A golden age of private equity buyouts has come to a end and returns in the $4tn industry will no longer be driven by rising valuations, according to a report by the Financial Times quoting Apollo Global Management Chief Executive Marc Rowan.
His warning comes as the private equity sector faces new challenges presented by a period of lower economic growth and higher interest rates, which makes the cost of borrowing to take companies private, more expensive.
“In the [private] equity business, this year has really marked the end of an era,” said Rowan on Thursday, adding that PE firms will “be forced to go back to investing in the old-fashioned way” by being “very good investors”.
Rowan made his comments as Apollo, one of the world’s biggest private equity groups with $617bn in assets, reported second-quarter results showing an adjusted profit of $1.1bn, slightly ahead of consensus estimates and nearly 60 per cent higher than the same period a year before. The New York-based group has also recently closed its newest flagship corporate buyout fund with about $20bn in commitments, short of the more than $24bn raised by a predecessor buyout fund in 2018.
