“There’s Nothing to Celebrate Until We Exit” with Apollo’s Reed Rayman | KindredCast

value on the buy growth once we own

that's kind of my Approach in techland

is let's create um you know something

that's got you know real downside

protection with cash flow and purchase

price but let's make sure that now that

we own it we're it's a tech company and

we're going to have to exit it to a

buyer who's going to get excited about

the terminal value and the growth for

them hi everyone and welcome to Kindred

cast where we shine a light on the

people and ideas shaping our future

Kindred cast is a production of Kindred

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welcome to Kindred cast our lion Tre

podcast I'm antel rabo today we continue

our series of private Equity investing

in the technology sector following this

Summer's conversation with Brian Rudder

at prier on the emergence of the

software buyout industry in the second

installment we're diving into the world

of private equity and Tech investing

again with Reed Raymond who is a partner

in private Equity at Apollo Global

Management who focuses primarily on

investing in in the technology space in

addition to certain sectors in media

Reed has been at the center of some of

Apollo's most high-profile deals in the

technology sector ranging from Western

Digital to Intel Shutterfly Expedia

simpress ADT and of course Yahoo

rejoined Apollo in 2010 following the

start of his career at Goldman Sachs in

today's conversation we'll dive into re

Journey at Apollo Apollo's approach to

investing in the technology sector we'll

talk through some of Reed's deals that

demonstrate the breadth of Apollo H

Solutions and we'll wrap up with a

conversation on investing in the

technology sector in

2025 welcome to ker cast Reed thanks for

having me my fir my first podcast

fantastic fantastic very excited tell us

how you got started in private equity

and what led you down the path of

investing in the technology sector so um

originally from New York um went to uh

went Public School in New York went to

Harvard I started Goldman doing

Investment Banking um I was actually in

the Industrials group in invest Banking

and um I was I was chugging the Goldman

Kool-Aid I never thought I want to leave

I loved Goldman Sachs I didn't

understand why anyone worked anywhere

but Goldman Sachs and so then I moved

over in um 2010 to the on balance sheet

hedge fund called gsps after my two

years in invest in Industrials

Investment Banking and I thought you

know it was this great it was called uh

it was the former risk ARB group it was

this um this you know super exciting

group that I thought I was join the best

seed at Goldman it was you I thought it

was just you know thought it was the man

it was the worst timed career move ever

because that was so I moved over in June

2010 in July 2010 I think the Dodd Frank

bill pass the vulker rule and uh so this

was the group that got vulker so we

literally you know a month after I got

they were getting shut down and so here

I was I thought I was this like young

hot hot shot basically out of a job and

I think it just you know shows you the

careers are not linear um and so back

then um Apollo was really small we uh we

were you know there was one woman she

she's terrific you know we're still in

touch who who's the entire HR department

we probably you 150 people at the whole

firm um next thing you know that that

fall i' started Apollo um and and so

that the you know that that was the fall

of

2010 um again back then firm was

probably 30 billion or so of AUM um and

vast majority of that was Private Equity

so the arc to getting into the

technology sector so so look my when we

started um you know as Associates uh and

still you're you're generalist

and so um you know my first four years

uh you know I um worked on I actually

worked on a lot of things across the

industrial space randomly and I was

associate said we didn't do a lot of

tech back then um you know it's it's a

good lesson you know one of the things I

tell our guys now is um especially as an

associate it's not about working on the

sexiest deals or working on um you know

the sectors you want is working on

getting the best reps with the best

people so my busiest deal I would say

for four you know for you know basically

my entire associate years was a uh a

small uh Paper Company we owned but

there were so we did so many different

interesting things with that company and

um the principal on the team was a guy

named David samber who now run you know

co-heads our Equity business the partner

on the team was our guy named Scott

kimman who now is the co-president of

the firm so just one of these like you

know as a young guy you get really good

reps um uh with with great people and so

then I'm getting to the the answer of of

how how I got to technology so so so

then back you know we'll talk about the

growth in The Firm but from the private

Equity side we really did not uh invest

in Tech back then right we were a value

oriented

contrarian um firm and and you know of

the sectors that we didn't touch Tech

was one of them um and you know as as I

got into my principal years um you know

we as a firm started opening the

aperture a little bit about what it

meant to be a value investor and and how

you can find do value investing in

technology so um you know we then uh you

know some of these are my partners some

of these are me but did a whole slew of

whether it was Tech data rack space

Shutterfly speedia simp yah we'll talk

about them but um next thing you know

we're we're finding ways to be you know

kind of value investors in the tech base

and got a great franchise um and I love

it yeah that's awesome tell us a little

bit about how Apollo has changed since

you joined because as you said right

very very dramatic increase in a AC you

know across the firm and new divisions

and uh mergers uh since You' you've

started what's changed in the uh culture

and approach AT AP poos since you've

been there you know and I joined uh the

entire firm was on one floor for the for

the most part uh in in 9 West 57 Street

um we had about I think in 2010 it was

about 30 billion of AUM probably about

150 people um the uh and we weren't a

public company so fast forward to today

we about 5,000 people um a little bit

over 700 billion of

AUM uh you know hundred billion dollar

market cap company and um we've really

um innovated in a lot of ways and it's

really it's an exciting place and time

um to be at the firm with you know with

with Mark at the home it stayed the same

in that um in our private Equity

business uh our core you know we've

stuck T knitting we are still you know

our funds have gotten larger but the

