Apollo Global Management has experienced difficulties in successfully completing major acquisitions in the UK market, leading to a lower conversion rate of its bids compared to some rivals. The firm withdrew its $1.5 billion bid for Bodycote, a FTSE 250 components business, after multiple proposals, causing Bodycote's shares to fall 9% to around $7.40. Similarly, Apollo dropped its $7 billion offer for UK education publisher Pearson after its third attempt was rejected, leading to a 12% drop in Pearson's shares. Analysts noted that Apollo's offers for Pearson were seen as "opportunistic" and "undervalued a high-quality asset."
Despite these setbacks, Apollo remains highly active in exploring potential acquisitions. The firm has considered buying supermarkets Asda and Wm Morrison and is among the potential buyers for UK chemist chain Boots. Its strategy has included seeking out businesses with strong, defensible cash flows and limited exposure to technological uncertainty, similar to deals completed by other private equity firms like Blackstone's acquisition of Senior and EQT's purchase of Intertek.
The broader context for these challenges includes difficult financing conditions, limited visibility on exits, and constrained LP patience in the current market. Private equity firms are circling UK-listed companies due to depressed valuations, but completing deals requires confidence in servicing debt, improving the asset, and finding a buyer at a higher price within a reasonable timeframe. The inability to satisfy this third condition, according to analysts, is a primary reason for failed deals.
Apollo's experience reflects a wider industry trend where firms are warning about the need for discipline and patience. The industry has increasingly resorted to "creative capital solutions" like NAV loans and continuation vehicles to generate liquidity, as actual realizations through traditional exits have been challenging. This situation highlights the difficulty in finding successful exit routes for investments made during the 2017-2022 period, when assets were bought at peak multiples with cheap debt that has since become expensive.
