Private equity groups commit $160 billion as they prepare for a revival of deals

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The four largest U.S. private equity groups invested more than $160 billion in the last quarter, ramping up investment in anticipation of a full recovery in the deal market.

Ares, Apollo, Blackstone and KKR said they invested a combined $162 billion between April and June, with Apollo accounting for more than 40% of that amount.

Corporate executives said they are bracing for increased buyout and merger activity as the U.S. Federal Reserve moves closer to cutting interest rates.

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

Private equity firms have more than $2 trillion in capital at their disposal—capital that has been committed but not yet invested, according to data provider Preqin.

But an 18-month lull in trading, caused by an aggressive series of interest rate hikes by the Federal Reserve, also meant firms struggled to sell existing investments and return cash to their investors.

There are now signs that the freeze on deals is starting to thaw. Buyout activity has jumped 28 percent this year to $471 billion, according to data provider LSEG.

However, this is well below the prosperity of 2021 and 2022, and the weak private equity market has seen large alternative asset managers scramble to invest capital in credit and infrastructure.

Apollo, which invested $70 billion this quarter, has committed $11 billion to fund Intel’s construction of a chip manufacturing plant in Ireland.

More than 13 percent of the $34 billion Blackstone invested this quarter was used to anchor a $7.5 billion debt financing for technology company CoreWeave.

However, since the end of the quarter in June there have been a number of high-profile acquisitions.

Apollo has closed a string of multibillion-dollar deals, including acquisitions of British courier group Evri and gaming company Everi. Co-CEO Scott Kleinman estimated the company had closed five deals worth a combined $15 billion, including debt, in the past few months. “Our deal pipeline looks strong,” he said.

Meanwhile, KKR announced the buyout of brokerage firm Janney Montgomery Scott, the $4.8 billion acquisition of education technology company Instructure and a joint venture with T-Mobile to buy broadband internet provider Metronet.

This week, private equity firms TowerBrook Capital Partners and Clayton, Dubilier & Rice won the battle to acquire U.S. healthcare IT provider R1 RCM with a $9 billion offer, a deal that is likely to be one of the largest this year.

“The gauge in my briefcase continues to fill up, which indicates we should see more and more transaction activity,” said Jon Gray, chief executive of Blackstone, referring to the number of trade term sheets crammed into his briefcase.

“The fact that we see falling interest rates, more favorable market conditions, more people are thinking about selling assets, I think as the IPO market reopens we should see more of that behavior,” he added.

Credit-focused investment manager Ares also said it was seeing an increase in new buyout activity. Ares CEO Michael Arougheti told the Financial Times that banks and private credit funds were increasingly being used to create new buyout financing packages rather than simply refinancing existing debt or financing small acquisitions.

Other private investment groups, including Brookfield, Carlyle and TPG, are scheduled to report financial results next week.