core you know what it means to be doing

private Equity Apollo has not change

materially we're stuck tting purchase

price matters value oriented contrarian

cash flow oriented investors small

partnership small team across the firm

it's been really exciting to be part of

it the growth and it's been you know

we've been in business building mode in

2008 or nine we started a business

called

ath which um you know is is obviously

now a huge part of our franchise our

it's our insurance business which is

almost $400 billion doll of our balance

sheet of the 700 billion um but you know

it means for us we've got a massive

credit business you know massive

Insurance business large hybrid business

um you know we're in the secondary space

now we've got all sorts of innovative

new products that you know we've

launched especially in the last couple

of years so it just means that for me as

an investor um H at the firm I I just

have this really broad toolkit yeah and

we'll get into it but I can go to

corporates now and you know talk about a

take private I can talk about a hybrid

solution I can talk about a pipe I can

talk about everything down to inventory

and reable finance ing so it's a really

exciting time to be at the firm let's

just spend a minute on on the Arc of

your your deal history you went from

Industrials to to semiconductors and

across that way I mean I I think I first

met you when when you were looking at uh

Talent marketplaces yeah right so

getting your feet wet in uh in the

internet uh in in the internet sector

you you started with ADT and and uh you

know V various deals that were uh a

little bit more removed from the

technology sector to to then getting

into the internet sector kind of at the

height of the consumer internet internet

at the last decade and then you pivoted

further into into semiconductors and

Hardware that's that's a journey not a

lot of people make right from across all

these different uh spaces how do how did

you navigate that personally and what

drove you into these what drove your

ambition into these new uh new spaces

for the for you know the way we think

about our sectors as a firm right so so

we are we've we've we've you know

associate principal partner um at the

associate level you're you're really a

generalist at the principal level you

start to specialize and you kind of you

know you know work with Partners on

certain things and you get a try so I I

worked with you know a bunch of folks

who um you know were like-minded and

thinking about tech and media and other

parts of the world um and then as a

partner you specialize and so you know

really is when you you know I think I

became a a partner in 2019 and so that's

when I you know formally you know

co-head um Tech with my my partner Rob

Kelo Ramos and you know as as we um

we're opportunistic investors right so

that that is our we are not thematic

investors we don't sit here at the

beginning of the year saying um you know

I really need to do a deal in consumer

internet because I've got this thesis we

are we are opportunistic in the way we

go to market and the way we look at at

situation so it's just a function of

where we found really good risk reward

over time so it's it's not it's nothing

wasn't intentional wasn't deliberate you

know there's a time when there was

really good risk reward in as we talk

about tech in parts of consumer internet

um and then I there was some really

interesting risk across semis and then

you know most recently you know then

obviously we'll talk about covid and we

were very active during the depths of

covid and those um uh and then now you

know just given the various tools we

have uh they've been most this year

especially very relevant for a lot of

semiconductor situations you know where

where there's huge cback needs huge

opportunities for us to finance those

you you came into the pandemic having

invested in in CareerBuilder Shutterfly

and then the the pandemic hits and and

consumer internet had a very very strong

uh start of the pandemic and then it

went the other way um there were other

sectors within uh internet that that

suddenly shut down like travel and you

had to you had to navigate through that

very very difficult

environment um in your private Equity

deals that that led to some some fairly

meaningful retracements it also created

New Opportunities like Expedia right uh

to be opportunistic but that that that

learning of going through that cycle

tell tell us a little bit about that

that experience and how you navigated it

and how it's how it's turned out I'm

super proud of of you know what um of

our investing experience in track rer

during the pandemic I had at that point

I had two young kids with a third on the

way I mean like like many others

listening and that we all work with it

was a you know traumatic time with no

child care to be like working literally

247 for uh you know at least all of

March and April and May and and

thereafter in the depths of 2020 um I

think the most look the as relates to

the portfolio we were actually we were

in a pretty we were fortunate we we were

we had the chance to play offense more

than we had to be playing defense and so

we because of the stability of our

portfolio um and the way you the types

of businesses we tend to buy we we

weren't playing that much defense uh we

didn't have to and we could really focus

on deployment uh you know in private

Equity we can do you know we do

opportunistic buyouts we do carve outs

but we we also do distress for control

and so we can deploy um into markets

where there's a lot of volatility we

we're not we're not a hedge fund in

private Equity anytime we're investing

in a credit out of private Equity

there's a catalyst to control or a

catalyst to

restructuring but in those weeks of

March and April

2020 we invested about $3 billion of

equity and um you know I I uh I'll

borrow a quote well it's a Lenin quote

that my partner David samber loves using

but I love it as well it's you know

there's um there's decades when nothing

happens then there's weeks when decades

happen um and and that's really what uh

it felt like and I think the big

takeway was um being prepared probably

in a in a several week period right I

mean we couldn't have started from from

scratch um so each of us you know as

part of being a partner in in in our

private Equity business I've got a

screen of all the credits in my sector

and I know exactly what my price Target

is for every one of those credits and so

when something like Co happens and you

know the leverage loan index Falls 40

points and um you know things start you

know we we were able to move really

really

fast um so we I was you know I was

involved in a lot of our you know

deploying into the secondary CR markets

