The four biggest investment funds Americans, Apollo, Ares Blackrock and KKR, have invested over 160 billion dollars in the second half of 2024. A sharp increase compared to the last period, despite still very high interest rates, which signals a change in the acquisition market worldwide.
It is precisely the high interest rates that have almost frozen for a year and a half mergers and acquisitionsafter a record period between 2021 and 2022. Funds are also struggling to recover from their investments but US employment data could soon push the Fed to a lowering of the cost of money which would give the green light to a new season of activity on the financial markets.
Funds prepare to invest
Apollo, Ares Blackrock and KKRthe four largest investment funds in the US, invested approximately 160 billion dollars in the second quarter of 2024. This is an increase of almost 40% compared to the previous quarter and a doubling on a large part of the 2023 data. This despite the fact that the cost of money in the US is still very high.
Interest rates could drop soon, however.. U.S. employment data showed a slowdown in growth in the second quarter, suggesting to observers that the period of monetary tightening may have gone on for too long. Fed risks strangling the real economic boom that the US is experiencing and in September interest rates could fall in line with what the European Central Bank has already done.
This would finally allow investment funds to unlock 2 trillion investments already planned but frozen precisely by the very high cost of money. Among these there are above all acquisition and merger operations that, after a long period of records after the pandemic, have almost completely blocked following the surge in inflation and the consequent cut in interest rates.
Why Falling Interest Rates Will Drive Mergers
Acquisitions and mergers are very complex operations. On the one hand, a private group takes control of a company whose shares are entrusted to the market. On the other hand, two large companies merge into a new company with a series of delicate decisions to make. However, both operations have in common the same need for move huge capital.
For this reason, when it comes to mergers or acquisitions, companies rely on large investment fundsinstitutions that are in fact created specifically to move large amounts of capital. At this time, however, liquid money is very expensive. Interest rates on loans are very high for everyone, not for citizens only.
For this reason, many companies have postponed mergers or acquisitions to a more favorable time, hoping that the period of restrictive monetary policy would last only a few months. However, it has now been more than a year that Fed keeps rates at 5.50% and therefore the market has accumulated a very high number of operations, which could succeed at the first rate cut due to the impatience of the parties involved that has accumulated in recent months.
