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.

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.

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.

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.

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.

Hilton (NYSE: HLT) volatility and volume elevated prior to Blackstone paying $26 billion. HLT announced Blackstone Group (NYSE: BX) will acquire all the outstanding common stock of HLT for $47.50 per share. HLT closed at $36.05. I reported near the close of trading on 7/3/07 "option volume & volatility Elevated as HLT rallies 6%." HLT total volume of 32,490 contracts and HLT July option implied volatility of 39 was aggressive, above its 26-week average of 31 according to Track Data, suggesting larger risk.

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 7-3-07: Blackstone purchasing Hilton originally appeared on BloggingStocks on Wed, 04 Jul 2007 06:35:00 EST. Please see our terms for use of feeds.

Blackstone's dealmaker helicopter originally appeared on BloggingStocks on Tue, 12 Jun 2007 09:45:00 EST. Please see our terms for use of feeds.

Another one bites the dust. Morgan Stanley (NYSE: MS) lost its chief investment strategist, Henry McVey, today. He had held the job since early 2004. The company said he would be moving to another firm, but its name was not mentioned.

It is probably a safe bet that his new home will be in private equity or at a hedge fund. And as those sectors grow, the need for the kind of advice that Mr. McVey and his department put out is dwindling. According to Bloomberg, "fund companies cut spending on Wall Street research to $4.9 billion in 2006 from $5.4 billion in 2004 and will reduce it to $4 billion in four years."

The news comes on the same day that is was disclosed that Blackstone CEO Stephen Schwarzman and his co-founder will get $2.33 billion when the company completes its IPO. They will also retain a 28% interest in the firm. Studies of hedge fund compensation have turned up a number of managers who made several hundred million dollars.

Mr. McVey is not likely to make what Mr. Schwarzman does, but, if he can only get a little piece of that pie, it is easy to see why he is changing jobs.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Morgan Stanley loses chief strategist as mainline firms bleed talent originally appeared on BloggingStocks on Mon, 11 Jun 2007 13:14:00 EST. Please see our terms for use of feeds.

CNBC's deal reporter David Faber who got the scoop on the TXU Corp. (NYSE: TXU) buyout has another big one. Apparently, the big-time private equity firm, The Blackstone Group, is planning to file for an IPO within the next couple weeks.

Funny enough, Blackstone's CEO, Stephen Schwarzman, has indicated -- on many indications -- that an IPO was not in the cards. Why deal with all the hassles? Well, I guess Schwarzman could not ignore the huge $10.4 billion IPO of Fortress Investment Group (NYSE: FIG).

Faber thinks a Blackstone offering could fetch a valuation at least twice that. It's stunning considering that it was in 1985 that Schwarzman, who owns about 40% of Blackstone, invested $200,000 to start the company. How about that for an ROI?

I think it's a good bet that other premier private equity firms are preparing for IPOs. Yes, things are going to get very interesting - very soon.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

CNBC: Blackstone prepping for mega IPO originally appeared on BloggingStocks on Fri, 16 Mar 2007 10:13:00 EST. Please see our terms for use of feeds.

In light of the success of the Fortress Investment Group LLC (FIG) IPO, the buzz is swirling on what private equity firm will be next to go public.

How about Blackstone?

Well, probably not. This is according to a report in Reuters.

Blackstone's chief, Stephen Schwarzman, was on a panel at the Super Return conference in Germany (this is pretty big event in the private equity world).

He pointed to some flubs, such as the IPOs from KKR and Apollo. In fact, he called the public markets "overrated."

Yes, Schwarzman is not shy.

But, there may be a couple other reasons why he does not want to go public. First of all, it is likely to be a distraction. The IPO process is time-consuming. There are also ongoing public disclosures.

In fact, a big advantage for private equity firms is speed. This was likely a factor for why Blackstone won the bidding for Equity Office Properties (NYSE: EOP).

Besides, if Blackstone did go public, Schwarzman would have to disclose his compensation. And, in light of the backlash on this topic, it's probably best he keep things private.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Thinking of a Blackstone IPO originally appeared on BloggingStocks on Tue, 27 Feb 2007 10:50:00 EST. Please see our terms for use of feeds.

Over the years, commercial real estate has made a variety of people multi-billionaires. Actually, in the buyout of Equity Office Properties (NYSE:EOP), we are seeing some of these all-stars compete on a grand scale. This is detailed in a great story in Bloomberg.com. Ok, let's take a look at the roster:

• Sam Zell: He is the cofounder and CEO of EOP. He got his start, back in the 1970s, as a skillful investor in distressed properties. His nickname became the "Gravedancer." Forbes has his net worth pegged at $4.5 billion.
• Stephen Schwarzman: He is the CEO and cofounder the Blackstone Group. True, a big part of his wealth has come from private equity. However, Blackstone is one of the world's largest real estate investors. His networth is about $2.5 billion.
• Steven Roth: He is the cofounder and CEO of Vornado Realty Trust (NYSE:VNO). His networth is about $1.1 billion. Yes, in terms of net worth, Roth is lagging. However, he now has the high bid for EOP - at about $37.6 billion. Moreover, he is being joined by Barry Sternlicht, who built Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT).
  

True, if Blackstone loses the deal, it will get a $200 million break-up fee. But, this is chump change. Actually, it looks like Blackstone wants to make a counter bid. Funny enough, if Blackstone wins, it's a good bet that the firm will sell of some of its properties to Roth.

All in all, this shows that mega real estate moguls still see potential in commercial real estate -- that is except Zell, who wants to cash out. And, of course, he's the richest of the whole group. And about to get even richer.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The Equity Office Properties buyout is real estate's all star game originally appeared on BloggingStocks on Wed, 24 Jan 2007 13:58:00 EST. Please see our terms for use of feeds.

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.

A Financial Times interview with Blackstone's private equity superstar originally appeared on BloggingStocks on Wed, 20 Dec 2006 16:20:00 EST. Please see our terms for use of feeds.