Leon Black’s New Apollo Buyout Fund Raises $6.8 Billion

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Leon Black / Getty

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/ By Clive Minchom /

Apollo Global Management, the New York based private-equity firm run by Leon Black, is reported by Bloomberg to have completed the first stage of its new buyout fund scooping up about $6.8 billion at the first closing, according to a source close to the company.
The new buyout pool, Apollo Investment Fund VIII, is currently seeking to extend this to as much as $12 billion in total. It apparently had earlier introduced an upper limit of $15 billion after originally marketing it without any limit proposed, two persons close to the subject said last month. A spokesman for Apollo declined to comment officially on this fundraising progress.

With concentration in the industry taking place, a smaller number of buyout firms are raising a larger share of the capital and as investors, seeking to cut their own costs, allocate their money to a smaller group of managers. Just ten funds amassed 55% of the money raised in the second quarter of this year, according to London-based research firm Preqin Ltd.

The Big Four

Carlyle the second-biggest private-equity firm after Apollo, expects to exceed its U.S. buyout fund target of $10 billion when it finishes fundraising for the pool in the next few months, according to a letter Carlyle sent to investors this week. Carlyle’s previous U.S. pool raised US$13.7 billion in 2007. KKR is targeting US$8 billion for its newest North America fund, which follows a US$17.6 billion vehicle before the crisis. Finally, in 2012 Blackstone Group finished raising one of the biggest post-crisis funds, collecting US$16 billion. That fund though followed a US$21 billion pool when it had completed its capital raising in 2007.

So if they can pull it off Apollo may just be the only one of this very small and select group of huge firms that may be able to put together a new buyout fund that is (just) larger, than it did before – the last Apollo fund raised US$14.7 billion in 2008, when the financial crisis brought the whole buyout industry to a grinding halt. Let’s wait and see how well they can actually do.
Transaction Fees

To sweeten their proposed new fund it is also reported that Apollo has now agreed to direct all transaction fees, collected from deals the fund makes, to its investors – up from a proposed 80 % share when the fund started marketing last year, according to people familiar with the terms. The firm’s previous fund, which raised $14.7 billion in 2008, had offered a 68% fee share as an offset to its charges to investors. It is not clear how much these new numbers may add up to over the life of a fund.
The previous pool, Apollo’s seventh flagship, has been generating a 28 percent net IRR (internal rate of return) as of March 31, according to the firm’s most recent financial reporting. They obviously had great timing and could buy a lot of stuff at the bottom, which is great when they cash out, but may be harder to replicate going forward.