M&A will ‘ramp more gradually than hoped’, says KKR private credit head

M&A is picking up at a slower pace than expected, according to KKR global head of private credit Dan Pietrzak.

In an interview on KKR’s website, Pietrzak said that mergers and acquisitions are “picking up, but not quite at the pace many market participants expected post-election”. 

“There is still a lot of dry powder, and investors are pushing for realizations,” he continued. “DPI figures are still depressed. But geopolitical headlines have kept some GPs on the sidelines.”

“We do think activity will ramp – just maybe more gradually than people hoped.”

Read more: KKR takes majority share in asset leasing business

Pietrzak acknowledged the roles that geopolitical tensions and the US tariff policies have had on markets, accepting that this “will always make markets feel uneasy and result in slower capital markets activity”.

He argued, however, that credit has “held up particularly well” during receiving sell-offs in equities, creating an opportunity for credit investors. 

Pietrzak maintained that investor demand for direct lending has held even as interest rates have dropped. “Even with spread compression, elevated base rates make today’s all-in yields compelling – especially for senior-secured risk,” he said.

Read more: KKR closes opportunistic real estate credit strategy with $850m

Pietrzak recognised a resurgence in inflation and a rates reverse as KKR’s downside scenario. “If inflation does flare up, we would anticipate higher defaults,” he said, “particularly for levered companies where free cash flow is already tight, and the company has less cushion to deal with the negative impacts.”

“This is where credit asset selection matters the most. We are underwriting to stress cases and looking closely at cyclical exposure.”

Read more: Capital Group and KKR unveil public-private debt funds