Blackstone Group
Encyclopedia
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
, real estate
Real estate investing
Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development...
, and credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
and marketable alternative investment strategies, as well as financial advisory services, such as mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
(M&A), restructuring
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
s and reorganizations, and private placements.
Blackstone's private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
business has been one of the largest investors in leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
transactions over the last decade, while its real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
business has actively acquired commercial real estate. Since its inception, Blackstone has completed investments in such notable companies as Hilton Worldwide, Equity Office Properties, Republic Services, AlliedBarton
AlliedBarton
AlliedBarton Security Services is a security officer company in the United States, made up of the former companies Barton Protective Services, Spectaguard, Initial and Allied Security. It is the largest American owned security company in the United States, employing approximately 50,000 people...
, United Biscuits
United Biscuits
__FORCETOC__United Biscuits is a British multinational food manufacturer, makers of the BN biscuits, McVitie's biscuits, KP Nuts, Hula Hoops, The Real McCoy's crisps, Phileas Fogg snacks, Jacob's Cream Crackers, and Twiglets...
, Freescale Semiconductor
Freescale Semiconductor
Freescale Semiconductor, Inc. is a producer and designer of embedded hardware, with 17 billion semiconductor chips in use around the world. The company focuses on the automotive, consumer, industrial and networking markets with its product portfolio including microprocessors, microcontrollers,...
and Travelport
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
.
Blackstone was founded in 1985 as a mergers and acquisitions boutique by Peter G. Peterson
Peter George Peterson
Peter G. Peterson is an American businessman, investment banker, fiscal conservative, author, and politician whose most prominent political position was as United States Secretary of Commerce from February 29, 1972, to February 1, 1973 under Richard Nixon. He is most well known currently as...
and Stephen A. Schwarzman
Stephen A. Schwarzman
Stephen Allen Schwarzman is an American businessman and investor and the chairman and co-founder of the Blackstone Group, the private-equity and financial advisory firm.-Early life and education:...
, who had previously worked together at Lehman Brothers, Kuhn, Loeb Inc. Over the course of two decades, Blackstone has evolved into one of the world's largest private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
investment firms. In 2007, Blackstone completed a $4 billion initial public offering to become one of the first major private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
firms to list shares in its management company on a public exchange
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
. Blackstone is headquartered at 345 Park Avenue
345 Park Avenue
345 Park Avenue is a 634ft tall skyscraper in New York City, New York. It was completed in 1969 and has 44 floors. Emery Roth & Sons designed the building, which is the 60th tallest in New York....
in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, with eight additional offices in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and offices in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, Düsseldorf
Düsseldorf
Düsseldorf is the capital city of the German state of North Rhine-Westphalia and centre of the Rhine-Ruhr metropolitan region.Düsseldorf is an important international business and financial centre and renowned for its fashion and trade fairs. Located centrally within the European Megalopolis, the...
, Sydney
Sydney
Sydney is the most populous city in Australia and the state capital of New South Wales. Sydney is located on Australia's south-east coast of the Tasman Sea. As of June 2010, the greater metropolitan area had an approximate population of 4.6 million people...
, Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, Beijing
Beijing
Beijing , also known as Peking , is the capital of the People's Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010. The city is the country's political, cultural, and educational center, and home to the headquarters for most of China's...
, Shanghai
Shanghai
Shanghai is the largest city by population in China and the largest city proper in the world. It is one of the four province-level municipalities in the People's Republic of China, with a total population of over 23 million as of 2010...
, Mumbai
Mumbai
Mumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
and Dubai
Dubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...
.
Business segments
The firm is organized into four business segments:- Corporate private equity - Management of Blackstone's family of private equity funds investing in leveraged buyout transactions;
- Real Estate - Management of Blackstone's family of real estate investment funds;
- Marketable Alternative Asset Management - Management of Blackstone's funds of hedge funds, mezzanine funds, senior debt vehicles, and closed-end mutual funds; and
- Financial Advisory - Includes Blackstone's mergers and acquisitions advisory services, restructuring and reorganization advisory services and fund placement services for alternative investment funds.
Corporate private equity
As of 2011, Blackstone is the world's fifth-largest private equityPrivate equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
firm by committed capital and focuses primarily on leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
s of more mature companies. The firm also invests through minority investments, corporate partnerships and industry consolidations
Rollup
A Rollup is a technique used by investors where multiple small companies in the same market are acquired and merged. The principal aim of a rollup is to reduce costs through economies of scale. Rollups also have the effect of increasing the valuation multiples the business can command as it...
and occasionally, start-up investments
Startup company
A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets...
in new entrants into existing industries. The firm focuses on friendly investments in large capitalization companies
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
.
Blackstone's private equity business employs approximately 120 investment professionals in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, Menlo Park
Menlo Park, California
Menlo Park, California is a city at the eastern edge of San Mateo County, in the San Francisco Bay Area of California, in the United States. It is bordered by San Francisco Bay on the north and east; East Palo Alto, Palo Alto, and Stanford to the south; Atherton, North Fair Oaks, and Redwood City...
, Mumbai
Mumbai
Mumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, and Beijing
Beijing
Beijing , also known as Peking , is the capital of the People's Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010. The city is the country's political, cultural, and educational center, and home to the headquarters for most of China's...
.
Historically, Blackstone has primarily relied on private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s, pools of committed capital from pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s, insurance companies, endowments
Financial endowment
A financial endowment is a transfer of money or property donated to an institution. The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust....
, fund of funds
Fund of funds
A "fund of funds" is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment...
, high net worth individual
High net worth individual
A high-net-worth individual is a person with a high net worth. In the private banking business, these individuals typically are defined as having investable assets in excess of US$1 million. As explained below, the U.S...
s, sovereign wealth fund
Sovereign wealth fund
A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
s and other institutional investors. As of the end of 2008, Blackstone had completed fundraising for six funds with total investor commitments of over $36 billion, including five traditional private equity fund and a separate fund focusing on telecommunications investments.
