Banking

Apollo’s dealmaking went into overdrive in the first quarter during a tumultuous period for the investment giant

  • Apollo has faced plenty of bad press this year, from its former CEO’s ties to Jeffrey Epstein to a management shakeup. 
  • At the same time, its private-equity deal machine is as busy as ever, according to data compiled by Dealogic for Insider. 
  • The firm logged $17 billion in PE sales in the first quarter, Dealogic said, a firm record over the past decade. 
  • See more stories on Insider’s business page.

Apollo Global Management has made headlines for the wrong reasons this year, from its former CEO’s ties to Jeffrey Epstein and abrupt resignation months ahead of schedule to a management shakeup.

At the same time, the firm’s private-equity deal machine has been cranking, according to data compiled by Dealogic at the request of Insider. Analysts are prepared to see the investment giant put up solid numbers for the first quarter — but one said he’ll be looking closely at whether the turmoil hampered fundraising during the period. 

In the first quarter, the company’s $80 billion private equity arm announced $17 billion of sales, a record for the alternative investment firm and an indication of the fees it could reap in its first quarter earnings, due to be released on Tuesday. 

The firm has also announced a string of deals that indicate it is on track to keep up the momentum, including the acquisition of arts and crafts retail chain Michael’s for $3.3 billion and the rights to operate the Venetian resort and casino on the Las Vegas strip for $2.25 billion.

In total, Apollo’s PE group announced $11 billion of acquisitions in the first quarter, according to Dealogic data, putting it on pace for one of its busiest years of buyouts ever.

Several analysts told Insider they expect to see a good quarter, pointing to the IPO of the budget airline Sun Country as one of several sales that will likely help to pay back investors and drive fees and investment returns for Apollo.

“The earnings picture is very solid,” said Glenn Schorr, a research analyst at Evercore ISI who covers asset management companies, including Apollo.

“We have gotten two very good data points from Goldman, which booked great equity gains, and Blackstone, which had amazing results across pretty much every asset class,” Schorr said. “You should expect good numbers from Apollo.”

The investment giant also attracted plenty of scrutiny during the quarter. Associates complained in detail to Insider about Apollo’s brutal work culture and how it was exacerbated by cranking through rapid-fire deals while working in isolation at home. The firm subsequently offered six-figure retention bonuses to some of its private equity associates. 

In January, Apollo released the findings of an investigation it commissioned into the personal and business dealings between its founder Leon Black and the late convicted sex offender Jeffrey Epstein.

The report, produced by Dechert LLP, found that Black had paid Epstein at least $158 million over the past decade for tax and business advice and services. Black has denied any knowledge of or involvement in any of Epstein’s wrongdoing, but the association cast a pall over the firm, prompting it to overhaul its management and governance structure. 

Black had earlier said he would resign from his post as the company’s CEO by the summer, but abruptly left the firm last month, stating that he wanted to focus on his family and both his own and his wife Debra’s health. In early March, a woman alleged Black had sexually harrassed and abused her, a scandal that came to light in a New York post report published earlier this month.

Black alleged to the Post that the two had a consensual relationship. But the hastened exit led to questions whether his accelerated departure was prompted by the accusation — a connection Apollo denied.

How all of the drama will affect Apollo’s financial picture is less clear. 

Marc Rowan, a co-founder who succeeded Black as CEO, acknowledged in recent weeks that some among the firm’s largest limited partners — a collection of pension funds, sovereign wealth clients, and other institutions that invest in its myriad funds — had reconsidered their relationships with the firm.  

“A smaller portion of our investors will need time to consider these events and the changes we are implementing,” Rowan said during the company’s fourth quarter earnings presentation in February.

“For some LPs as I’ve said, they will want to see how these changes develop. And for some they will want to see these changes fully implemented.”

Analysts said they will be looking closely at Apollo’s fundraising in the first quarter. 

“There is still a view out there that [Leon Black’s] issues might have weighed on their ability to fundraise,” said Patrick Davitt, an analyst with Autonomous Research. “If they did not, I think that is also another net positive.”

With Rowan at the helm, Apollo has also moved to expand the firm’s business internally. In March, it announced a deal to buy insurer Athene in a $11 billion all-stock deal. And earlier this month, it launched a credit secondaries platform with $1 billion to deploy. 

Apollo’s $17 billion in announced sales in the first quarter exceeds the firm’s annual totals for recent previous exits. The firm sold off almost $11 billion of assets in all of 2019, its highest total in the past five years. 

It is still less than its larger competitor, Blackstone, which announed $26 billion in sales during the first quarter, according to Dealogic. Blackstone reported record net income of $1.75 billion in the first quarter, driven in part by that selling.


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