A Financial Times interview with Blackstone's private equity superstar

Back in 1985, Peter Peterson and Stephen Schwarzman pooled together $400,000 and started a private equity firm: The Blackstone Group. Now one of the biggest in the world and has been a player in a variety of mega deals in 2006.In the Financial Times, there's an interview with Schwarzman (who is the current CEO).

First of all, he's not a fan of Sarbanes-Oxley, the law Congress passed in order to deal with the blow-ups like Enron and WorldCom. This law has made it difficult for companies to go public. This is important to private equity firms, as they often need a way to get liquidity for their buyouts – which often means selling the company into the public markets.

Next, Blackstone has been active in real estate plays. His analysis is fairly straightforward: 1) the economy is expanding, creating demand for commercial real estate and 2) there has been little supply because of replacement costs (commodities such as steel, cement and so on) and regulations. As a result, rents are increasing – making it much easier to get a buyout done.

Schwarzman even talks about the apparent lack of bidding on private equity deals (at least for the big ones). Yes, the conspiracy theory is that there is collusion. But, of course, Schwarzman begs to differ. His reasoning: in the buyout process, the private equity firms get the same information. And, since they use typical valuation approaches, it should be no surprise that valuations are similar.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.