Following is a summary of Blackstone's private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
s raised from its inception through the beginning of 2009:
| Fund | Vintage Year | Committed Capital ($m) |
| Blackstone Capital Partners I | 1987 | $800 |
| Blackstone Capital Partners II | 1994 | $1,270 |
| Blackstone Capital Partners III | 1997 | $3,780 |
| Blackstone Communications Partners I | 2000 | $2,019 |
| Blackstone Capital Partners IV | 2003 | $6,450 |
| Blackstone Capital Partners V | 2006 | $21,700 |
| Blackstone Capital Partners VI | 2010 | $13,500 |
From 1987 to the time of its IPO filing in 2007, Blackstone invested approximately $20 billion in capital in 109 private equity transactions.
Blackstone's most notable investments include Allied Waste, AlliedBarton
AlliedBarton
AlliedBarton Security Services is a security officer company in the United States, made up of the former companies Barton Protective Services, Spectaguard, Initial and Allied Security. It is the largest American owned security company in the United States, employing approximately 50,000 people...
Security Services, Graham Packaging, Celanese
Celanese
Celanese Corporation is a Fortune 500 global technology and specialty materials company with its headquarters in Dallas, Texas. The company is a leading producer of acetyl products, which are intermediate chemicals for nearly all major industries, and is the world's largest producer of vinyl...
, Nalco
Nalco Holding Company
Nalco Holding Company supplies water treatment and process improvement services, chemicals and equipment programs for industrial and institutional markets. These products and services are marketed in some cases to prevent corrosion, contamination and the buildup of harmful deposits...
, HealthMarkets
HealthMarkets
HealthMarkets, Inc is a company, formerly known as UICI and headquartered in North Richland Hills, Texas, that provides health and life insurance products to individuals, families, the self-employed and small businesses....
, Houghton Mifflin
Houghton Mifflin
Houghton Mifflin Harcourt is an educational and trade publisher in the United States. Headquartered in Boston's Back Bay, it publishes textbooks, instructional technology materials, assessments, reference works, and fiction and non-fiction for both young readers and adults.-History:The company was...
, American Axle
American Axle
American Axle & Manufacturing, Inc. , headquartered in Detroit, Michigan, is a manufacturer of automobile driveline and drivetrain components and systems.-History:...
, TRW Automotive
TRW Automotive
TRW Automotive , headquartered in Livonia, Michigan, USA, is a major global supplier of automotive systems, modules and components to automotive original equipment manufacturers and related aftermarkets....
, Catalent Pharma Solutions, Prime Hospitality, Legoland
Legoland
Legoland is a chain of Lego-themed theme parks. They are not fully owned by Lego Group itself; rather they are owned and operated by the British theme park company Merlin Entertainment.The chain currently consists of:* Legoland Billund...
, Universal Studios Parks, Madame Tussauds
Madame Tussauds
Madame Tussauds is a wax museum in London with branches in a number of major cities. It was founded by wax sculptor Marie Tussaud and was formerly known as "Madame Tussaud's", but the apostrophe is no longer used...
, La Quinta, Luxury Resorts (LXR), Pinnacle Foods
Pinnacle Foods
Pinnacle Foods Group LLC is a leading packaged foods company headquartered in Mountain Lakes, New Jersey, owned by The Blackstone Group. Pinnacle Foods is a key player in the shelf stable and frozen food categories and their products can be found in more than 85% of American households.The company...
, Hilton Hotels Corporation
Hilton Hotels Corporation
Hilton Worldwide is a global hospitality company. It is owned by the Blackstone Group, a private equity firm. As of July 2011 Hilton brands encompass 3,750 hotels with over 600,000 rooms in 84 countries...
, Apria Healthcare, Travelport
Travelport
Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry...
, The Weather Channel
The Weather Channel
The Weather Channel is a US cable and satellite television network since May 2, 1982, that broadcasts weather forecasts and weather-related news, along with entertainment programming related to weather 24 hours a day...
(United States) and (in 2009) The PortAventura
PortAventura
PortAventura is a theme park and a resort in Salou, Catalonia, Spain; on the Costa Daurada , approximately an hour drive south of Barcelona. It attracts around 3 million visitors per year making it the most visited theme park in Spain. PortAventura Park is also the 6th most visited theme park in...
Resort.
Real estate
Blackstone began building its real estate investment business in 1992 with the acquisition of a series of hotel businesses and has built it into a global operation with 122 investment professionals in the United States, Europe and Asia. The real estate business has raised approximately $28 billion for a variety of fund vehicles including: six US-focused funds and three International opportunity funds. Blackstone also raised a real estate special situations fund focusing on non-controlling debt and equity investment opportunities. The special situations fund invests directly in real estate as well as private and publicly traded real estate-related securities.The following is a summary of Blackstone's real estate funds raised from inception through November 2009:
| Fund | Vintage Year | Committed Capital ($m) |
| Blackstone Real Estate Partners I | 1994 | $485 |
| Blackstone Real Estate Partners II | 1996 | $1,300 |
| Blackstone Real Estate Partners III | 1999 | $1,500 |
| Blackstone Real Estate Partners International (Europe) | 2001 | € Euro The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,... 800 |
| Blackstone Real Estate Partners IV | 2003 | $2,500 |
| Blackstone Real Estate Partners International (Europe) II | 2006 | €1,550 |
| Blackstone Real Estate Partners V | 2006 | $5,250 |
| Blackstone Real Estate Partners VI | 2007 | $10,900 |
| Blackstone Real Estate Special Situations PE Fund | 2008 | $1,000 |
| Blackstone Real Estate Partners Europe III | 2009 | €3,100 |
From 1987 through the time of its IPO filing in 2007, Blackstone invested more than $13 billion in 212 real estate transactions and is a major owner of real estate throughout the US and Europe.
