Up until the credit crisis, private equity firms had it made. They had plenty of leverage to play with and could load up their acquisition targets with it. So, they could realize a fantastic return on equity, mitigate their own risks, and show that they were the studs of the Street.

Then, all that went away. Credit markets dried up, and private equity companies lost their acquisition fuel. The numbers aren't as big as they used to be, but it looks like the private equity market is back in action.

Continue reading Private equity biz back in action

Private equity biz back in action originally appeared on BloggingStocks on Thu, 15 Oct 2009 11:00:00 EST. Please see our terms for use of feeds.

The private equity industry has been through the worst, but now it seems the situation is taking a turn for the better. Stephen Schwarzman, CEO of Blackstone (NYSE: BX) expects deal flow and IPOs to bounce, saying the economy is showing "more than green shoots" of recovery.

Schwarzman, speaking at the Super Return Middle East conference in Dubai, doesn't expect another slip into recession, but the full recovery will take time, for all the same reasons you've been reading on BloggingStocks for a while: tighter lending standards; uncooperative consumers who won't spend beyond their means and so on.

Continue reading Blackstone ready for recovery with exit strategy of sales and IPOs

Blackstone ready for recovery with exit strategy of sales and IPOs originally appeared on BloggingStocks on Wed, 14 Oct 2009 10:30:00 EST. Please see our terms for use of feeds.

No surprise, the Blackstone Group (NYSE: BX) posted a horrible fourth quarter. The firm, which is massive private equity firm, suffered a loss of $827.1 million. Basically, the firm had to recognize that the values of its portfolio are shrinking. Oh, and there will be no cash distribution for the quarter.

Yet, Blackstone's stock spiked 25% to $4.87.

Continue reading Blackstone's stock is 'dimwitted'?

Blackstone's stock is 'dimwitted'? originally appeared on BloggingStocks on Sun, 01 Mar 2009 10:40:00 EST. Please see our terms for use of feeds.

This post is part of our feature on Money Losers of 2008. See all 20.

There's no doubt about it -- times are tough. People are struggling to find work and to pay the bills as the value of their homes and savings dwindle. The poor get poorer, and the rich get richer.

Or do they? It's all relative, of course, but world's billionaires have been taking some big hits too. We take a look at Sheldon Adelson, Kirk Kerkorian, and Lakshmi Mittal in their own separate posts, but here are some other billionaires who have lost billions this year (courtesy of Forbes and Business Sheet).

• Brothers Anil and Mukesh Ambani of India's private conglomerate Reliance lost $32.5 billion and $28.2 billion, respectively.
• Warren Buffett, the Sage of Omaha, lost $16.5 billion. Shares of Berkshire Hathaway Inc. (NYSE: BRK.A) are down about 32% since the beginning of the year.
• Microsoft (NYSE: MSFT) founders Bill Gates and Paul Allen lost $12.3 billion and $2.6 billion, respectively, while CEO Steve Balmer lost $6.5 billion. Shares of Microsoft are down 46% since the beginning of the year.
• Larry Page and Sergey Brin, cofounders of Google Inc. (NYSE: GOOG), lost $11.9 billion and $11.7 billion, respectively, and CEO Eric Schmidt lost $3.8 billion. The share price of Google has fallen 55% since the beginning of the year.
• Larry Ellison, CEO of Oracle Corp. (NASDAQ: ORCL), lost $8.2 billion. Shares of Oracle are down 21% since the beginning of the year.
• Media maven Sumner Redstone lost $7.2 billion. Shares of his private investment firm National Amusements fell 70% this year.

Continue reading Money losers of 2008: Billionaires who lost billions this year

Money losers of 2008: Billionaires who lost billions this year originally appeared on BloggingStocks on Wed, 24 Dec 2008 12:30:00 EST. Please see our terms for use of feeds.

In early December, the powerhouse private equity shop, the Carlyle Group, announced layoffs of 10% of its workforce. Let's face it, there's not much deal making lately.

Well, now it looks like another biggie in private equity is letting go of workers: the Blackstone Group LLP (NYSE: BX).

