How Apollo Global and KKR Are Quietly Buying Up America — and Who’s Letting Them

Some of the most important decisions regarding American economic life are made in a building in Midtown Manhattan that appears unremarkable from the outside. These decisions are made without a single public hearing, news conference, or shareholder vote.

There are no politicians among them. They work as financiers. Additionally, over the course of the last 20 years, companies like Apollo Global Management and KKR have discreetly put together what amounts to a parallel economy, one that functions inside the apparent one, feeding off of it, altering it, and occasionally hollowing it out.

It is worthwhile to take a step back and inquire as to how this occurred. The 1980s leveraged buyout frenzy gave rise to modern private equity. The nation temporarily took notice of KKR’s 1989 takeover of RJR Nabisco, which was depicted in Barbarians at the Gate. Congress was concerned. There were hearings. Then, as is often the case in Washington, the firms continued to develop covertly while attention strayed.

Because the mechanics are so peculiar, it is worthwhile to comprehend them. Apollo and KKR usually contribute very little of their own funds when they acquire a business, often as little as one or two percent of the transaction price. The remainder is derived from sovereign wealth funds, pension funds, and university endowments, all of which are pursuing profits that the public stock market can no longer consistently provide.

Then, rather than the acquiring company, the debt is placed on the acquired company. The business you recently acquired is now in charge of repaying the loans used to buy it. It’s similar to someone charging you rent after pressuring you to take out a mortgage on a home they purchased.

What follows is typically damaging in all other contexts and efficient in a limited, numerical sense. Expenses are reduced. Employees are cut. Real estate, equipment, and even the land beneath nursing homes are examples of physical assets that are sold and then leased back to the company at exorbitant prices. One of the more heartbreaking examples in history is the nursing home business Manor Care, which was purchased by the Carlyle Group.

Before the company had made a single dollar in operating profit, Carlyle sold the land underneath the facilities almost quickly, recovering the whole amount of their original investment. After that, the houses paid rent they couldn’t afford. Whistleblowers who later came forward claimed that Medicare fraud and a habit of putting old, weak residents through medically inappropriate rehabilitative procedures—just to create billable hours—followed.

The character of Apollo’s story is different, while the conclusion may not be. The company has developed a more advanced device. Apollo gained what most private equity firms do not have: a consistent flow of policyholder premiums to use in its own investing strategies through its acquisition of Athene, a retirement services and annuities provider. Over the course of three years, the company’s assets under management have increased at a compound annual growth rate of around eight percent, and Apollo projects that by 2029, total AUM will be at $1.5 trillion. The figures are just astounding. It is difficult to ignore the fact that a company handling such a large amount of capital has interests that touch on almost every area of the economy.

For its part, KKR has been rapidly growing into infrastructure, including data centers, pipelines, airports, and the physical conduits of contemporary life. These assets never go out of business. In the same manner that they require groceries, people also require electricity and internet access. In a way, owning infrastructure is like owning a daily toll booth. Henry Kravis and George Roberts, the company’s co-founders, have emerged as two of the most significant private individuals in the nation’s financial history for a reason.

Beyond a single poor transaction or unsuccessful purchase, the larger picture is concerning. Across the nation, hospitals, ERs, doctor’s offices, and assisted living facilities are now owned by private equity corporations. According to research, personnel cuts and decreased regulatory compliance are linked to significantly higher patient death rates in nursing homes managed by private equity corporations. With a population of approximately 330 million, America had about 925,000 hospital beds going into the COVID-19 epidemic, compared to over 1.5 million beds for a far smaller nation in 1975. The lack of beds wasn’t an accident. It occurred as a result of hospitals turning into investment vehicles, which prioritize profit over capacity.

Whether there is the political will to effectively regulate these companies is still up for debate. The Carlyle Group, which is notably headquartered in Washington instead of Wall Street, has long maintained a revolving door with high-ranking government officials. These companies have benefited from the names and networks of former secretaries of state and defense, giving them access that money couldn’t buy. Despite having a larger Wall Street focus, Apollo and KKR have been equally successful in influencing the regulatory landscape in which they operate. Carried interest tax treatment, a long-contested clause that permits fund managers to pay capital gains rates on income that most economists would categorize as ordinary remuneration, benefits the corporations. Every significant effort to change it has quietly failed.

Although there is a lot of avarice on display, Apollo and KKR stand for more than that. It’s a specific theory of value that maintains that asset extraction, financial engineering, and leverage generate wealth that should be celebrated regardless of what happens to the companies, employees, and communities left behind. It’s challenging to draw the conclusion that the hypothesis has been validated by events after seeing this develop over the last 20 years. The companies’ balance sheets appear outstanding. It is more difficult to read the nation’s balance sheet.