The Blackstone GroupThe Blackstone Group
Headquarters: New York, N.Y.
The Company
Founded in 1985, the Blackstone Group has more than $78 billion in assets under management. Blackstone has multiple lines of business in addition to buyouts, including real estate, corporate debt funds, and hedge funds. Blackstone also provides mergers and acquisitions and restructuring advice to corporate clients. In 2006, Blackstone raised a record $15.6 billion private equity fund, then later upped its size to $20 billion.
Blackstone invests in a wide range of industries, including chemicals, communications, energy, entertainment, health care, insurance, lodging, manufacturing, technology, transportation, and waste management. Based on total amounts invested, the bulk of Blackstone’s investments have been in consumer-related companies and the transportation sector. Either alone or as part of club deals, Blackstone has bought out such well-known companies as Michaels Stores, Madame Tussauds, and LaQuinta Inns. At present, the firm owns controlling stakes in 47 companies producing more than $85 billion in revenues and that together employ more than 350,000 workers.
If Blackstone’s portfolio constituted one publicly traded corporation, it would hold spot No. 12 in the Fortune 500.
On March 22, Blackstone filed a registration statement with the SEC by which it intends to sell a portion of its business to the public. Blackstone explained in its initial S-1 filing that the public offering would allow it to tap a new permanent capital source to expand its business, enhance its brand, provide an acquisition currency for strategic acquisitions, give it a new way to incentivize its employees, and allow its founders to liquidate some of their holdings in the company. Published reports indicate that Blackstone hopes to raise up to $4 billion through the IPO.
The Moneymakers
Blackstone has 57 senior managing directors. However, the key money-makers and decision-makers are the company’s two founding partners and the firm’s president:
Schwarzman.Stephen Schwarzman: Forbes Magazine ranked Blackstone co-founder Schwarzman as No. 73 on their list of wealthiest Americans, estimating his net worth at $3.5 billion. He lives in a 35-room Park Avenue triplex purchased for $30 million, and also owns a 13,000-square-foot mansion in Palm Beach, Fla., a home in East Hampton, N.Y., and one in Jamaica. This past February, Schwarzman threw a well-chronicled 60th birthday party for himself at a cost of $3 million. However, Schwarzman has also indicated a concern about growing inequality of wealth, “[T]he middle class in the United States hasn’t done as well over the last 20 years as people in the high end. Part of the compact in America is that everybody’s got to do better.”
Peter G. Peterson: Former chairman and CEO of Lehman Brothers, Blackstone co-founder Peterson was Richard Nixon’s secretary of Commerce and now chairman of the Council on Foreign Relations. He has spoken very publicly against the mounting federal deficit. In a recent interview for the Financial Times, Peterson stated that middle-class Americans were more concerned about their own futures than about the rich, suggesting that “the American Dream still exists in the hearts and minds of the majority of Americans.”
Hamilton “Tony” James: James is widely seen as the heir apparent to Stephen Schwarzman. Prior to joining Blackstone, James worked at Donaldson, Lufkin & Jenrette (DLJ), an investment banking firm, where he demonstrated his financial acumen during the merger mania of the 1980s. At that time, The Wall Street Journal characterized him as a “merger whiz kid;” and by the age of 35, he was already earning more than $1 million annually. However, $1 million was penny change to him. "I can't resist the temptation to say '$1 million sounds like a lot of money, but it's really not,” he said. “No one's going to shed any tears for us. But the fact is, it's easy to make $1 million and not accumulate a lot."
Printing Money
In 2006, Blackstone collected $852 million in fund management fees (not including the fees received for the Equity Office Properties deal). In 2005, Blackstone made $370 million in fund management fees.
In July 2004 Blackstone closed its purchase of German chemicals company Celanese AG for $3.8 billion, of which Blackstone contributed $641 million in equity. Within one year, in January 2005, Blackstone conducted an IPO and relisted Celanese on the New York Stock Exchange, earning $3 billion—a 368 percent return on its investment.