and then you know we were able to take a

long-term View and I'm I'm super proud

of you know within a one week or two we

period of each other you know I was

fortunate to announce two separate very

large rescue financings um or Capital

solution financings um we did a billion

two investment to Expedia um which we

split with Silver Lake um and we we

again we moved very quickly in a matter

of weeks on the road you know that you

know people were going to travel again

and and you know took a long-term View

and that that was a a very very

successful for investment for us that

that expedient investment um uh with and

they they called us after a year and um

and then separately sypress um which is

another consumer interet business or you

know so B2B and consumer interet

business um and because we owned

Shutterfly at the time we knew the space

really well we could move very quickly

and that was a $300 million uh

investment another very very successful

investment for us so um look it was it

was hectic and scary but also

exhilarating and we were able to put a

lot of capital to work successfully this

Cuts cuts the core of some of your

differentiation in the technology sector

where you're investing across the

capital structure exactly across

different points in the in the cycle

yeah I mean in each I mean so and they

were very different Expedia was a pref

plus warrant and simpress actually a

second lean um credit like financing

that came with Warren so we had the

equity convexity there as well one last

uh point at the personal level you've

worked with some tremendous Founders and

leaders over the years at uh at Apollo

what what's a a memorable moment that

touches that really touches the culture

of the firm for you I I'll give two

examples of things that are kind of real

bookends um to dat memory one it's not

one but it's you know I grew up we are a

firm with an apprenticeship culture

meaning it's a very lean team like I

said three-person deal teams for a very

large pool of capital and you learn by

osmosis and one great example of that is

every single member of the investment

team joins IC every Monday so I grew up

my memories of growing up sitting around

the investment committee table I was in

the room while the partners and

principles sat on the table watching you

know the founders got kimman and Mark

Becker and other you know guys that I

you know mentors and and folks that I I

really grew up you know admire watch I

would watch them have intense IC debates

and we I mean that my best learning

experiences were often just being there

on Monday mornings being able to sit in

as a young person um when we were a

really small firm and and the whole firm

sat on the table again to be fair we

today still in private equity we we do

ic's that are everybody fast forward

another amazing memory on the other side

of now the growth as a firm this past

January um Mark organized our our first

big Partners outing um and he's talked

about this publicly we did it in Abu

Dhabi the so we now have 200 Partners um

or thereabouts and everyone descended

globally on Abu Dhabi and it was just an

amazing you know reflection if I just

think about everyone you know in the

camaraderie and the excitement now being

part of this this firm that has you know

reached this scale um yeah just amazing

experience memories you know March

leadership um and and some of the the

discussions we had in Abu Dhabi so

really memorable that's amazing so now

we're going to now we're going to go

over to uh Apollo's unique approach in

private equity and and also around

hybrid value and and infrastructure

Finance right areas you're you're

touching in in the deals that you've

been working on recently let me spend

just a second giving giving our audience

a little a little bit of uh a little bit

of data on on the Apollo platform so how

does that that mix of mix of assets and

capabilities and the scale of

particularly the credit portfolio give

you an edge in investing in the

technology sector against other private

Equity firms who may not have that that

deep sort of credit uh and

infrastructure Finance experience yeah I

think it's it's um I think of it as

about a little more than 700 billion of

of a of which like you said about 550 is

Credit One you know 20 130 or so these

days is um is private equ and the

remainder is what we call hybrid um

which you know again and there's real

estate and there I think in the equity

in the equity sleeve but hybrid and

we'll talk about hybrid because it's

really important part of the sleeve

you're exactly right it is a um it's a

real differentiator and you know

the there's the growth in the business

of Apollo but then there's the how does

it make us better as investors if I was

just um thinking out of my private

Equity with my private Equity hat we'd

never have the scale or the relevance to

do a very you know be talking to Intel

or talking to you know some of the

largest companies in the world that I

talk to on a regular basis um and so

what it means is we just have more tools

in the toolkit so I'm going you know as

part of like other partners and other

private Equity firms you know my day job

is you know meeting with uh you know

CEOs of you know scaled uh corporates uh

you know on a Conant basis and I can go

to them have and really have the

conversation around um again like I was

saying earlier either were um you know

let's here's the buyout option here's

the other option and here's all the way

down the Spectrum you know most of our

credit business is IG right and and

really plain vanilla financing people

think of our credit business for some

reason still as this you know the the

old Apollo distressed whatever but that

is not the business we're in in credit

land so that that's one way it helps the

other way it helps is we just have

tremendous visibility into you know our

credit guys we're probably the single

larger we're among the top buyers our

loan and high yield markets um

and so what that means is when I'm

looking at a sector I'm getting up speed

on a sector if we haven't spent time on

it in private Equity I'm call Credit

team yeah I'm call my part credit and

and we're getting smarter and we're

we're you know they're seeing a lot of

flow and so it's it's super symbiotic

and um and I actually love working on

the kind of crossplatform stuff now your

investor day uh fairly recently uh Mark

Rowan talked about the uh the the sort

of fiveyear fiveyear plan in terms of

growing AUM and and put some big targets

out there for 1.5 trillion by 2029 and

within that you've got a uh almost

tripling of your uh your private Equity

AUM to about 270 billion that's that's

at least the Target that was uh was