Among Blackstone's most notable real estate investments have included Equity Office Properties, Hilton Hotels Corporation
Hilton Hotels Corporation
Hilton Worldwide is a global hospitality company. It is owned by the Blackstone Group, a private equity firm. As of July 2011 Hilton brands encompass 3,750 hotels with over 600,000 rooms in 84 countries...
, Trizec Properties, Center Parcs UK
Center Parcs UK
Center Parcs is a holiday and recreation company which operates four holiday villages in the United Kingdom, with each village covering about of woodland. The first park opened in 1987...
, La Quinta Inns & Suites, Wyndham Worldwide
Wyndham Worldwide
Wyndham Worldwide is the holding company for Wyndham Hotels & Resorts, Group RCI and other lodging brands. It was spun off from Cendant Corporation in July 2006....
, Southern Cross Healthcare.
The purchase and subsequent profitable IPO of Southern Cross has led to controversy in the UK. Part of the purchase involved splitting the business into a property company, NHP, and a care home business, which Blackstone claimed would become "the leading company in the elderly care market." In May 2011, Southern Cross, now independent, was almost bankrupt, jeopardising 31,000 elderly residents in 750 care homes. Although it denies blame, Blackstone was widely accused in the media for selling on the company with an unsustainable business model and crippled with an impossible sale and leaseback strategy.
Marketable alternative asset management
In 1990, Blackstone created fund of hedge funds business to manage the internal assets for Blackstone and its senior managers. Over the years, this business evolved into Blackstone's marketable alternative asset management segment, which was opened to institutional investors. Among the investments included in this segment are funds of hedge funds, mezzanine fundsMezzanine capital
Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares...
, senior debt vehicles
Collateralized loan obligation
Collateralized loan obligations are a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches...
, proprietary hedge funds
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
and closed-end mutual funds.
In March 2008, Blackstone acquired GSO Capital Partners
GSO Capital Partners
GSO Capital Partners is one of the largest credit-oriented alternative asset managers in the world and a major participant in the leveraged finance marketplace....
, a leading credit-oriented alternative asset manager, for $620 million in cash and stock and up to $310 million through an earnout over the next five years based on certain earnings targets. The combination of Blackstone and GSO created one of the largest credit platforms in the alternative asset management business, with over $21 billion of total assets under management. GSO was founded in 2005 by Bennett Goodman, Tripp Smith and Doug Ostrover. The GSO team had previously managed the leveraged finance businesses at Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette or DLJ is a defunct U.S. investment bank founded by William H. Donaldson, Richard Jenrette and Dan Lufkin in 1959. Its businesses included securities underwriting; sales and trading; investment and merchant banking; financial advisory services; investment research;...
and later Credit Suisse First Boston
Credit Suisse First Boston
Credit Suisse First Boston was the former name of the banking firm Credit Suisse.-History:In 1978, Credit Suisse and First Boston Corporation formed a London-based 50-50 investment banking joint venture called the Financière Crédit Suisse-First Boston...
, after the acquisition of DLJ. Blackstone had existing relationships with the GSO team as an original investor in GSO's funds. Following the completion of the acquisition, Blackstone merged GSO's operations with its existing debt investment operations.
Financial advisory services
Blackstone's financial advisory business is composed of three businesses:- Corporate and Mergers and Acquisitions AdvisoryMergers and acquisitionsMergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
- Restructuring & Reorganization Advisory
- Private Placement AdvisoryPrivate placement agentPrivate placement agent or placement agent is a firm assisting either funds managers in the alternative asset class or entrepreneurs/private companies Private placement agent or placement agent is a firm assisting either funds managers in the alternative asset class (e.g. private equity ,...
Blackstone was originally founded by Peterson and Schwarzman in 1985 as a boutique investment banking firm that provides mergers and acquisitions advisory services. Among Blackstone's most notable corporate and mergers and acquisitions, advisory clients include Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
, Procter & Gamble
Procter & Gamble
Procter & Gamble is a Fortune 500 American multinational corporation headquartered in downtown Cincinnati, Ohio and manufactures a wide range of consumer goods....
, Verizon, Comcast
Comcast
Comcast Corporation is the largest cable operator, home Internet service provider, and fourth largest home telephone service provider in the United States, providing cable television, broadband Internet, and telephone service to both residential and commercial customers in 39 states and the...
, Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
and AIG
AIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
.
In 1991, with the collapse of the 1980s buyout boom, Blackstone began to offer advisory services in corporate restructurings as well. Blackstone's most notable restructuring clients have included General Motors
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
Xerox
Xerox
Xerox Corporation is an American multinational document management corporation that produced and sells a range of color and black-and-white printers, multifunction systems, photo copiers, digital production printing presses, and related consulting services and supplies...
, Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
, Bally Total Fitness
Bally Total Fitness
Bally Total Fitness is an American fitness club chain which operates 100 gyms, in several U.S. states. In November of 2011, competitor L.A. Fitness took over operation of 171 former Bally locations...
and Global Crossing
Global Crossing
Global Crossing Limited was a telecommunications company that provides computer networking services worldwide. It maintained a large backbone and offered transit and peering links, VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and...
.
Blackstone's fund placement advisory group
Private placement agent
Private placement agent or placement agent is a firm assisting either funds managers in the alternative asset class or entrepreneurs/private companies Private placement agent or placement agent is a firm assisting either funds managers in the alternative asset class (e.g. private equity ,...
, The Park Hill Group, was formed in 2005 with a team of professionals from Atlantic-Pacific Capital
Atlantic-Pacific Capital
Atlantic-Pacific Capital is a leading independently-owned placement agent. APC has established relationships with a network of institutional investors in North America, Europe, the Middle East, Australasia, and the emerging markets to which it markets private equity funds.Founded in 1995, APC has...
and Credit Suisse. The group focuses on raising capital from institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s for private investment vehicles
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
that invest in private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
, mezzanine
Mezzanine capital
Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares...
