Suppose you have a wildly successful business in an ultra-hot market. Time to sell? It's probably something to consider. Well, that's certainly the state of affairs in the private equity world.
According to the Wall Street Journal, the founder of Apollo Management, Leon Black, is mulling these kinds of cash-out issues [subscription required]. His private equity firm is one of the largest and has done many deals, including ones for Harrah's Entertainment Inc. (NYSE: HET), Realogy Corp. (NYSE: H), and Nalco Holding Co. (NYSE: NLC).
Based on the market multiples -- such as for Fortress Investment Group (NYSE: FIG) -- it looks like Black could take home about $1.5 billion by selling a minority stake of 10% but still keep control of his destiny. To me, this is having your cake and eating it too.
What's more, by selling the stake to private investors, there's no need to go through the hassles of the IPO process. In other words, Black will have more time to do deals. If the Apollo stock is registered -- which is likely to happen -- it will become publicly traded within the year.
It's an interesting structure and is typical for small companies. As for Black, he does think out of the box and the back-door IPO does make a lot of sense.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