In all, the cuts are expected to come to 70 positions (the firm has about 1,300 employees), according to Bloomberg.com.

Back in November, Blackstone's chief, Stephen Schwarzman, was actually bullish on things. This was despite a terrible Q3, in which the firm reported losses of $502.5 million, or $0.44 per share.

For the most part, Schwarzman is eyeing some good deals (although, there has yet to be much activity). Also, he thinks there will be lots of growth in restructuring. In fact, General Motors (NYSE: GM) has hired Blackstone to help with restructuring options.

Despite all this, investors are quite skeptical of Blackstone. Simply put, the firm's portfolio write-downs do not seem to reflect the severe economic environment. Then again, Blackstone's shares have continued to languish.

Continue reading Blackstone chips away at its workforce

Blackstone chips away at its workforce originally appeared on BloggingStocks on Sat, 13 Dec 2008 11:40:00 EST. Please see our terms for use of feeds.

Stephen Schwarzman regrets 2007 birthday bash originally appeared on BloggingStocks on Fri, 31 Oct 2008 15:18:00 EST. Please see our terms for use of feeds.

Despite having lots of cash - and little debt - shares of Blackstone Group LP (NYSE: BX) have collapsed along with the other financials. Over the past year, the stock price has plunged from $29.38 to a recent low of $6.88.

But the firm's uber dealmaker, Stephen Schwarzman, is getting optimistic. At the Super Return Middle East conference, he gave a presentation that extolled the benefits of the US's ambitious - and expensive - plan to get things back on track. Yes, he thinks it's a good idea for the Feds to become equity holders in some of the top US banks.

So, why is this die-hard capitalist turning into a government supporter? Well, I guess the globalization of finance requires new approaches. In fact, Schwarzman mentioned that it was critical that the recent interventions have involved a variety of governments.

What's more, by having a strong government backstop, institutions will have a comfort level with counterparty risks. In other words, it's a good bet that we'll start seeing some risk taking again. And, for Schwarzman, it should also mean a re-emergence of buyout activity, which has been virtually frozen over the past few months..

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He is also the founder of BizEquity, a valuation website

Blackstone's Schwarzman says US plan is the right stuff originally appeared on BloggingStocks on Tue, 14 Oct 2008 11:56:00 EST. Please see our terms for use of feeds.

I'm not sure how management at Lehman Brothers Holdings Inc. (NYSE: LEH) has time to run the business. What's more, with all the turbulence, I'm wondering if many of the employees are working mostly on parsing rumors and fine-tuning resumes.

Of course, this week Lehman got rid of its CFO, Erin Callan and president, Joseph Gregory. The company also raised $6 billion, which was quite dilutive. So from Monday to Friday, the stock price plunged from $33 to $25.81.

Yet, by Friday, things were perking up. The stock price shot up 13.7%. Maurice "Hank" Greenberg, the, who is the former CEO of AIG (NYSE: AIG), said he bought shares. This was also the case with BlackRock (NYSE: BLK) and Putnam Investments.

But there was something else: Wall Street was abuzz with buyout rumors.

In fact, according to a report from CNBC, it looks like the senior management team of Lehman is meeting this weekend (which is a rare thing). Are they talking to possible suitors? Or, is it to review the figures for Q2? Both?

Despite all this, the fact remains that Lehman's potential suitors are also distressed. So, even if there is a deal, the valuation is likely to be muted.

But there is an interesting scenario: Blackstone Group LLP (NYSE: BX) as a buyer or major investor. The firm is well capitalized and may want an investment banking platform. Moreover, the firm's cofounders -- Stephen Schwarzman (CEO) and Peter Peterson (Senior Chairman) -- were formerly with Lehman (back in the 1980s).

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Blackstone to buy up Lehman? originally appeared on BloggingStocks on Sun, 15 Jun 2008 09:40:00 EST. Please see our terms for use of feeds.

Blackstone Group head makes an off-color joke originally appeared on BloggingStocks on Tue, 13 May 2008 10:00:00 EST. Please see our terms for use of feeds.

