Apollo's Leon Black on the Risk of Overpaying

NEW YORK (TheStreet) -- Leon Black is most proud of Apollo Global Management's (APO) thrift, as money pours into the private equity giant and is showered upon investors and upper management.

Apollo Global Management accounted for over 10% of the private equity industry's realization and fundraising activity in 2013. The Apollo chairman and CEO, however, appears most proud of not overpaying for deals in recent years.

In January, Apollo announced it closed of its newest flagship private equity fund, Apollo Investment Fund VIII, with $17.5 billion of commitments from limited partners. The PE giant also is realizing investment returns from its previous flagship private equity fund. In 2013 alone, Apollo realized over $15 billion in investments, well over 10% of the industry's total.

Amid all of that activity, Black said at the Columbia Business School Private Equity & Venture Capital Conference in midtown Manhattan on Friday that he's most proud of Apollo's discipline.

Specifically, Black said that Apollo's 2008 flagship fund, Fund VII, was able to invest in deals at an average price of 6.2 times earnings before interest, taxes, depreciation and amortization (EBITDA), while the private equity industry bid deals up to an average price of 8.5 to 9 times EBITDA.

That fund, which closed in 2008, has generated annual gross and net internal rates of return in excess of 38% and 29%, buoyed by deals like the takeover of Lyondell-Basell (LYB) during its bankruptcy.

"We are getting best in class returns but we are also taking the least risk," Black said of Apollo's selectivity in making investments.

Black also repeatedly countered the image many have of the firm as a PE-industry giant. "We are a value investor," Black said. He added that Apollo doesn't need a global recession to find good value investments or distressed opportunities and pointed out the firm's recent investments in CEC Entertainment and Hostess Brands.

Currently, Apollo is working on two or three corporate carve-out investments, Black said, while noting that the company is also in the process of signing a deal in the chemicals industry. Given continued recovery of the banking industry five years after the crisis and the burden of new regulations, Black said  Apollo is investing in financial services firms in the U.S. and Europe. 

"Europe is a place where we are very active," Black said, referring to acquisitions of non-performing consumer loan portfolio's and bankable assets in Spain, Ireland and to a lesser extent, the United Kingdom & Germany.

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