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New York, we have a problem. Apollo insiders claim it is not ready to join Blackstone in the race to plant big private equity’s flag in the public markets. But its communication systems seem to be malfunctioning. Goldman Sachs – previously linked with Blackstone’s float (only to be absent from the actual deal) – is now widely rumoured to be one of the banks working on a forthcoming initial public offering or private placement for Apollo.
Private equity big hitters – and bankers who would lap up the fees – have good reason to salivate at the prospect of going public. It would crystallise the value of the asset management businesses they have built and allow them to take out cash before an IPO. It would also ensure they were not left at a disadvantage. If Blackstone’s float is a success, its stock could become a powerful draw for talent. It would smooth the way for a change of ownership as the founders one day step back from the business. And there is the ego factor of private equity kings wanting to show they have created as much value as their rivals.
The question is how the following pack, including KKR, Apollo and Texas Pacific Group, plan their next moves. They can wait and see. After all, if market conditions change and Blackstone’s stock performs badly, it would be a blow to both its reputation and employees. The trouble is that waiting also risks the IPO market getting tougher or investor demand being soaked up by others going first. That happened when KKR raised so much permanent capital for a European fund last year that others backed off. They will move cautiously. But expect another fund to announce an IPO or an alternative way to crystallise value for its founders soon.