Apollo seeks deals amid market distress

Leon Black-led Apollo - which has approximately $10bn in dry powder - believes the volatile markets could be rife with opportunities.

Apollo Global Management is prepared to deploy capital into the turbulent markets and, far from panicking, the firm’s limited partners expect it to get busy finding deals. The firm had $9.9 billion in dry powder in its private equity funds as of 30 June.

Apollo's second quarter earnings call Tuesday was punctuated by repeated questions about the extreme volatility in the stock markets this week. The Dow Jones Industrial Average plunged more than 600 points Monday, the first trading session after Standard & Poor’s downgraded America's credit rating for the first time ever. Other markets around the world also felt the shock Monday, including Britain's FTSE 100 index, which was down 1.7 percent to 5,160, and Germany's DAX, which dropped 2.3 percent to 6,096.

“When markets are going up, we’re looking to do realisations; when markets are going down, we’re looking to deploy capital,” firm president Mark Spilker said during the call. “Our LPs look to us to deploy in this environment, and there’s a lot of work and dialogue going on.”

Apollo is seeing “big opportunities” in its capital markets and credit business and has been building out its capabilities in those areas, Spilker said. However, opportunities could evaporate depending on how long markets remain depressed.

Indeed, the market needs to stay down long enough for capital to be deployed, Spilker said. Similarly, in good times, the markets need to stay up long enough to make realisations. “If this is a blip and it stays down for a short period of time, it’s harder to get capital to work,” he said.

The environment so far is different than 2008, mostly because there has not been big strains on liquidity, Spilker noted. “We see anxiety about sovereign debt in Europe, anxiety about growth and re-pricing of markets – that’s different from what we were seeing in 2008, which was a credit crisis,” he said. “I’m not saying one couldn’t lead to the other, but we are seeing opportunities to put capital to work.”

Additional reporting by Christopher Witkowsky