Continue reading Blackstone crumbles as Schwarzman's eyes legacy

Blackstone crumbles as Schwarzman's eyes legacy originally appeared on BloggingStocks on Fri, 25 Apr 2008 17:21:00 EST. Please see our terms for use of feeds.

For me, one of the most interesting things about reading through the financial pages of the newspaper has been the realization that America's economic situation, both in good times and bad, is not a pre-ordained matter of fate. While economic processes, the intervention of various governmental organizations, and good old supply and demand all play their part in determining the direction of the nation, these forces are also not the whole story. A large chunk of the economy can also be tacked up to the personalities of its big players. For example, the failure of Silverado Savings and Loan in the late 1980's was due in no small part to Neil Bush (by the way, we're still paying for the bailout, which was estimated to have cost the American taxpayers $1 billion). Similarly, the Savings and Loan crisis was itself fueled by the amazing Michael Milken, whose ability to "restructure" debt made him the poster boy for 1980's greed. And, after all, who can deny the importance of Ivan Boesky when it comes to demonstrating the seductive nature of insider trading? While it is unreasonable to lay any economic boom or bust at a single person's door, there is no doubt that individuals can strongly influence the economy, both for good and for ill.

Warren Buffett

One person that I've been researching lately is Warren Buffett. The CEO and largest shareholder of Berkshire Hathaway, he is currently listed as the richest person in the world. On the surface, Buffett's business strategy is amazingly simple: he believes in so-called "value investing," in which he finds companies that are undervalued, purchases significant amounts of their stock, and holds on to it until the market comes to its senses and values the company more highly. Of course, while Buffett's strategy is simple in concept, it requires a great deal of financial knowledge and economic muscle to make it work.

What's really gotten to me about Buffett is his surprisingly egalitarian stances on pretty much everything. Although he is almost incalculably wealthy, he chooses to stay in Omaha, where he famously lives in the same house that he has occupied for almost fifty years. His salary is only $100,000, which is low for a senior executive in a holding company; for somebody with Buffett's skills and knowledge base, it borders on the ridiculous. In fact, as Buffett has repeatedly noted, under the current income tax system, he pays far less in taxes than many of his employees.

Continue reading Buffett and Schwarzman: Two sides of American business

Buffett and Schwarzman: Two sides of American business originally appeared on BloggingStocks on Tue, 01 Apr 2008 18:31:00 EST. Please see our terms for use of feeds.

Stephen Schwarzman, CEO of Blackstone Group (NYSE: BX) is donating $100 million to the New York Public Library, according to the New York Times. After Blackstone CEO got some bad press last year about eating $400 worth of crab claws and complaining about the squeaky shoes of his waiters, Blackstone stock had an IPO at $31 -- but it's now trading over 50% below its offering price.

Last month, Schwarzman tried to improve his image in a New Yorker interview, but that just got him more grief. A New York Public Library board member commented that he was not giving to his capacity. Now, for a mere $100 million, Schwarzman will have his name emblazoned on the "venerable lion-guarded New York Public Library building on Fifth Avenue at 42nd Street ."

If there was ever a signal that Blackstone stock is going to sink further, this is it. That and the 89% decline in profits it reported for the final three months of 2007. Also, it is not good news that Blackstone warned that the deep freeze in the credit markets - and, by extension, in the private equity industry - is unlikely to thaw soon.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Blackstone securities.

Buyout bigwig's $100 million book box billboard originally appeared on BloggingStocks on Tue, 11 Mar 2008 11:06:00 EST. Please see our terms for use of feeds.

When talking about Blackstone (NYSE: BX), people usually refer to Stephen Schwarzman. However, there is actually a cofounder of the firm; that is, Peter Peterson.

Although, he's not a pure finance junkie. Some of his prior gigs include: Chairman of the Federal Reserve Bank of New York, the CEO of Lehman Brothers (NYSE: LEH), the CEO of Bell and Howell, and even the Secretary of Commerce (under President Richard Nixon).

And, of course, he's a very wealthy man. He cashed out $1.8 billion from the Blackstone IPO.

OK, so what's next? Well, he has formed the Peter G. Peterson Foundation. Basically, he wants to create a platform to deal with major issues, such as Social Security, budget deficits, education, energy, the environment, and the spread of nuclear weapons.

