KKR private credit chief predicts slower ramp-up for M&A than expected

Mergers and acquisitions are not progressing as rapidly as initially anticipated, according to Dan Pietrzak, the global head of private credit at KKR. Pietrzak expressed in an interview on KKR’s official website that mergers and acquisitions are on the rise but are not meeting the anticipated post-election speed. He noted that there is still a substantial amount of available capital, with investors pushing for asset realizations, and that DPI figures remain low. Geopolitical uncertainties and US tariff policies have caused some general partners to remain cautious, affecting the pace of activity.

Despite the impact of geopolitical tensions and trade policies on the market, Pietrzak stated that the credit market has proven resilient during equity declines, presenting a promising opportunity for credit investors. He also highlighted that investor interest in direct lending remains strong, even amidst declining interest rates. While spread compression persists, elevated base rates are generating attractive all-in yields, particularly for senior-secured risk investments.

Pietrzak identified potential scenarios that could affect KKR, including a resurgence in inflation and a reversal in interest rates. In the event that inflation accelerates, higher default rates are anticipated, especially among companies heavily leveraged and struggling with tight cash flow. To address such challenges, Pietrzak emphasized the critical importance of selecting credit assets carefully, focusing on stress case scenarios, and closely assessing cyclical exposure within investments.

In conclusion, despite the current slow ramp-up in mergers and acquisitions activity, Pietrzak remains optimistic about the potential for future increases. He highlighted the importance of being mindful of prevailing geopolitical and economic conditions while emphasizing the resilience of the credit market and the opportunities it presents for investors. By maintaining a focus on sound credit asset selection, stress testing investments, and acknowledging potential downside scenarios, firms like KKR aim to navigate the evolving market landscape effectively.