stated publicly can can you give us a

sense where that growth is going to come

from one of the really great things

about working in a place with with Mark

as a leader is again just the way he

thinks about innovating and business

building is is probably unmatched on on

the street so here's the answer um today

uh our private Equity business is you

know still a core critical part of our

firm but it's mature so as we think

about the building blocks of growth

private Equity is our critical stable

you know intellectual you know Center in

a lot of ways um but it's mature so

different businesses in the equity

ecosystem to your point the broader

equities that are going to get us to you

know the the tripling of the equity

business and where you were going uh

direct to very large family off offes

now you're going to high net worth well

that's that to you extend further down

as well totally a slightly different

point but yeah that too is not just we

because I mean even with our with our

massive Sovereign wealth LPS we're

thinking about them more as clients than

we ever did them before but yeah you are

making a simp point is exactly right

we're also you know retail is going to

be a huge uh I mean everyone's focused

on retail I mean if you look at we've

got some wild stats I mean at our firm

two or three years ago we had something

like zero people focusing on the high

net worth Channel now we've got like 150

um I mean it's just been a whole you

know new Initiative for us it's going to

be a big driver of of growth going

forward let's spend a a moment on

private Equity the the classic the

classic the classic buyout strategy so

we've we've had an opportunity to be

alongside you on on a number of uh

number of transactions and and when when

I think of you from the outside you're

often described as a value player right

so your your average creation multiple

uh publicly stated is six to seven times

you're you're typically putting three to

four times Leverage on these businesses

so you're very reliant on sort of

operational cash flow Generation Um to

to drive to drive returns uh you also

have done really well with that strategy

and I think in some of the the public

discussion at the investor day there was

a I think an interesting uh stat that

showed that most of your uh Returns come

from operational Improvement versus

multiple expansion and other things so

that strategy is different than a number

of the other Tech P players you're

coming in at at lower multiple typically

more mature businesses and um what what

is it that uh uh what is it when you

have that strategy within technology

what what are the good fits for those

those types of investment parameters

what kind of companies and then my

second question to that is when when

will you will you ever kind of uh go up

the up the chain into higher growth is

there a path to to a different model

within private equity in the next couple

years like you said so our core private

Equity strategy is um it's a value

oriented contrarian strategy we we go to

market you know you're exactly right on

T you know we we we've created we think

about you know purchase price matters

and everything we do the average lbo

multiple is 12 and change our creation

multiple as you said is you know 6 to

eight um the uh historically as we

thought about sources of you know value

creation um exactly you said the things

that we focused on were one creating

value on the buy through through just

multiple you know buying at you know

below fair value um and and two uh free

cash flow and then three you know cost

saves or operational Improvement like

you said um I think in Tech what we've

done what I've tried to do in my deals

is as you know again you guys have been

you know involving all them almost all

them um is value on the buy growth once

we own that's kind of my Approach on

techland is let's create um you know

something that's got you know real

downside protection with cash flow and

purchase price so we'll talk about Yahoo

we'll talk about shut flight we'll talk

about these other deals um but let's

make sure that now that we own it we're

it's a tech company and we're going to

have to exit it to a buyer who's going

to get excited about the terminal value

and the growth for them and so we're

going to have to make investments that I

think when I was growing up at a firm we

made at the firm we may not have made

once we owned it and so uh that's really

the the value on the buy growth once we

own is really the the approach that I

bring to Tech investing um and uh the

second part your question no you're not

going to see us be a we're never going

to be a mid teens buyer of a or a 20

plus you know times iida buyer of a sexy

software asset it's not going to be us

so hybrid value you started talking

about it um I've I've in my interactions

with Apollo seen some very different

flavors of of Capital Solutions that

might come to bear with with hybrid

Valley you've done you've done uh

converts you've done instruments that

look more debt plus warrant like uh

We've also

come to hear your name more often in in

pre-ipo Solutions can you tell us a

little bit about the breadth of what

hybrid value can bring to the table uh

in different situations right it might

be in a distress situation during the

the pandemic but it might also be a

solution on a path to an IPO for example

so a little bit of color on what you're

trying to do there would be great yeah I

mean you summarized it really well I'm

trying to think what's additive but yeah

it's exactly like you said we are um

this is a strategy that we started it's

a lower cost of capital strategy than

our private equity strategy so we can be

very competitive with corporates um you

know in terms of you know when they're

we're competing against a private Equity

oriented 20% plus return Capital where

you know hybrid value is more in the

kind of mid to high teens uh really mid

teens cost of capital um exactly like

you said there's a lot of ways to get

there right so that that is everything

from you know heavily structured returns

you then will have on the other side of

the spectrum stuff that's a lot more

equity-like that doesn't have a coupon

but it's hybrid value because it's got

structural downside maybe in where it

sits in the cap structure maybe it's got

a you know put right or maybe it's got

something and so you still have to

believe in the equity value appreciation

but at least you've got down to

protection I mean it's a strategy where

you know obviously when you've got a

strategy that's um you know lower return

targets you just have to be very very

focused on Capital preservation so it's

a strategy cannot have cannot have

Capital loss and uh so it's got to be