, real estate
Real estate investing
Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development...
, venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
, and hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s. Park Hill Group also provides secondary advisory
Private equity secondary market
In finance, the private equity secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds....
services to investors seeking portfolio liquidity and unfunded commitment relief.
Founding and early history
The Blackstone Group was founded in 1985 by Peter G. PetersonPeter George Peterson
Peter G. Peterson is an American businessman, investment banker, fiscal conservative, author, and politician whose most prominent political position was as United States Secretary of Commerce from February 29, 1972, to February 1, 1973 under Richard Nixon. He is most well known currently as...
and Stephen A. Schwarzman
Stephen A. Schwarzman
Stephen Allen Schwarzman is an American businessman and investor and the chairman and co-founder of the Blackstone Group, the private-equity and financial advisory firm.-Early life and education:...
with $400,000 in seed capital. The founders named their firm Blackstone, which was a cryptogram
Cryptogram
A cryptogram is a type of puzzle which consists of a short piece of encrypted text. Generally the cipher used to encrypt the text is simple enough that cryptogram can be solved by hand. Frequently used are substitution ciphers where each letter is replaced by a different letter or number. To solve...
derived from the names of the two founders (Schwarzman and Peterson): Schwarz is German
German language
German is a West Germanic language, related to and classified alongside English and Dutch. With an estimated 90 – 98 million native speakers, German is one of the world's major languages and is the most widely-spoken first language in the European Union....
for black; Peter, or Petra in Greek
Greek language
Greek is an independent branch of the Indo-European family of languages. Native to the southern Balkans, it has the longest documented history of any Indo-European language, spanning 34 centuries of written records. Its writing system has been the Greek alphabet for the majority of its history;...
, means stone or rock. The two founders had previously worked together at Lehman Brothers, Kuhn, Loeb Inc. At Lehman, Schwarzman served as head of Lehman Brothers' global mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
business.
Prominent investment banker Roger C. Altman, another Lehman veteran, left his position as a managing director of Shearson Lehman Brothers to join Peterson and Schwarzman at Blackstone in 1987. In 1992, after playing a role in the firm's growth, Altman would leave Blackstone to join the Clinton Administration as Deputy Treasury Secretary. After leaving politics in 1996, Altman would found a boutique investment banking and private equity firm, Evercore Partners
Evercore Partners
Evercore Partners is an investment bank located in New York City. Evercore also has an investment management business through which the Company manages private equity and venture capital funds for institutional investors...
.
Blackstone was originally formed as a mergers and acquisitions advisory boutique. Blackstone advised on the 1987 merger of investment banks E. F. Hutton & Co.
E. F. Hutton & Co.
E. F. Hutton & Co. was an American stock brokerage firm founded in 1904 by Edward Francis Hutton, his brother Franklyn Laws Hutton, and later led by well known Wall Street trader Gerald M. Loeb. Under their leadership, Hutton became one of the most respected financial firms in the United States...
and Shearson Lehman Brothers, collecting a $3.5 million fee. The firm also advised CBS Corporation
CBS Corporation
CBS Corporation is an American media conglomerate focused on commercial broadcasting, publishing, billboards and television production, with most of its operations in the United States. The President and CEO of the company is Leslie Moonves. Sumner Redstone, owner of National Amusements, is CBS's...
on its 1988 sale of CBS Records to Sony
Sony
, commonly referred to as Sony, is a Japanese multinational conglomerate corporation headquartered in Minato, Tokyo, Japan and the world's fifth largest media conglomerate measured by revenues....
to form what would become Sony Music Entertainment
Sony Music Entertainment
Sony Music Entertainment ' is the second-largest global recorded music company of the "big four" record companies and is controlled by Sony Corporation of America, the United States subsidiary of Japan's Sony Corporation....
.
Black Monday (1987)
In finance, Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin...
. After two years of providing strictly advisory services, Blackstone decided to pursue a merchant banking model after its founders determined that many situations required an investment partner rather than just an advisor. The largest investors in the first fund included Prudential Insurance Company, Nikko Securities and the General Motors pension fund
General Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
.
Blackstone also ventured into other businesses, most notably investment management. In 1987, Blackstone entered into a 50–50 partnership with the founders of BlackRock
BlackRock
BlackRock, Inc. is an American multinational investment management corporation and the world's largest asset manager. BlackRock is headquartered in Manhattan, New York City, New York, United States and is the leading provider of investment, advisory, and risk management solutions...
, Larry Fink
Laurence D. Fink
Laurence D. "Larry" Fink is the chairman and chief executive officer of BlackRock, an American multinational investment management corporation. BlackRock is the largest money-management firm in the world.-Early life and education:...
and Ralph Schlosstein. The two founders, who had previously run the mortgage backed securities divisions at First Boston
First Boston
First Boston Corporation was a New York-based, bulge bracket, investment bank, founded in 1932 and acquired by Credit Suisse in 1990. Together with its sister investment banks, it was referred to as CS First Boston after 1993 and part of Credit Suisse First Boston after 1996, the First Boston part...
and Lehman Brothers Kuhn Loeb respectively, initially joined Blackstone to manage an investment fund and provide advice to financial institutions. They also planned to use a Blackstone fund to invest in financial institutions and help build an asset management business specializing in fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
investments.
As the business grew, Japanese bank Nikko Securities acquired a 20% interest in Blackstone in 1988 for a $100 million investment in 1988 (valuing the firm at $500 million). Nikko's investment allowed for a major expansion of the firm and its investment activities. The growth firm also recruited politician and investment banker David Stockman
David Stockman
David Alan Stockman is a former U.S. politician and businessman, serving as a Republican U.S. Representative from the state of Michigan and as the Director of the Office of Management and Budget ....
from Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...
in 1988. Stockman led many key deals in his time at the firm, but had a mixed record with his investments. He left Blackstone in 1999 to start his own private equity firm, Heartland Industrial Partners
Heartland Industrial Partners
Heartland Industrial Partners is a private equity firm focused on industry consolidation and growth capital investments in middle-market industrial companies....
