bloggingbuyouts

According to The New York Times, everybody's doing it! Well, maybe not the birds and the bees, but certainly Blackstone (NYSE: BX), KKR, and now Apollo Management, the latter to the tune of $1 billion, are investing in distressed debt.

It's no surprise that Blackstone is ahead of the game and has already raised a $1.4 billion fund to focus on cheap loans and bonds. The Deal.com also lists Cerberus and Carlyle as being interested in joining the party.

Apollo's Leon Black wrote in a letter to investors:"We're doing exactly what you would expect of us in this market -- using our distressed expertise and appetite for complexity to find investments in good companies that are available at a significantly discounted basis."

Luckily for Apollo, they happen to own some of those "good companies" that are "significantly discounted." So some of the bonds it will invest in will be issued by companies it already owns. Neat trick, huh?

As for the "appetite for complexity" -- I'll bet. Blood from a stone, anyone?

With Blackstone Group LLC (NYSE: BX) already public and KKR on its way to the NYSE exchange, there is lots of chatter about the next candidates. Well, according to a recent report in the Wall Street Journal [a paid service], it looks like Apollo Management may be trading soon.

Interestingly enough, the firm's founder -- Leon Black -- took a trip to Abu Dhabi. Yes, there's a ton of money there and I'm sure some eager investors who would want to be a part of Apollo. Although, it looks like there are some issues on valuation.

An investment from Abu Dhabi would likely mean a boost for Apollo's efforts in emerging markets. As the dealmaking gets crowded in the U.S. and Europe, private equity needs to find new frontiers of opportunity.

So, with a slug of capital from Abu Dhabi, Apollo might then file for an IPO and get even more money from U.S. public investors.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements

For billionaire private equity tycoons, the big question is: should I go public?

It's a decision that needs to be made fairly quickly. With Blackstone expected to suck up $4 billion or more from its own offering, there is certainly not unlimited funds -- despite the go-go environment for private equity.

So, in a report in the AP, the leader of Apollo Management, Leon Black, is giving lots of thoughts to public markets.

But, since he's a uber dealmaker, he's not showing his cards. He basically says that there are good things and bad things about going public (yes, Black is kind of like an American politician).

However, Black realizes that markets don't go up forever and he has a juicy opportunity to get some liquidity for his work. So, if I were to place a bet, I have a good feeling he wants to take his company public -- and soon.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The Wall Street Journal (subscription required) Weekend Edition's Billionaire Black's Latest Game of Investing Hardball provides an interesting look at Leon Black's Apollo Management LP, and some information about the future of the private equity industry. For one, private equity is relentlessly focused on the bottom-line, and often seeks to cut costs rather than grow revenues:

Like many buyout firms, Apollo sometimes stirs resentment at companies it buys with its unwavering focus on the bottom line. In late 2001, Apollo purchased Compass Minerals International Inc., NYSE:CMP)an Overland, Kan., salt and fertilizer maker, for $590 million, investing $102 million of the fund's money and borrowing the rest. Whenever Apollo executives visited, they "made a beeline for the accounting department," says former Chief Executive Robert Clark, who ran it for a year after the purchase. When he tried to discuss marketing, their "eyes would glaze over."

Last summer, Black appeared less than optimistic about the future of private equity:

"There are few bargains out there. Deals private-equity players would have required a 25% return on in the past are now being done for mid-teens returns. That may be OK if everything goes OK. But if we have an economic downturn, some of these deals will come back to haunt the people who did them."

This makes his decision to explore taking Apollo public, or selling a portion privately, all the more suspect. After all, with a net worth north of two billion dollars, he can't possibly need the money. It seems that the only reason for him to sell a stake in the company is to cash out because he's bearish on the future of private equity. And if Leon Black doesn't like the industry's futures, investors should avoid private equity IPOs.