structured but that the the returns can

be generated with a lot of flexibility

as you think about the tools between you

know coupon pick oid Equity returns you

know and exit mechanisms I'm going to

I'm going to read to you one one quote

from uh from Mark Rowan uh again lastly

from your investor day but just to get

your comment on it he said the ability

to originate assets that offer alpha or

excess return is the key driver of

Apollo's business going forward and he

also quoted he said that uh one of the

key kpis he looks at is is the uh the

amount of of origination per year which

which he expects to go from about 160

billion per year to 275 uh by by

2029 we hear a lot from private Equity

that uh that they are looking for

innovative ways to to originate and that

can be through through relationships

with Founders in some cases um it can be

by building relationships with uh with

investment grade companies but as you

think about your own strategy uh in

terms of being able to drive origination

and not wait for for Banker processes to

come on to your desk right what what's

what is your approach to kind of driving

origination Apollo yeah so I let me

answer the question big picture and then

I'll talk about my Approach for

origination so when we say origination

um and when Mark says that it's because

we put ourselves in a fortunate position

through a theme where we have you know

no shortage of capital shortage of

assets right so just to for for folks

who you know aren't familiar when you're

listening right so athe is um it's in a

handful of businesses but the most basic

is just in the retail annuity business

and you know meaning you know onto wants

an you know 30 years guaranteed to 5 and

a half% you'll pay premium up front

won't give you that annuity over time so

our job then is over a long duration

with you know it's highly regulated but

rated matching you know generating some

excess spread to the liability okay in a

year um we are going to do 70 to hundred

billion dollar of capital inflows

through the insurance business right so

that that so we are you know I said

before I think of the entire credit

business about 400 billion is our own

you know Insurance business and again

that's growing to the tune of 70 to 100

billion plus per year and sometimes in

excess of that so that's on the capital

side so when we talk about our

origination business which you know my

close friend Chris Edson just got

promoted to run um that's and I'll get

to that that's me and and some of but

that's also a in terms of my day job and

and originating assets for that but that

starts with the platforms that Chris and

the rest of the team have built over

time you know we have 16 platforms now

originating we have wheels donland

originating Auto Finance we have

Alliance originating inventory

receivable Finance we have PK era we

have doing aircraft financing we have

midcap doing low mid-market you know so

so we have originating takes lots and

lots of forms all of our real estate

stuff credit real estate credit so

that's kind of almost half the

origination maybe a little more than

half and and that sits on the you know

primarily the Ethan balance sheet the

other side of origination is the more

deal oriented you know type of thing so

we'll talk about Intel we'll talk about

you know we can so ABM Bev Intel very

large deals or originating assets that

make sense for the balance sheet okay so

that's the what Mark is talking about to

your question how I focus on my look I

think that like you said we we have a

pretty young Scrappy partnership at

Apollo like I think everyone says this

in terms of not participating in

auctions but like we really don't

participate like it's it's very very

unusual that we're competing with

someone else so it is you know I am

again my day job is being on the road

not to similar for be meeting with CEOs

building relationship with management

teams obviously being in the flow with

all all the right Banks um and and the

right folks in the industry um spending

time with management teams that are you

know independent developing their own

thesis so that's kind of that's and

that's what I love doing is just being

out there um you know uh people make fun

of me that you know you you you've

needle you know I have lunch of noo

every day but that's because that's I'm

meeting with a new CEO or you know our

management team or building

relationships with Bankers every day so

that that's my that's our core that's my

job okay we're going to to hear a little

bit more about how you do that in

practice now and what we call the

anatomy of the deal segment right uh

we'll dive deep dive into a handful of

your kapollo Tech deals now and so we're

going to start with uh we're going to

start with Intel right where you

provided 11 billion of capital uh

earlier this year to fund uh what they

call Fab 34 in uh in Ireland uh this

deal from the outside looked like you

were buying 49% of the the equity of it

wasn't clear whether it was the entire

Fab or or some kind of J operating JV

around it but uh you described the uh

the um the deal as Equity like and it'd

be interesting to hear a little bit more

about how this was structured and and

how it works for for Apollo and how it

works for for Intel and the the the

second piece to this question is like

what other types of businesses can this

type of financing structure apply to

this is obviously an investment grade

partner you've got a lot of financing

right now of of Big Data Centers driven

by AI so be interesting to hear a little

bit more about the applicability of the

solution to other uh situations you

might encounter totally um it it was a

really it's a really exciting one and um

I think gives a good glimpse into

everything you just said and how we

think about the world so

um stepping back uh you know

the as you think about the semiconductor

ecosystem there are really three guys in

the world that make Leading Edge chips

tsmc Samsung

Intel historically you know tsmc is of

course a Foundry for third parties

Samsung is a little bit of both mostly

themselves but they Supply third parties

um Intel has been an integrated device

manufacturer they just do for

themselves um Pat elel singer comes in

launches IDM 2.0 strategy where they're

going to create a Foundry business um to

provide chips for for other

customers making a Fab constructing Fab

is insanely expensive insanely expensive

a new Fab at Leading Edge is 20 Fab is a

factory a new Fab at Leading Edge is 25

to30

billion um you know the the euv

lithography tools you know you could see

a tool out of asml being a quarter of a

billion dollars and you know Fab 34 has

got like a dozen of them I mean it is

the scale of this is is just

