Leon Black, chief executive officer of private-equity firm Apollo Global Management LLC, said prices for traditional buyouts have risen so much that it’s a good time to sell.
“We think it’s a fabulous environment to be selling,” Black said during a panel discussion today at the Milken Institute Global Conference in Beverly Hills, California, adding that Apollo has sold about $13 billion of assets in the past 15 months. “We’re selling everything that’s not nailed down in our portfolio, and if it is nailed down, we’re refinancing it.”
The number of private-equity deals announced in the first quarter declined 22 percent from a year earlier to about 1,300, according to data compiled by Bloomberg. Deal makers don’t know whether economic uncertainty will fade or “rain on us again,” Scott Sperling, co-president of buyout firm Thomas H. Lee Partners LP, said in a Bloomberg Television interview at the conference.
U.S. equity markets have more than doubled from their 2009 lows, helping push up average prices for leveraged buyouts to nine times earnings, Black said. The Standard & Poor’s 500 Index rose to a record today as consumer confidence countered an unexpected drop in business activity and investors weighed earnings reports. A reasonable LBO price is less than eight times earnings before interest, taxes, depreciation and amortization, according to the consulting firm Bain & Co.
“Valuations are not as cheap as you would like,” David Rubenstein, co-founder of Carlyle Group LP, said in an interview today at the conference. European deal valuations are more attractively priced than those in the U.S., he said, and the energy and health-care industries are attractive because they need capital and have strong growth prospects.
Private-equity firms including KKR & Co. and Washington-based Carlyle have said they are taking advantage of low interest rates to refinance companies in their portfolios and put them on more solid footing. KKR, based in New York, is taking advantage of low yields and record lending to reduce interest costs in its portfolio, Jeff Rowbottom, the firm’s head of capital markets for the Americas, said in a Bloomberg TV interview at the event.
Black’s comments were echoed by buyout executives including Sperling and Jonathan Sokoloff, managing partner at Los Angeles-based Leonard Green & Partners LP.
“It has become more difficult to find transactions priced at levels we’d like,” Sperling said on the same panel.
“We’re having trouble deploying capital at these price levels,” said Sokoloff. It’s “time to take a pause.”