Apollo Global Management scraps partnership status to become a corporation

Apollo Global Management has announced that it is scrapping its partnership status to become a corporation, following similar moves by private equity rivals Blackstone and KKR.

The conversion, which is expected to become effective in the third quarter of this year, will see the investment company paying more corporate tax under a simplified structure, which it hopes will make it more attractive to investors.

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Under the new structure corporate tax is expected to swallow seven to nine per cent of profit Apollo would have earned, however, the firm said it would lead to a “broader eligible shareholder base and enhanced liquidity”, as well as the “potential for reduced stock price volatility”.

“We believe (this) will simplify our structure and enable a much broader set of shareholders to participate in the exceptional long-term growth and profitability that we have been delivering to our investors,” Apollo chief executive Leon Black said a statement.

The old partnership structure saw the majority private equity firms’ income exempt from US corporate tax, however, potential shareholders were required to submit complex tax documents in order to invest.

The additional tax bill has become less of an issue for investment firms after President Donald Trump slashed the levy on corporate income from 35 per cent to 21 per cent.

The move led some investment firms to decide that the complex partnership structure is more harmful than taking the additional tax hit.

Blackstone, the world’s largest alternative investment firm, announced last month that it would transition to a corporation structure to make it easier for investors to buy stock, following KKR’s decision in May last year.

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Apollo’s announcement came as the firm reported that total revenue in the first quarter of this year was $677.7m, up from $166.9m in the first three months of 2018.

Assets under management totalled $303bn in the first quarter, up from $246.4bn the previous year.