insane um Intel as part of their Fab

their their IDM 2.0 strategy they were

looking to raise the the the Fab 34 net

of government incentives needed about

$22 billion for their Ireland Fab and um

they were going to do 11 of it and they

needed 11 from someone else you know

having covered the space for a number of

years um I knew the team over there very

well we had a great long-term

relationship you know i' known Dave zzer

since his Micron days the gentleman who

run strategy over there since his zling

days so um you know we were really deep

with the company and really respected

them and admired them we also my partner

jamid asani um who's you know an amazing

leader and runs our entire you know most

of our insurance franchise and this

business that we call high-grade Capital

Solutions um had had this product this

balance sheet that jump sheet runs and

so was a partnership you know between

kind of uh you know between us and a

handful of other folks on the team Joe

Jackson and others without getting too

technical so so Intel Fab 34 produces

Wafers mhm two people two two types of

folks buy those Wafers one is Intel for

their own product

and two is another

customer we said to Intel okay why don't

we create a we'll build we'll put a JV

and we'll create a JV and the J the JV

exists for the sole purpose of operating

Intel Fab 34 but it sits in the middle

of Intel the design company The Product

Company in the The

Fab we'll pay 11 billion to buy 49% of

that

JV at the same time Intel the design

company buying Wafers out of the JV will

sign up to a long-term minimum volume

commitment okay they have to buy a

certain number of Wafers outside so

Intel Corp is committed to buy a certain

number of Wafers outside of the Fab from

the Fab and it flows to the

JV to Apollo we can price that as debt

because we said okay great Intel we're

taking Intel credit risk they had this

minimum volume commitment you know the

Intel bonds traded to about 5 and a

half% yield so we can price this to only

a couple hundred bases points wide of

the Intel bonds wow so it's an IG

financing you know again it can't be

totally debt so there's a there's a lot

of nuances here and I'm simplifying but

effectively taking Intel credit risk so

we're for the same risk that the bonds

have we are and we even have some

structural seniority of bonds we can get

into it but we are taking we're earning

an excess spread you know as Mark always

says exra spread for for unit of risk so

we're entering in this instance call it

250 basis points of of excess spread on

11 billion so really big really

important for us Intel can go to the

rating agencies and say Apollo bought

49% of the JV that's Equity they bought

49% Equity stake in a JV and every and

not not that we're tricky I mean

everyone they radi is super deep

alongside with us they understand every

Nuance of our contract and but it is

equity to them we can price it as debt

and you know the competitive solution in

that instance was a large private Equity

Firm with an infrastructure fund so that

they were going to do three to four

billion of equity infrastructure Equity

so mid to high teal mid teens capital

and then you know they were going to

have debt that sat on top of that so be

three plus eight or so Equity plus debt

to get to the 11 um but it's just not

you know the weighted average cost of

that for Intel would have been you know

low double like just wildly not

competitive with our Capital so and all

that sits on our balance sheet right and

and we syndicated some of it and we got

it rated right so it's IG so it's a long

duration you know bespoke piece of paper

that literally zero other people in the

entire world could have done all right

super exciting great partnership with

Intel what does he mean for other things

there are a lot of the the industrial

Renaissance and the capex Renaissance

and everything you got going on um

there's going to be a huge need for this

product um and um you know so so I think

that this is just you know anyone who is

IG or close to ig and has off and needs

Capital at scale for long duration this

is it kind of feels like this is like

what Mike mil was doing in the 80s

inventing the high yield market like

this is the that that's how excited I am

about that product fascinating we're

going to see more about that I'm sure in

the next couple years let's go to Yahoo

uh for a minute yes uh so this was a a

pretty complex uh digital media car Val

uh you structured it again in an

interesting way there there's various

different assets underneath the the

Yahoo umbrella ranging from the the core

o and O uh owned and operated business

that everyone knows is the Yahoo brand

to a membership business to an attech

business uh tell us a little bit about

how you how you went about doing this

deal and how you structured the deal to

make it compelling for for Apollo and

and also we would love to hear how it's

going obviously yeah yeah um all right

I'll but I'll do the obligatory plug L

advis us on it and co-invested on it and

it was great it's a great partnership

with Lion tree yeah I mean this is a

really uh it hits all the kind of

vectors of what Apollo does best so we

had um been very close to Verizon for a

long time um we knew that they were

going to have to change strategy at some

point and sell their media assets so um

you know they had built over a long

period of time you know the collection

of media assets adtech assets and it was

it all sat within this kind of uh

Verizon Media Group uh

umbrella they were looking for one

partner to take on the entirety of of

Verizon media as you remember look it's

it makes sense for them right they they

multi hundred billion dollar Enterprise

Value company it doesn't make they

didn't need to get the extra billion

dollars they just want to shift strategy

and have one partner deal with the

entirety of it as opposed to selling off

individual pieces which they knew they

could they could have done as

alternative to maximiz Value but it

would have been painful we were really

the only party that made sense for that

um it's exactly what we do super

complicated carve out scaled value

oriented um so we ended up buying it for

you know about uh$ four and a half

billion dollars um uh a little more than

four times eitaa if you include cost

savings um so really uh attractive

purchase price but what I'm most proud

of up front of the structuring is like

you said we structure this in a way we

could Finance different silos separately

and create a situation we could return

Capital very quickly so you know we the

the there only five businesses that sat

within Yahoo we bought it or variz media

we bought it one was Yahoo so the own

and operated internet media sites the

