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Mar 28, 2011 09:00 AM IST | Source: Reuters

After Apollo Global, the deluge

Private equity firm Apollo Global is set to go public this week, and if the sale goes well, a gaggle of alternative investment managers could follow.

After Apollo Global, the deluge

Private equity firm Apollo Global is set to go public this week, and if the sale goes well, a gaggle of alternative investment managers could follow.


Bankers are holding discussions with firms including Oaktree Capital Management and Carlyle Group about going public and are watching to see how Apollo does, sources familiar with the situation said.


Apollo, which hopes to raise about USD 473 million in its IPO, missed the first great wave of private equity firms going public, which started in 2007 with the Blackstone Group.


But with debt markets exuberant and the stock market open to initial offerings, the profit picture for private equity firms looks stronger than it used to. Hedge funds are benefiting, too.


"It's a pretty opportune time to come public," said Michael Kim, an analyst who covers asset managers at investment bank Sandler O'Neill & Partners LP.


"The private equity industry is cyclical and certainly what we've seen over the last six months has been a pretty nice recovery across almost any metric."


It has been a long road for Apollo, which first filed its public listing registration papers in April 2008, just before capital markets melted down.


The credit crunch trapped private equity firms without new capital. They had trouble both financing leveraged buyouts and selling companies they already owned.


But the picture for private equity firms has improved over the past year.


The Standard & Poor's 500 index has gained more than 14% over the past six months and more than 90% since troughing in early 2009, as the global economy stepped back from recession. Junk bond prices have surged more than 65% since mid-March 2009, according to Merrill Lynch indexes.


Buyout firms are taking advantage of the stock market rebound to take some of their large portfolio companies public, such as HCA Holdings Inc, Kinder Morgan Inc and BankUnited Inc, which have been some of the biggest IPOs of the year.



Pitch, wait, watch


Blackstone Group blazed the trail for private equity firms going public in 2007 with its own high profile IPO -- timed just before the market started to collapse.


Alongside it were hedge funds Och-Ziff Capital Management Group LLC and Fortress Investment Group LLC, which all made their debuts on the New York Stock Exchange in the space of a year.


Rival asset managers such as Apollo and Kohlberg Kravis Roberts & Co, which had also been planning to list, watched in the wings as their chance evaporated.


Since the economy and market started recovering, private equity firms have returned to look at going public.


KKR, which originally filed for a US IPO in 2007, listed in Amsterdam instead. It moved its shares to the New York Stock Exchange in July.


Going public gives companies a currency to incentivize more junior employees and gives the firm, as a whole, currency for acquisitions.


Investors in the firms have had a mixed experience. With the market collapse, shares of Blackstone, Och-Ziff and Fortress have tumbled -- 40%, 49% and 70% from their IPO prices, respectively -- but KKR has done exceptionally well: its shares have climbed 70% since they started trading.


Apollo, whose expected price range puts it at a steep discount to its rivals, could be another blockbuster. If it is, it could tip the balance for those laying in wait.


"There is a material advantage to being public in terms of cost of capital and access to capital," one source said. "I think it's fair to say that beyond just Apollo and Oaktree, over the next six to 12 months, we could see more asset managers look at going public."


Carlyle in February hired NASDAQ OMX Group Inc Chief Financial Officer Adena Friedman. A source previously told Reuters that the firm could file for an IPO this year.

Carlyle and Oaktree declined to comment.

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