Scott Kleinman, Co-President of Apollo Global Management, has stated that the era of expansion is drawing to a close, compelling the private equity industry to generate value through more traditional means. Speaking at the IPEM private equity conference in Paris, Kleinman highlighted that the key to managing investment portfolios in the current climate lies in boosting profit margins, streamlining cost structures, and opening up new avenues for growth.

He pinpointed 2022 as the true inflection point, a year when interest rates were raised by 400 to 500 basis points. This immediately exerted valuation pressure on portfolios assembled between 2017 and 2022, a period when acquisition prices for companies were generally at elevated levels. "Much of the commentary regarding the industry's difficulty in exiting positions points to those holdings from 2017 to 2022, when the cost of acquiring even high-quality businesses was significantly higher," he explained. Kleinman added that the sector was slow to respond to the resulting valuation recalibration.

Turning to the broader macroeconomic landscape, Kleinman believes the real economy is being supported by two primary forces: consumer resilience and capital expenditure on artificial intelligence. While acknowledging that risk signals are beginning to multiply, he maintained that the overall environment remains tilted toward optimism. He noted that if interest rates were to rise by another 200 basis points, valuations would face further pressure; however, even in a higher-rate scenario, buyout transactions would still be viable. Kleinman also observed that the current pipeline of opportunities is robust, reflecting the underlying strength of the economy rather than a market rush to secure deals ahead of the US midterm elections.