yaho is the second most visited website

on the internet sale Believe It or Not

700 million Maus huge scale platform

first party identity graph Etc Mail

sports Finance home search um that is

where the debt sat so the syndicated

term loans sat only against the O and O

EA at Yahoo so we created that sto

that's where the financing was

intentionally because I wanted to make

sure that we could deris the deal by

selling things quickly outside the

credit so that was where the debt sat so

outside the credit set the rest of the

businesses AOL 300 million of IA still

actually it's grown since we did the

deal it's now close 400 million v um

yaho Japan royalty stream we'll talk

about in a second um we earned that that

was 3% of Yahoo Japan's revenues for

using the brand in Japan in perpetuity

that was about 100 million $120 million

cash flow stream there's a Content

delivery Network as you know mini mini

aami uh and then there was the the

adtech business U because those last

four businesses sat outside the credit

um the way what we did day one is

effectively day one in the first couple

you know really months out of the gate

we closed in the fall of 2021 we sold

Yahoo Japan a month later for a billion

six said outside the credit so that went

entirely to the equity we sold CDN we

sold some other things and so really

within the first kind of six to nine

months of the deal we'd been fully

realized on our entire two billion of

equity and we still own the most

important pieces we still owned you know

on Ando AOL and uh and adtech and so um

you know kind of phase one of the deal

was you know with the financial

engineering which you know I think some

people think of as a four-letter word

but we you know we're proud of being

very good at that aspect of the deal so

we bought Yahoo for free um and then

this goes back to I was saying earlier

then the next phase was you know value

on the buy growth once you own right and

um and I by I don't want to minimize

like this was it's an insane amount of

work and we're not done we got an insane

amount of work ahead of us so I

certainly there's nothing to celebrate

until we till we exit but um you know we

hired Jim lzone who's been an amazing

CEO um we've really I mean put a lot of

money into investing in the team we've

upgraded you know you know we have an

amazing management team we have GMS of

each of sports and finance um and home

mail news who run them as basically

independent businesses um we've done

really strategic things you know Yahoo

sports as relates to the betting side of

things we've had Yahoo finance you know

bought a company called common stock and

a lot of really interesting things there

so um a lot of momentum in the core

business so phase one was kind of uh we

did a really Nifty deal with tabula so

we could spend a whole podcast on just

Yahoo but um so phase one was the

fincial engineering phase two was really

bringing gy and investing in talent and

growth and um you know creating value

improving product Etc and phase three

which we are kind of in the midst of now

is you know getting you know really

thinking strategically about um you know

strategic Partners m&a continuing to

grow the platform um selling some small

things here and there and so like all

private Equity deals what really matters

is um is is you know cash you know at

the exit um but so far so good and we

it's it's a really really fun one and I

love the company I want to just get a

very very quick take on another deal you

did just to kind of show the the breadth

of solutions right so you invested in

West Western Digital as well right and

this is a this is a a more classic uh

convertible uh transaction for for a

company that was coming into into a good

po part of its uh investment cycle um

you did some interesting things there in

terms of separating the business under

your under your uh investment

uh position a little bit of interesting

Dynamics around how that might uh might

have come together and yeah how that's

going yeah so so you know like you

talked about you know you said you asked

about origination and how we think about

origination so this is one where um I

had built a

uh like really close relationship with

the CEO and the team there we' filed the

company for a long time um it was a you

know large uh you know IG public company

um$ 20 billion market cap that was going

through a period of transition and it's

got two businesses one is the hard drive

business so uh and the other is the nand

semiconductor uh storage business um it

is the you know if you think about

storage globally about a third of all

things all storage on a Western Digital

device um the drive business is a very

very good stable business it's really WD

and Cate and then tashiba to a small

extent the Nan business has the

potential to be a very good business but

can cycle very hard it's a cyclical

semiconductor space that has a you know

Samsung HX Micron Etc kokia so a bunch

of different players competing in that

space um we came in uh really at the

trough of the last couple years for this

company both segments were cycling hard

the stock was in the high

30s um we invested just under billion

dollars in in a in a large pipe I joined

the board

um you know it's what we do we we we

worked really closely that actually was

invested out of our private Equity

business um even though it's a it's a

you know there's some aspects of it that

are hybrid really the mo like I said

before there's different ways you know a

lot of different ways to make money in

these Securities this one is really an

equity was an equity bat and we

basically you know became the deal team

along with geckler David geckler the CEO

and and some other folks uh on SE either

separating out the two companies or or

doing a spin merge with one of the

business business is um and long long

story short we

successfully uh you know help worked

with the company to split into two

create a lot of value um you know we

we've have I'm still on the board but

we've um fully exited that position um

you know in a little more than a year

you know the stock made its way to kind

of the 80s um so we exited and um it was

a a really again a great investment for

rlps but uh I think a great answer for

the company and for the management team

and so kind of win-win win all around

fantastic fantastic we're going to we're

going to focus uh for a moment on what

comes next in in 2025 okay obviously

we've just been through an election

cycle we're going to end up in a new uh

new political environment next year lots

of it's it seems like there's a a

growing uh flow towards more activity in

in 2025 we're hearing from a lot of uh

lot of folks at the same time we remain

