Matt Nord, co-head of private equity at Apollo Global (APO), has raised concerns over the inflated valuations in the private market, hinting at a cautious approach towards asset acquisitions. In a Bloomberg TV interview, Nord highlighted that many investors have overpaid for assets, which may lead to challenges in realizing returns, especially in an environment characterized by higher interest rates and tighter financial conditions.
Nord emphasized Apollo's conservative strategy, stating that the firm typically acquires assets at six to seven times their value, utilizing prudent underwriting assumptions. This approach, he suggests, positions Apollo to navigate the current market dynamics more effectively than others who may have overleveraged or overvalued their acquisitions. "The air is very slowly coming out of that balloon," Nord commented, alluding to the gradual correction in private market valuations.
The broader private equity sector has witnessed a significant downturn in deal activity and exits over the past year. Data from PitchBook indicates a 43% drop in median private equity realizations for the largest publicly traded US firms as of June 30 for the trailing 12 months. This decline underscores the challenges faced by the industry amidst rising interest rates and a shift in market sentiment.
Looking ahead, Nord expressed optimism about the IPO market in 2024, suggesting it could see a modest improvement. Apollo, he noted, is actively engaged in discussions regarding potential asset sales, indicating a proactive stance in navigating the evolving market landscape. This perspective offers a glimpse into Apollo's strategic considerations and the broader sentiment in the private equity sector amid shifting economic conditions.