If anything, the foundation won't lack for resources. After all, Peterson has pumped a cool $1 billion into it. Apparently, he's prepared to pump more money into it.

Continue reading Blackstone cofounder wants to save the world

Blackstone cofounder wants to save the world originally appeared on BloggingStocks on Sun, 17 Feb 2008 09:40:00 EST. Please see our terms for use of feeds.

Blackstone Group (NYSE: BX) head Stephen Schwarzman's 60th birthday party quickly became a symbol of the excesses of the private equity bubble, corporate greed, the frailty of man, etc., etc., etc.

Equally symbolic of the credit crunch, his 61st birthday -- which fell on Valentine's Day, another symbol of something -- was a more modest affair. True, he and his wife weren't exactly drinking store-brand apple juice out of plastic cups and smacking around dollar-store pinatas, but it was a definite let-down for observers looking forward to the private equity party of the year. He ate at a Four Seasons restaurant, drank pink champagne, and then had what Forbes called a "low-key gathering" with close friends and family at his home that night.

Perhaps he has good reason to scrimp: shares of Blackstone have declined more than 50% since the IPO, knocking billions off his net worth.

If things keep going like this, next year's birthday party could be at Chuck E. Cheese.

Stephen Schwarzman's low-key birthday party originally appeared on BloggingStocks on Sat, 16 Feb 2008 17:40:00 EST. Please see our terms for use of feeds.

In the private equity world, Stephen Schwarzman -- who is the chief at the The Blackstone Group L.P. (NYSE: BX) -- is a legend. Because of the nature of his business, he really didn't have a high profile; that is, not until last year, when his firm went public.

And the PR was horrible: He took a huge slug of cash off the table. He even had a blow-out 60th b-day party. Oh, and he owns a variety of opulent homes, such as in St. Tropez and Jamaica.

But, as is usual, the real person is much more complicated. And, that's the take from a tremendous piece in The New Yorker. The author, James Stewart (who is also the author of the best-seller, The Den of Thieves), had a chance to interview Schwarzman as well as some of his colleagues. He has also done quite a bit of research.

Continue reading The New Yorker: Schwarzman, we hardly knew ye

The New Yorker: Schwarzman, we hardly knew ye originally appeared on BloggingStocks on Mon, 04 Feb 2008 17:58:00 EST. Please see our terms for use of feeds.

Stephen Schwarzman -- the subject of my Napoleon-Watch feature -- had a mixed 2007. He got the public markets to buy Blackstone Group's (NYSE: BX) busted IPO -- it trades 27% below its $30 IPO price. And he reaped some really bad publicity.

I appeared on CNBC back in June and discussed some of the negatives of the Blackstone IPO. I thought it presented complex tax issues and no legal recourse. I said: "You're getting a massive tax headache and massive losses due to high compensation. I would not want to own this stock; I'd be running for the hills."

But Schwarzman did well on the IPO and his net worth was recently estimated at $7.8 billion. Nevertheless, along with the money came some less than flattering publicity:

• At 5' 6" he is a "little man" who wants to "inflict pain" on and "kill off" his rivals;
• He noticed that one of the servants at his 11,000-square-foot Palm Beach mansion wore squeaky rubber soled shoes; and
• He ate $400 worth of stone crabs there during his 15 minute lunches.

Still, he's got plenty of money to soothe any hurt feelings. I'd say he's a true money winner.

Be sure to check out more Money Winners of 2007.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Money Winners of 2007: Blackstone's Stephen Schwarzman originally appeared on BloggingStocks on Fri, 14 Dec 2007 09:40:00 EST. Please see our terms for use of feeds.

This post is part of our Money Face-Offs feature. Let us know who you think comes out ahead in this head-to-head match-up, and check out our other Money Face-Off posts.

Stephen A. Schwarzman, co-founder of the Blackstone Group vs. Henry Kravis, co-founder of KKR. A showdown so delicious, it's already been immortalized on Page Six -- Schwarzman calls Kravis a "one-trick pony," Kravis calls Schwarzman "the poster boy for greed." Who is more arrogant? More eccentric? Richer? Only the planners of their lavish parties can tell ...

