have struggled to sell existing investments and return cash to their backers.

There are now signs that the deal freeze is starting to thaw. Buyout activity is up 28 per cent so far this year to $471bn, according to data provider LSEG.

That remains well below the boom years of 2021 and 2022, however, and the lacklustre market for pure private equity deals has meant that big alternative asset managers have instead sought to deploy capital into credit and infrastructure.

Apollo, which deployed $70bn in the quarter, put $11bn to work financing Intel’s construction of a chip manufacturing plant in Ireland.

More than 13 per cent of the $34bn Blackstone invested in the quarter was used to anchor a $7.5bn debt financing package for technology company CoreWeave.

Since the quarter ended in June, there has nonetheless been a number of high-profile buyouts.

Apollo struck a string of multibillion dollar deals, including the acquisitions of UK parcel delivery group Evri and gaming company Everi. The firm’s co-president Scott Kleinman estimated the firm had struck five deals worth a combined $15bn including debt in the last couple of months. “Our deal pipeline looks strong from here,” he said.

KKR meanwhile announced buyouts of broker dealer Janney Montgomery Scott, the $4.8bn acquisition of educational technology business Instructure, and entered a joint venture with T-Mobile to buy broadband provider Metronet.

And this week, private equity firms TowerBrook Capital Partners and Clayton, Dubilier & Rice won a takeover battle for US healthcare IT provider R1 RCM with a bid worth $9bn in what is likely to be one of the biggest buyout deals of the year.

“My briefcase indicator continues to be getting full and indicates that there should be increasing solid levels of transaction activity,” Blackstone president Jon Gray said in a reference to the number of deal term sheets stuffed in his briefcase.

“The fact that we’re seeing rates coming down, markets being more conducive, more people are thinking about selling assets, I think as the IPO market reopens we should see more,” he added.

Credit-focused investment manager Ares also said it was seeing a pick-up in new buyout activity. Ares chief executive Michael Arougheti told the Financial Times that banks and private credit funds were increasingly being tapped to assemble new buyout financing packages instead of just refinancing existing debt or funding small acquisitions.

Other private investment groups including Brookfield, Carlyle and TPG report earnings next week.