, based in Greenwich, Connecticut
Greenwich, Connecticut
Greenwich is a town in Fairfield County, Connecticut, United States. As of the 2010 census, the town had a total population of 61,171. It is home to many hedge funds and other financial service companies. Greenwich is the southernmost and westernmost municipality in Connecticut and is 38+ minutes ...
.
In June 1989, Blackstone acquired freight railroad operator, CNW Corporation. That same year, in 1989, Blackstone partnered with Salomon Brothers
Salomon Brothers
Salomon Brothers was a bulge bracket, Wall Street investment bank. Founded in 1910 by three brothers along with a clerk named Ben Levy, it remained a partnership until the early 1980s, when it was acquired by the commodity trading firm Phibro Corporation and then became Salomon Inc. Eventually...
to raise $600 million to acquire distressed thrifts
Savings and loan association
A savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...
in the midst of the Savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
.
1990s
As the 1990s began, Blackstone continued its growth and expansion into new businesses. In 1990, Blackstone launched its fund of hedge funds business, initially intended to manage investments for Blackstone senior management. Also in 1990, Blackstone extended its ambitions to Europe, forming a partnership with J. O. Hambro Magan in the UK and Indosuez in France. In 1991, Blackstone created its Europe unit to enhance the firm’s presence internationally.In 1991, Blackstone launched its real estate investment business with the acquisition of a series of hotel businesses under the leadership of Henry Silverman
Henry Silverman
Henry R. Silverman is an American entrepreneur and private equity investor. Silverman is best known for his role in building Cendant Corporation into a multibillion dollar business services company that provided car rentals, travel reservation services as well as real estate brokerage services and...
. In 1990, Blackstone and Silverman acquired a 65% interest in Prime Motor Inn’s Ramada
Ramada
Ramada is a hotel chain owned and operated by Wyndham Worldwide.- History :The lodging chain was founded in 1953 by longtime Chicago restaurateur Marion W...
and Howard Johnson
Howard Johnson's
Howard Johnson's is a chain of hotels and restaurants, located primarily throughout the United States and Canada. Throughout the 1960s and 1970s, Howard Johnson's was the largest restaurant chain in the United States, with over 1,000 restaurants...
franchises for $140 million, creating Hospitality Franchise Systems as a holding company
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
. In October 1991, Blackstone and Silverman added Days Inns of America for $250 million. Then, in 1993, Hospitality Franchise Systems acquired Super 8 Motels
Super 8 Motels
Super 8 Hotels Inc. is the world's largest budget hotel chain, with hotels in the United States and Canada, as well as newer properties in China. The company is a subsidiary of Wyndham Worldwide, formerly a part of Cendant.-History:...
for $125 million. Silverman would ultimately leave Blackstone to serve as CEO of HFS, which would later become Cendant Corporation.
Blackstone made a number of notable investments in the early and mid 1990s, including Great Lakes Dredge and Dock Company
Great Lakes Dredge and Dock Company
Great Lakes Dredge and Dock Company is an American company providing construction services in dredging and land reclamation, currently the largest such provider in the United States. GLD&D operates primarily in the United States but conducts one-quarter of its business overseas...
(1991), Six Flags
Six Flags
Six Flags Entertainment Corp. is the world's largest amusement park corporation based on quantity of properties and the fifth most popular in terms of attendance. The company maintains 14 properties located throughout North America, including theme parks, thrill parks, water parks and family...
(1991), US Radio (1994), Centerplate
Centerplate
Centerplate, Inc. is a food vending corporation in Spartanburg, SC that operates in North America, primarily at sports arenas.Centerplate was formerly known as Volume Services America, Inc., and was originally a division of The Flagstar Companies. In 1995, Flagstar, which was controlled by private...
(1995), MEGA Brands
Mega Brands
Mega Brands, Incorporated , formerly Mega Bloks, Incorporated, is a publicly traded children's toy company. Mega Bloks is the name of their most popular product, a line of construction set toys, with other brands including Mega Puzzles, Board Dudes and Rose Art. Mega Brands, Inc. distributes a...
(1996). Also, in 1996, Blackstone partnered with the Loewen Group, the second largest funeral home and cemetery operator in North America, to acquire funeral home and cemetery businesses. The partnership's first acquisition was a $295 million buyout of Prime Succession from GTCR
GTCR
GTCR LLC is a private equity firm focused on leveraged buyout, leveraged recapitalization, growth capital and rollup transactions. As of 2008, it manages more than $8 billion in equity and mezzanine capital invested in a wide range of companies and industries....
.
Through the mid and late 1990s, Blackstone continued to grow. In 1997, Blackstone completed fundraising for its third private equity fund, with approximately $4 billion of investor commitments and a $1.1 billion real estate investment fund. In the following year, in 1998, Blackstone sold a 7% interest in its management company to AIG
AIG
AIG is American International Group, a major American insurance corporation.AIG may also refer to:* And-inverter graph, a concept in computer theory* Answers in Genesis, a creationist organization in the U.S.* Arta Industrial Group in Iran...
, replacing Nikko Securities as its largest investor and valuing Blackstone at $2.1 billion. Then, in 1999, Blackstone launched its mezzanine capital
Mezzanine capital
Mezzanine capital, in finance, refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares...
business. Blackstone brought in five professionals, led by Howard Gellis from Nomura Holding America's Leveraged Capital Group to manage the business.