The two have been in a high-stakes tennis match of sorts for years in every financially-oriented aspect of their lives, starting with the companies they target, continuing through their more personal acquisitions and not even ending in their contributions to charity.

Nope. In the world of private equity, KKR had always been the hugest, the most storied, the most secret and powerful. KKR was responsible for the 1988 leveraged buyout of RJR Nabisco, inspiration for thousands of MBAs, as well as a book and a movie. Not many financial deals have inspired so much as a little sonnet, but this, this was the stuff of legend.

Part of that legend? Kravis' formidable ego.

Continue reading Money Face-Off: Steve Schwarzman vs. Henry Kravis

Money Face-Off: Steve Schwarzman vs. Henry Kravis originally appeared on BloggingStocks on Sun, 16 Sep 2007 13:34:00 EST. Please see our terms for use of feeds.

Blackstone Group LP (NYSE: BX) Chief Executive Stephen Schwarzman, who became a billionaire thanks to the firm's recent initial public offering, won't be able to stop the U.S. Congress from making his firms pay higher taxes particularly as the presidential election looms.

Legislation proposed by Sens. Max Baucus (D-MT) and Charles Grassley (R-IA) would TRIPLE the amount of taxes that the New York-based company would pay annually. The company is arguing that the Baucus-Grassley bill raising taxes on private equity and hedge funds would deprive the government of revenue because it would discourage companies from going public.

Blackstone won't win too many friends on Capitol Hill with that argument since hedge funds already get a huge break from the IRS because they pay taxes at the 15% rate of partnerships instead of the 35% corporate tax rate. To many people and quite a few economists this just doesn't seem fair.

Politically speaking this also is a losing issue for Blackstone. Americans believe in the Horatio Alger myth that by hard work and luck anyone can become rich. The public, though, has little sympathy for people who climb their way to the top by cutting corners or getting breaks that they don't seem to deserve.

The Democrats in Congress are well attuned to this reality. For them, there is no better industry to target than hedge funds and private equity firms. To most Americans, the industry is mysterious and scary. What possible downside could they have in targeting the likes of Blackstone.

Blackstone (BX) will lose the tax fight with Congress originally appeared on BloggingStocks on Fri, 24 Aug 2007 10:40:00 EST. Please see our terms for use of feeds.

Should we like Blackstone's Schwarzman? originally appeared on BloggingStocks on Mon, 30 Jul 2007 13:15:00 EST. Please see our terms for use of feeds.

As I posted last month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

The New York Times reports that Blackstone Group LP (NYSE: BX) is making things tough for itself and its peers in the eyes of Congress. That's because Blackstone used a loophole to avoid paying tax on $3.7 billion -- most of which was raised in its IPO last month.

Although they will initially pay $553 million in taxes, Blackstone's partners will get that back, and $200 million more, from the government over the long term. In a nutshell, the partners used the writeoff of goodwill -- the difference between the book value and market value of an asset -- to shield their gain from tax.

The details are rather complex but fiendishly clever:

• the Blackstone partners paid a 15% capital gains rate on the shares of Blackstone's management company they sold last month in the IPO
• Blackstone then arranged to get deductions for itself for the $3.7 billion worth of goodwill at a 35% rate. They taxed low and deducted high.
• The deductions must be spread out over 15 years. And the original Blackstone partners are getting just 85% of the tax savings, leaving the other 15% to outside investors. The deductions on the $3.7 billion to the partners are $1.1 billion over 15 years.
• If these tax savings were paid as a lump sum this year, the partners would get $751 million, which is $198 million more than the taxes the partners will pay on the $3.7 billion of goodwill.

These guys didn't get to be billionaires for nothing. Meanwhile my proposal for putting half their pay in escrow for 10 years to cover the costs of bad deals is gaining tiny amounts of support.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Blackstone.

Napoleon-watch: Blackstone's $3.7 billion tax dodge originally appeared on BloggingStocks on Fri, 13 Jul 2007 08:45:00 EST. Please see our terms for use of feeds.