Apollo Says Private Equity Must Cut Valuations

Longer hold periods are dragging private equity returns, and Apollo Global Management Co-President Scott Kleinman says the industry now has to give up on old price expectations. Speaking on June 10 on the sidelines of the SuperReturn conference in Berlin, Kleinman said firms are going to have to start capitulating on valuations as delayed exits weigh on internal rates of return.

The market consequence is plain: sellers who waited for 2021-style multiples aren't getting them back. Kleinman's comments, delivered in an interview with Bloomberg's Dani Burger, amount to a blunt message from one of the industry's biggest firms that the reset is no longer optional.

Background

Private equity has spent the past two years stuck between stale valuations and a hostile exit market. Firms bought assets at rich prices when financing was cheap and public markets were forgiving. Then rates rose, buyers pulled back, and the path to clean exits narrowed. The result: portfolios stayed on the books longer, and the core performance metric that matters in buyout fundraising — IRR — started to suffer.

That pressure is mechanical. Private equity firms can defend paper marks for a while, but time is ruthless. A delayed sale can still produce a money multiple that looks respectable. But the annualized return falls as the holding period stretches. That's the point Kleinman made in Berlin, and it lands because Apollo sits at the center of global credit and buyouts. When a co-president of Apollo says firms must capitulate, he isn't describing a niche problem. He's describing the industry clearing price.

The backdrop is a market still struggling to reopen fully. Sponsors have leaned harder on continuation vehicles, dividend recaps and minority stake sales to create liquidity while avoiding outright disposals at weaker prices. But those are holding actions, not solutions. They buy time. They don't restore 2021 valuations. And they don't fix the drag that longer ownership periods impose on investor returns, a problem that matters just as firms head back to limited partners for fresh commitments.

The tension is familiar across capital markets. Assets repriced faster in public markets than in private ones, leaving sponsors slow to recognize the gap. That disconnect has shown up well beyond buyouts, from infrastructure to real estate to power systems under strain, as BreakWire has reported in Eskom breakup plan alarms bondholders over credit risk and Morgan Stanley Warns on Australia Property Market Pockets. Private equity isn't insulated from the same repricing force. It just reports it later.

What this means

Kleinman's intervention matters because it tells sellers the waiting trade is breaking down. If more firms accept lower valuations, deal flow improves. Exits resume. Distributions to investors recover. And fundraising gets a little less painful. But the losses are real. General partners that bought at peak prices will have to explain why they sold below prior marks, and some managers will discover that their vaunted discipline vanished when debt was cheap.

But the buyers gain. Secondary funds, private credit shops and large strategic acquirers now have more leverage in negotiations. So do firms with dry powder and patience. Apollo itself is well placed in that world. It has scale across private equity and credit, and that matters when assets need flexible financing to get done. The firms under the most pressure will be the ones with aging funds, sparse distributions and too many portfolio companies still valued for a market that no longer exists.

This also sets a precedent for how the industry talks about performance. For months, many sponsors implied the slowdown was temporary and pricing would normalize if they just waited. Kleinman cut through that. Waiting has a cost. It compounds every quarter an asset isn't sold. The conclusion is brutal and simple: marks that can't clear the market aren't really marks at all.

And there's a broader market read-through. Private equity has been one of the last big pools of capital resisting full repricing. If that changes, it feeds into M&A volumes, financing demand and the tone of public listings. A healthier exit market would help reopen risk appetite that has been uneven across sectors, much as issuance trends have diverged in technology, as BreakWire noted in US Trails China in Tech IPO Listings. Capitulation sounds ugly. In markets, it's often the start of normalization.

Waiting has a cost, and private equity can no longer pretend stale marks are real prices.

The industry context is easy to trace in public data. Higher borrowing costs have altered deal economics across markets, according to the Federal Reserve and the European Central Bank. Private equity relies on debt to amplify returns, so a higher-rate world changes what buyers can pay. That alone compresses valuations. Add slower exits and the squeeze becomes obvious. Even the basic math of internal rate of return tells the story: time erodes performance when cash comes back later.

Still, repricing doesn't mean collapse. It means reality. Healthy markets clear. Sick markets cling to yesterday's marks and call that patience. Private equity has done too much of the latter. Kleinman's remarks are a signal that at least part of the industry is ready to stop pretending otherwise. That should help buyers, help dealmakers and, eventually, help investors who have been waiting for distributions that never arrived.

Watch the next earnings calls and conference appearances from the largest buyout firms, including any fresh comments from Apollo and its peers, for evidence that markdowns and lower exit pricing are starting to move from private admission to public policy. If more executives echo Kleinman after SuperReturn Berlin, the valuation reset will stop being a warning and become the market's operating fact.