Private Equity Segment
Our private equity business had assets under management of approximately $44 billion as of December 31, 2016. Since 1990, Apollo has developed substantial expertise and valuable relationships across nine core industries through our private equity investment activities.
We have a demonstrated ability to adapt quickly to changing market environments and capitalize on market dislocations through our traditional and distressed buyout approach. In prior periods of strained financial liquidity, our private equity funds have made attractive investments by buying the debt of quality businesses, converting that debt to equity, creating value through active participation with management, and ultimately monetizing the investment. This combination of traditional buyout investing with a “distressed option” has been deployed through prior economic cycles and has allowed our funds to achieve attractive long-term rates of return in different economic and market environments. Our latest private equity fund, Fund VIII, closed in December of 2013 with more than $18 billion of commitments.
Our private equity investing activities are conducted through several strategies including traditional buyouts, distressed buyouts and debt investments, and corporate partner buyouts.
Opportunistic Buyouts: Opportunistic buyouts have historically comprised the majority of our investments. We generally target investments in companies where an entrepreneurial management team is comfortable operating in a leveraged environment. We also pursue acquisitions where we believe a non-core business owned by a large corporation will function more effectively if structured as an independent entity managed by a focused, stand-alone management team. Our leveraged buyouts have generally been in situations that involved consolidation through merger or follow-on acquisitions; carveouts from larger organizations looking to shed non-core assets; situations requiring structured ownership to meet a seller’s financial goals; or situations in which the business plan involved substantial departures from past practice to maximize the value of its assets. Some of our traditional buyout investments include Compass Minerals International in 2001, Nalco Investment Holdings and United Agri Products in 2003, Intelsat in 2004, Berry Plastics in 2006, Smart & Final in 2007, Caesars Entertainment in 2008, CKE Restaurants Inc. in 2010, Brit Insurance Holdings in 2010 and CORE Media (formerly CKx, Inc.) in 2011.
Distressed Buyouts & Debt Investments: Over our 24-year history, over 40% of our private equity investments have involved distressed buyouts and debt investments. We target assets with high quality operating businesses but low-quality balance sheets, consistent with our traditional buyout strategies. The distressed securities we purchase include bank debt, public high-yield debt and privately held instruments, often with significant downside protection in the form of a senior position in the capital structure. Some of our distressed buyout investments in prior economic downturns include Vail Resorts in 1991, Telemundo in 1992, SpectraSite in 2003, Cablecom in 2003, Charter Communications in 2009, Gala Coral in 2010, Lyondell Basell in 2010 and Nine Entertainment in 2012.
Corporate Partner Buyouts: Corporate partner buyouts offer another way to capitalize upon investment opportunities during environments in which purchase prices for control of companies are at high multiplies of earnings, making them less attractive for traditional buyout investors. Corporate partner buyouts focus on companies in need of a financial partner in order to consummate acquisitions, expand product lines, buy back stock or pay down debt. In these investments, we do not seek control but instead make significant investments that typically allow us to obtain control rights similar to those that we would require in a traditional buyout, such as control over the direction of the business and our ultimate exit. Although corporate partner buyouts historically have not represented a large portion of our overall investment activity, we do engage in them selectively when we believe circumstances make them an attractive strategy. Some of our corporate partner buyouts include Sirius Satellite Radio in 1998, Educate in 2000, AMC Entertainment in 2001, Oceania Cruises (now Prestige Cruise Holdings) in 2007 and McGraw-Hill Education in 2013.
Other: In addition to our traditional, distressed and corporate partner buyout activities, we also maintain the flexibility to deploy capital of our private equity funds in other types of investments such as the creation of new companies, which allows us to leverage our deep industry and distressed expertise and collaborate with experienced management teams to seek to capitalize on market opportunities that we have identified, particularly in asset-intensive industries that are in distress. In these types of situations, we have the ability to establish new entities that can acquire distressed assets at what we believe are attractive valuations without the burden of managing an existing portfolio of legacy assets. Similar to our corporate partner buyout activities, other investments, such as the creation of new companies, historically have not represented a large portion of our overall investment activities, although we do make these types of investments selectively. Examples of our other investments include Vantium in 2007, Athlon Energy LP in 2010 and Veritable Maritime in 2010.