NEW YORK (

TheStreet

) - Private equity shops sitting on stacks of cash are licking their lips as market volatility increases and scares-off public market investors from cheaply priced deals.

"This is an environment where private equity thrives," said Alexander Navab a co-head of KKR's North American private equity business at the

Dow Jones

Private Equity Analyst Conference in the Waldorf Astoria Hotel on Tuesday.

Top dealmakers at

KKR

(KKR) - Get Report

, TPG Capital and The Carlyle Group said that their business will thrive through good times and crisis, even if they don't expect that the U.S. economy will slip back into contraction after the worst recession since the Great Depression.

"It's a fun time to be a private equity investor when equity markets are down and debt markets are tough," said Michael MacDougall a Partner at TPG, citing the increased opportunities for high returning investment and lesser competition. "Almost every time is a good time for private equity. When times are terrible, it's always good to be a buyer and when times are good, it's a good time to be a seller," said Peter Clare a co-head of Carlyle's buyout group.

After highlighting the versatility of their business through varying economic times, the three private equity dealmakers reassured their audience that there would be no U.S. recession.

Though IPO markets to sell shares of privately held companies to stock investors are closed after the S&P 500 fell more than 10% in recent weeks and banks are struggling to extend debt financing for giant buyout deals, the private equity investors said that even in today's market there are ways to earn returns on investment.

Traditionally, companies give investors or owners a return on investment when shares are sold to public markets and new investments require the use of bank debt. "While IPO markets are important for an exit strategy, it's not the only source of a lot of our exits," said KKR's Navab.

Corporations flush with cash and pressed for growth opportunities in the U.S., have been buying private equity owned companies, giving firms a return on investment without the need for stock market stability. In June,

Marathon Oil

(MRE)

bought Hilcorp Resources Holdings for $3.5 billion from KKR and other investors. A year earlier, the New York-based firm sold East Resources to

Royal Dutch Shell

(RDS.A)

for $4.7 billion.

Corporations looking to buy private companies for growth, what the industry calls "strategics", may become more active in buying a private-equity owned company for a return, even if the stock market continues to fall and make IPO's unlikely. "Equity values are, in my opinion, relatively cheap," said Carlyle's Clare. He added, "I've been surprised that strategics haven't been more aggressive."

In the first two quarters of the year and the start of the third quarter, corporations looking to buy competitors surged to levels last seen before the financial crisis. Citing high levels of cash to be spent, TPG's MacDougall said, "Corporations have been making acquisitions at least until August." He did recognize a recent drop-off.

In preliminary numbers released from financial data firm Dealogic on Monday, global mergers and acquisitions for the third quarter that began in July and will end with September has fallen 23% from a year ago after posting gains of 22% and 23% in the first and second quarters.

Best of all, the panelists said their firms have ample capital to invest if company valuations continue to fall. "The biggest challenge is finding companies to invest in that can grow," said Clare of The Carlyle Group. Private equity deals have increased 51% so far this year compared with last year according to data compiled by

Bloomberg

. Along with new investments, private equity firms can use today's choppy markets for the companies under their ownership to make acquisitions that will pay off in coming years. MacDougall of TPG said his firm looks at the companies it owns and asks, "How can you help companies grow and where are there companies to buy?"

While optimism about the deals outlook and a belief that the U.S. will avoid a recession may prove to be opportunistic, private equity investors have, in the past, been burned by their optimism. In 2007, KKR, TPG and Carlyle did some of their biggest deals, buying TXU, First Data and HD Supply at greater than $10 billion pricetags, only to see the U.S. quickly fall into the worst recession since the Great Depression. From the end of 2007 to the end of 2008, buyout activity fell 72%, the lowest share of overall M&A activity since 2001, according to Dealogic.

-- Written by Antoine Gara in New York