Blackstone's investments in the late 1990s included AMF Group (1996), Haynes International
Haynes International
Haynes International Inc. is a manufacturer of metal alloys employing more than 1,070 employees worldwide with sales of 434.4 million United States Dollars in 2007 with 8 plants around the world. The corporation is headquartered in Kokomo, Indiana...
(1997), American Axle
American Axle
American Axle & Manufacturing, Inc. , headquartered in Detroit, Michigan, is a manufacturer of automobile driveline and drivetrain components and systems.-History:...
(1997), Premcor
Premcor
Premcor was a Fortune 500 oil refinery group based in Greenwich, Connecticut. It operated five refineries, which are located in Port Arthur, Texas; Memphis, Tennessee; Lima, Ohio; Hartford, Illinois; and Delaware City, Delaware with a combined crude oil volume processing capacity of approximately ...
(1997), CommNet Cellular (1998), Graham Packaging (1998), Centennial Communications
Centennial Communications
Centennial Communications and its subsidiaries provide wireless and broadband telecommunications services to wireless telephone subscribers in the United States, Puerto Rico, and the U.S. Virgin Islands...
(1999), Bresnan Communications
Bresnan Communications
Optimum West is a division of Cablevision that operates in the Rocky Mountain area, servicing Montana, Wyoming, Utah and Colorado. It offers digital cable, high speed internet, and digital voice services to over 300,000 subscribers....
(1999), PAETEC Holding Corp.
PAETEC Holding Corp.
PAETEC Holding Corp. is a FORTUNE 1000 telecommunications company headquartered in Perinton, New York, USA. It was founded as the private company PaeTec Communications, Inc. in 1998 by its current CEO, Arunas A. Chesonis...
(1999). Haynes and Republic Technologies International, a specialty steel maker in which Blackstone invested in 1996, both had problems and ultimately filed bankruptcy.
Also, in 1997, Blackstone made its first investment in Allied Waste. Two years later, in 1999, Blackstone, together with Apollo Management
Apollo Management
Apollo Global Management, LLC is a private equity investment firm, founded in 1990 by former Drexel Burnham Lambert banker Leon Black. The firm specializes in leveraged buyout transactions and purchases of distressed securities involving corporate restructuring, special situations and industry...
provided capital for Allied Waste's acquisition of Browning-Ferris Industries
Browning-Ferris Industries
Browning-Ferris Industries was a North American waste management company that was disbanded in 1999. Its name is a licensed trademark of Allied Waste Industries. Its headquarters were located in the Eldridge Place 1 and 2 complex in the Energy Corridor area of Houston, Texas.BFI was founded in...
in 1999 to create the second largest waste management
Waste management
Waste management is the collection, transport, processing or disposal,managing and monitoring of waste materials. The term usually relates to materials produced by human activity, and the process is generally undertaken to reduce their effect on health, the environment or aesthetics...
company in the US. Blackstone's investment in Allied was one of its largest to that point in the firm's history.
Its investments in telecommunications businesses—four cable TV systems in rural areas (TW Fanch 1 and 2, Bresnan Communications and Intermedia Partners IV) and a cell phone operator in the
Rocky Mountain states (CommNet Cellular) were among the most successful of the era, generating $1.5 billion of profits for Blackstone's funds.
Early 2000s
With a significant amount of dry powder
Dry powder
Usage of the term dry powder originated during infantry battles fought during the era of gun powder and cannons. The gun powder had to be kept dry to be effective. It was stored in containers that were as waterproof as the technology of the times allowed, but this was not always reliable...
in its new fund, Blackstone was one of a handful of private equity investors capable of completing large transactions in the adverse conditions of the early 2000s recession
Early 2000s recession
The early 2000s recession was a decline in economic activity which occurred mainly in developed countries. The recession affected the European Union mostly during 2000 and 2001 and the United States mostly in 2002 and 2003. The UK, Canada and Australia avoided the recession for the most part, while...
. At the end of 2002, Blackstone, together with Thomas H. Lee Partners
Thomas H. Lee Partners
Thomas H. Lee Partners is a private equity firm based in Boston, Massachusetts specializing in leveraged buyouts, growth capital, special situations, industry consolidations, and recapitalizations....
and Bain Capital
Bain Capital
Bain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
, acquired Houghton Mifflin Company for $1.28 billion. The transaction represented one of the first large club deal
Club deal
A club deal, in finance, refers to a leveraged buyout or other private equity investment that involves several different private equity investment firms. Club deal can also be referred as syndicated investment....
s, completed since the collapse of the Dot-com bubble
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
.
In late 2002, Blackstone remained active acquiring TRW Automotive
TRW Automotive
TRW Automotive , headquartered in Livonia, Michigan, USA, is a major global supplier of automotive systems, modules and components to automotive original equipment manufacturers and related aftermarkets....
in a $4.7 billion buyout, the largest private equity deal announced that year (the deal was completed in early 2003). TRW's parent was acquired by Northrop Grumman
Northrop Grumman
Northrop Grumman Corporation is an American global aerospace and defense technology company formed by the 1994 purchase of Grumman by Northrop. The company was the fourth-largest defense contractor in the world as of 2010, and the largest builder of naval vessels. Northrop Grumman employs over...
, while Blackstone purchased its automotive parts business, a major supplier of automotive systems. Blackstone also purchased a majority interest in Columbia House
Columbia House
The Columbia House brand was introduced in the early 1970s by the Columbia Records division of CBS, Inc. as an umbrella for its mail-order music clubs, the primary incarnation of which was the Columbia Record Club, established in 1955. It had a significant market presence in the 1980s and early...
, a leading music club, in mid 2002.
Blackstone made a significant investment in Financial Guaranty Insurance Company
Financial Guaranty Insurance Company
Financial Guaranty Insurance Company is a monoline bond insurer established in 1983. It faced significant financial difficulties in 2008 which affected its ability to write new business....
