A KKR logo is seen on the floor of the New York Stock Exchange (NYSE) on August 23, 2018.
Brendan McDermid | Reuters
According to Pete Stavros, global co-head of private equity at KKR, despite the difficult interest rate environment, private equity firms should be motivated to seek deals as the potential purchase price tends to be more in their favour.
“This is a great time to close deals,” Stavros said in an interview with CNBC’s Leslie Picker for the Delivering Alpha newsletter. “If you want to be more careful, capital is everywhere. You can get as much debt as you want, be careful.
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Private equity fundraising has slowed sharply after a series of aggressive rate hikes caused borrowing costs to soar. Global private equity funds raised $444.65 billion in the first half of the year, down 20.5% year-on-year, according to S&P Global Market Intelligence.
“When public markets are more volatile and credit markets tighter, better yield deals are made. That’s the story,” Stavros said. “It makes sense because purchase prices are limited because you can’t borrow as much money and the money you can borrow is more expensive. Now is the time to lean it on.”
KKR announced its latest exit deal with RBmedia, an audio book publisher that was sold to another investment firm, HIG Capital. The deal includes an employee stock option plan.
Stavros said private equity investors shouldn’t decide to stay on the side of the market environment or go all out, adding that KKR has put in place a rigorous process that aims to never make too much or too much in any year use little.
“One of the most important things I think about private equity M&A is that as a private equity investor, you shouldn’t try to time the market,” Stavros said.