in a in a large cap Tech bull market led

by AI that is only now beginning to kind

of filter down into uh into more of the

the midcap um how do you how do you look

at the opportunity in 2025 for for you

across all these different uh tools that

you have from private Equity to hybrid

value where where are the opportunities

and what are you most excited about I

agree with you activity is uh it just

feels there's no other way to say it

other than it feels like the animal

spirits are kind of back in a bunch of

ways and you know if you look back on

private Equity activity as you know it's

been pretty muted right I mean we you

know you had you know obviously what

maybe maybe not will be an anomalous

year in 2021 um which was just a massive

year for everybody on the buy and on the

sell um you know 22 was was the collapse

of that 23 was people kind of picking up

the pieces there was no financing so no

lbos got done and then people came in in

24 saying 24 is going to be you know a

big deal market and for a whole bunch of

reasons we can get into I know we're

getting close to time um it wasn't

um I think 25 is the new

24 I think that we are um seeing already

in our business um you know real pickup

and activity uh in terms of just

inbounds you know ndas we signing you

know stuff we're seeing um on the Buy on

the sell I think right you know the

industry has uh 3.2 trillion in assets

that sit within private Equity

portfolios that have kind of been stuck

and it feels like the floodgates are

going to start to open and there's a

spon you know the the sponsor backed IPO

pipeline is is really deep right now and

um so I think I think you're just going

to see a lot of people are going to have

to start

transacting um so what it means for us I

think uh you know so so the private

Equity business will be busy especially

in an environment where there's also a

bunch of folks who are still too

levered um there's going to be a huge

amount of deleveraging opportunities and

deleveraging capital needs that are

going to come out of hybrid value and

hybrid type products and so I think that

um you know right now you know I think

right now the investing environment in

fact for hybrid is is maybe the best

part of the cap structure um where

you're kind of you've got Equity

convexity but have downside protection

relative to a very like you said a very

expensive Equity Market but but look I I

think point being it's going to be it

feels like after a couple years of real

muted activity um 25 is gon to be busy

one last question for you that's that

impacts your portfolio and then we'll do

the lightning round uh to to wrap up the

question of AI has come up in a lot of

our podcasts and we've begun kind of

having a lot of debate with with private

equity on what it means for their

portfolio companies and what it means

for investment strategy going forward it

adds disruption obviously and if you're

if you're in uh um people heavy

Industries it can have a lot of profound

effects on on the way you operate but

what's your take on AI um both within

your investment strategy in in Tech but

also more broadly across the Apollo

portfolio what impact is it expected to

have

yeah so look again I go back to the what

I said earlier like we are we are not

thematic you know growth investors right

so we're not the guys here who have I'm

not going to profess to have the most

sophisticated view on you know every

layer of the AI

stack clearly it is a really important

part when we're looking at new companies

it's a really important part you know

especially a lot of stuff kind of things

we look at like what what is a

disruption risk and um how do we box

that disruption risk and that's across

consumer internet that's across some my

media sectors that's across other parts

of tech um it obviously also has the

opportunity to be a a you know cost

opportunity right and so I think right

now right now it's probably in my world

more in as I look at new stuff more

disruption risk than kind of

Tailwind um the Apollo approach is you

know we now we're and I'm I'm you know

part of our you know we have a team

focused on um on AI across the portfolio

and opportunities to use AI to you know

enhance the portfolio we have a very

very large portfolio of companies as you

know and so um you know we have a one I

uh Partners in the in our apps business

which is our kind of internal operating

uh partner business um is basically

full-time focused on um you know using

AI to help portfolio companies and you

know we have been you know others have

taken the approach of hiring a whole

bunch of internal folks we've taken the

approach of being kind of lean centrally

but relying on um you know without over

investing and relying on kind of third

party Partners to help us across the

portfolio um and so uh but we we have a

whole work stream in flight and and you

know it's something we communicated

actively to our LPS around um you know

how we use AI to create value across our

portfolio fantastic we're gonna finish

up with with some fun lightning round

questions just to to wrap up but uh

three ones for you uh what's your one of

your favorite recent travel destinations

as we head into the holidays here

okay but I just realized I'll answer so

Kenya is the answer with my family you

didn't we didn't get to the personal

part where you know so you know I've got

a seven-year-old a six-year-old and a

four-year-old we didn't get to that and

the wife the uh we skip we were all

business on top but so part of the part

of the crazy thing that we do as a

family is we take our kids everywhere uh

travel-wise it's really important I

think my seven-year-old likes to tell

people he's been to 20 countries um and

so the end of August this year um one of

the places we took them this year but um

they've been to a bunch of other

countries year but we we did Safari in

Kenya um and uh my you know with a seven

six and four yearold and it was amazing

that's amazing what about a favorite

book you've read this

year so I actually I I had never read uh

IR ran the Fountain Head um but yeah so

I actually read it um actually on that

Kenya trip but uh so I've got a you know

so I think we're all we're all trying to

be a little more little more Howard work

and less Peter keing now onto Atlas

Shrug

next that's next I've never read that

one okay and then favorite podcast to

listen to besides P Kinder cast

obviously I'll confess I like profry um

I like Scott Galloway um uh I also as

you know like the Dan cenor call me back

podcast these days um so yeah fantastic

read thanks for the time today happy

holidays to you all really appreciate it

awesome thanks okay thank you for

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