Apollo Fund VIII is 15 percent invested at about 6x EBITDA

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  • Apollo deploying Fund VIII at steady pace
  • Firm is eyeing energy, carve-out deals
  • Real estate pool may return to fundraising

CEO Leon Black said the average purchase price multiple for Fund VII’s investments came in at about 6x EBITDA, versus the 9x to 10x EBITDA multiples common these days, because the firm seeks out “idiosyncratic opportunities” as well as “complex deals with hair on them.”

Apollo has been asked whether it would be able to deploy Fund VIII within its six-year investment period in the face of lofty purchase price multiples, but the buyout firm remains “very confident in our ability” to deploy the fund on time, Black said. Apollo made its first investments from Fund VIII in September 2013.

”Strong markets have generally driven up pricing, and average purchase multiples in the U.S. are very close to the 2007 peaks,” Black said. “As I have said before, we remain patient, disciplined, and committed to a strategy that has delivered the best investment performance since inception in private equity among all our public peers, by a sizeable margin. We won’t continue to achieve the kind of results we aim to deliver for our investors by following the pack.”

The energy sector remains a favorite spot for investing, with $2.2 billion committed during the second quarter to three partnerships with Zenergy Inc, CSV Midstream Solutions Corp and Caelus Energy Alaska LLC.

Robust M&A activity by corporations is leading to potential deals from carve-outs and non-core unit sales to raise cash, Black said.

“We are selectively seeing opportunities in other sectors and this is partially being driven by dialogs with strategics on the heels of rising corporate M&A activity,” Black said.

Josh Harris, senior managing director, said Apollo’s credit business ranks as its fastest-growing unit with about $106 billion in assets under management and a compounded annual growth rate of 47 percent over the past five years.

Separately, the New York buyout firm said its first real estate fund is almost fully invested, and the firm plans to return to the fundraising market for an “incrementally larger” successor to AGRE U.S. Real Estate Fund, which raised $785 million in 2011.

All told, Apollo ended June 30 with a record $167.5 billion in assets under management, up 48 percent from the year-ago period.