IPO Rethink: Apollo (and a Private Equity Curse?)

24/7 Wall St
March 15, 2011

The world of private equity is not what it once was, but the remaining private equity leaders that survived out there do now seem to be stronger if they survived.

Apollo Management has tried to come public in an Initial Public Offering before, but the deal has just not been able to make it out of the gate due to market conditions and timing issues. We were expecting an IPO to come fairly soon with a unit (equity in partnership interests) sale of up to almost $500 million. That may now be delayed.

Goldman Sachs, JPMorgan, and Bank of America Merrill Lynch were expected to lead the underwriting. Apollo has wanted to join the ranks of The Blackstone Group (NYSE: BX), Kohlberg Kravis Roberts & Co. (NYSE: KKR), and Fortress Investment Group LLC (NYSE: FIG) in the realm of public private equity.

CNBC reported earlier today that the current IPO, which has been three years in the making, is again being delayed though it’s unclear for how long. Too bad, because Reuters even noted that a price range was already being discussed. Is it fair to ask if Apollo’s market ambitions mark a top each time or if an unofficial hex is placed on the markets when it finally determines “now is the time” to come public? Probably not, but it is hard to not wonder about it.

In all fairness, private equity firms may not be much more intelligent than the rest of us. They may be just as prone to buying companies at the top of the market as Joe Retail. Some of the logic may be as simple as the thought that these firms are ‘smooth buyers’ in normal times but they can’t really be vultures as easily when capital markets are tighter. How many huge M&A deals were made by private equity buyers when share prices were in free-fall in 2008 and into 2009? It was not really until after a significant market rally and after the return of the credit markets came back that private equity firms were able to start aggressively making acquisitions again.

We have not been able to confirm whether Apollo is a dead IPO again or not. For now we’ll just take ‘market conditions’ at face value and assume that a private equity giant will remain private or that it will have to value itself a bit lower than it would have just a few days earlier.