(FGIC), a leading monoline bond insurer alongside PMI Group
PMI Group
The PMI Group is a holding company whose primary subsidiary is the PMI Mortgage Insurance Co. .PMI has a 50% equity ownership in CMG Mortgage Insurance Company and CMG Mortgage Assurance Company , a provider of private mortgage insurance to the credit union industry.The company was founded in 1972...
, The Cypress Group and CIVC Partners
CIVC Partners
CIVC Partners, previously known as Continental Illinois Venture Corporation, is a Chicago-based private equity firm that presently has over $1.3 billion of equity capital under management. The firm's predecessor was established in 1970 as a subsidiary of Continental Illinois National Bank and Trust...
. FGIC has suffered, along with the other leading bond insurers
Bond insurance
Bond insurance is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or security...
in the 2008 credit crisis.
Two years later, in 2005, Blackstone was one of seven private equity firms involved in the buyout of SunGard
SunGard
SunGard is a multinational company based in Wayne, Pennsylvania, which provides software and services to education, financial services, and public sector organizations. It was formed in 1983, as a spin-off of the computer services division of Sun Oil Company, during a period of low crude oil...
in a transaction valued at $11.3 billion. Blackstone's partners in the acquisition were Silver Lake Partners
Silver Lake Partners
Silver Lake is a US-based private equity firm focused on leveraged buyout and growth capital investments in technology, technology-enabled and related industries...
, Bain Capital
Bain Capital
Bain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
, Goldman Sachs Capital Partners
Goldman Sachs Capital Partners
Goldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally....
, Kohlberg Kravis Roberts, Providence Equity Partners
Providence Equity Partners
Providence Equity Partners is a global private equity investment firm focused on media, entertainment, communications and information investments...
, and Texas Pacific Group
Texas Pacific Group
TPG Capital is one of the largest private equity investment firms globally, focused on leveraged buyout, growth capital and leveraged recapitalization investments in distressed companies and turnaround situations. TPG also manages investment funds specializing in growth capital, venture capital,...
. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco
RJR Nabisco
RJR Nabisco, Inc., was an American conglomerate formed in 1985 by the merger of Nabisco Brands and R.J. Reynolds Tobacco Company. RJR Nabisco was purchased in 1988 by Kohlberg Kravis Roberts & Co...
at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard would be the largest buyout of a technology company in history, a distinction it would cede to the buyout of Freescale Semiconductor
Freescale Semiconductor
Freescale Semiconductor, Inc. is a producer and designer of embedded hardware, with 17 billion semiconductor chips in use around the world. The company focuses on the automotive, consumer, industrial and networking markets with its product portfolio including microprocessors, microcontrollers,...
. The SunGard transaction is also notable in the number of firms involved in the transaction, the largest club deal
Club deal
A club deal, in finance, refers to a leveraged buyout or other private equity investment that involves several different private equity investment firms. Club deal can also be referred as syndicated investment....
completed to that point. The involvement of seven firms in the consortium was criticized by investors in private equity who considered cross-holdings among firms to be generally unattractive.
In 2006, Blackstone launched its new long / short equity
Long / short equity
Long/short equity is an investment strategy generally associated with hedge funds, and more recently certain progressive traditional asset managers. It involves buying long equities that are expected to increase in value and selling short equities that are expected to decrease in value...
hedge fund business, Kailix Advisors. According to Blackstone, as of September 30, 2008, Kailix Advisors had $1.9 billion of assets under management. In December 2008, Blackstone announced that Kailix will be spun off to its management team to form a new fund as an independent entity backed by Blackstone.
While Blackstone was active on the corporate investment side, it was also busy pursuing real estate investments. Blackstone acquired Prime Hospitality and Extended Stay America
Extended Stay America
Extended StayAmerica is an American hotel company. It was founded in 1995 in South Carolina as an extended-stay hotel, catering to businesspeople....
in 2004. Blackstone followed these investments with the acquisition of La Quinta Inns & Suites in 2005 and its largest transaction, the buyout of Hilton Hotels Corporation
Hilton Hotels Corporation
Hilton Worldwide is a global hospitality company. It is owned by the Blackstone Group, a private equity firm. As of July 2011 Hilton brands encompass 3,750 hotels with over 600,000 rooms in 84 countries...
in 2007. Extended Stay Hotels was sold to The Lightstone Group
The Lightstone Group
The Lightstone Group is a privately held real estate investment company which owns and operates a diversified portfolio of multifamily, office, industrial, hotel and retail properties. Lightstone has invested directly in individual real estate assets and in real estate operating companies...
in July 2007 and Prime Hospitality's Wellesley Inns were folded into LaQuinta.
The Buyout Boom (2005-2007)
During the buyout boom of 2006 and 2007Private equity in the 21st century
Private equity in the 2000s relates to one of the major periods in the history of private equity and venture capital. Within the broader private equity industry, two distinct sub-industries, leveraged buyouts and venture capital experienced growth along parallel although interrelated tracks.The...
, Blackstone completed some of the largest leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
s. Blackstone's most notable transactions during this period include the following:
| Investment | Year | Company Description | Ref. |
| TDC TDC A/S TDC A/S is the former telecom monopoly in Denmark. It is now privatized. Thus, it is the biggest company in all aspects of telecommunications in Denmark with landline, mobile, Internet, VHF maritime borderline-radio etc.By the end of 2004, the TDC Group had more than 13.4 mil. customers in Europe:... | 2005 | In December 2005, Blackstone together with a group of firms, including Kohlberg Kravis Roberts, Permira Permira Permira is a United Kingdom-based private equity firm with global reach. The firm advises funds with a total committed capital of approximately €20 billion.... , Apax Partners Apax Partners Apax Partners LLP is a global private equity and venture capital firm, headquartered in London. The company also operates out of eight other offices in New York, Hong Kong, Mumbai, Tel-Aviv, Madrid, Stockholm, Milan and Munich. The firm, including its various predecessors, have raised... and Providence Equity Partners Providence Equity Partners Providence Equity Partners is a global private equity investment firm focused on media, entertainment, communications and information investments... , acquired Tele-Denmark Communications). The firms acquired the former telecom monopoly in Denmark, under the banner Nordic Telephone Company (NTC) for approximately $11 billion. | |
| Equity Office Properties | 2006 | Blackstone completes the $37.7 billion acquisition of one of the largest owners of commercial office properties in the US. At the time of its announcement, the Equity Office buyout became the largest in history, surpassing the buyout of HCA Hospital Corporation of America Hospital Corporation of America is the largest private operator of health care facilities in the world, It is based in Nashville, Tennessee and is widely considered to be the single largest factor in making that city a hotspot for healthcare enterprise.-History:The founders of HCA include Jack C.... . It would later be surpassed by KKR's buyout of TXU TXU Energy Future Holdings Corporation is an electric utility company headquartered in Energy Plaza in Downtown Dallas, Texas, United States. The company was known as TXU until its $45 billion leveraged buyout by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs... . Vornado Realty Trust bid against Blackstone, pushing up the final price. | |
| Freescale Semiconductor Freescale Semiconductor Freescale Semiconductor, Inc. is a producer and designer of embedded hardware, with 17 billion semiconductor chips in use around the world. The company focuses on the automotive, consumer, industrial and networking markets with its product portfolio including microprocessors, microcontrollers,... | 2006 | A consortium led by Blackstone and including the Carlyle Group Carlyle Group The Carlyle Group is an American-based global asset management firm, specializing in private equity, based in Washington, D.C. The Carlyle Group operates in four business areas: corporate private equity, real assets, market strategies and fund-of-funds, through its AlpInvest subsidiary... , Permira Permira Permira is a United Kingdom-based private equity firm with global reach. The firm advises funds with a total committed capital of approximately €20 billion.... and the TPG Capital completed the $17.6 billion takeover of the semiconductor company. At the time of its announcement, Freescale would be the largest leveraged buyout of a technology company ever, surpassing the 2005 buyout of SunGard SunGard SunGard is a multinational company based in Wayne, Pennsylvania, which provides software and services to education, financial services, and public sector organizations. It was formed in 1983, as a spin-off of the computer services division of Sun Oil Company, during a period of low crude oil... . The buyers were forced to pay an extra $800 million because KKR made a last minute bid as the original deal was about to be signed. Shortly after the deal closed in late 2006, cell phone sales at Motorola Corp., Freescale's former corporate parent and a major customer, began dropping sharply. In addition, in the recession of 2008-2009, Freescale's chip sales to automakers fell off, and the company came under great financial strain. | |
| Michaels Stores | 2006 | Blackstone, together with Bain Capital Bain Capital Bain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private... , acquired Michaels, the largest arts and crafts retailer in North America in a $6.0 billion leveraged buyout in October 2006. Bain and Blackstone narrowly beat out Kohlberg Kravis Roberts and TPG Capital in an auction for the company. | |
| Nielsen Company | 2006 | Blackstone together with AlpInvest Partners AlpInvest Partners AlpInvest Partners is a private equity investment manager and at the end of 2009 globally managed over €42 billion .... , Carlyle Group Carlyle Group The Carlyle Group is an American-based global asset management firm, specializing in private equity, based in Washington, D.C. The Carlyle Group operates in four business areas: corporate private equity, real assets, market strategies and fund-of-funds, through its AlpInvest subsidiary... , Hellman & Friedman Hellman & Friedman Hellman & Friedman is a private equity firm, founded in 1984 by Warren Hellman and Tully Friedman, that makes investments primarily through leveraged buyouts and minority growth capital investments.... , Kohlberg Kravis Roberts and Thomas H. Lee Partners Thomas H. Lee Partners Thomas H. Lee Partners is a private equity firm based in Boston, Massachusetts specializing in leveraged buyouts, growth capital, special situations, industry consolidations, and recapitalizations.... acquired the global information and media company formerly known as VNU. | |
| Orangina Orangina Orangina is a carbonated citrus beverage made from orange, lemon, mandarin, and grapefruit juice. The concept of Orangina originated at a trade fair in France and was first marketed in Algeria by the French Algerian Léon Beton... Sold | 2006 | Blackstone, together with Lion Capital Lion Capital LLP Lion Capital LLP is a British private equity firm, primarily focusing on leveraged buyout investments in Europe. The firm specializes on investments in the consumer sector... acquired Orangina, the bottler, distributor and franchisor of a number of carbonated and other soft drinks in Europe from Cadbury Schweppes Cadbury Schweppes Cadbury is a confectionery company owned by Kraft Foods and is the industry's second-largest globally after Mars, Incorporated. Headquartered in Uxbridge, London, United Kingdom, the company operates in more than 50 countries worldwide.... for €1.85 billion | |
| Travelport Travelport Travelport is a broad-based business services company and a leading provider of critical transaction processing solutions to companies operating in the global travel industry... | 2006 | Travelport, the parent of the travel web site Orbitz.com, was acquired from Cendant Cendant Cendant Corporation was a New York-based provider of business and consumer services, primarily within the real estate and travel industries. In 2005 and 2006, Cendant broke up and spun off or sold its constituent businesses... by Blackstone and Technology Crossover Ventures in a deal valued at $4.3 billion. The sale of Travelport followed the spin-offs of Cendant's real estate and hospitality businesses, Realogy Corporation and Wyndham Worldwide Corporation Wyndham Worldwide Wyndham Worldwide is the holding company for Wyndham Hotels & Resorts, Group RCI and other lodging brands. It was spun off from Cendant Corporation in July 2006.... , respectively, in July 2006. (Later in the year, TPG and Silver Lake would acquire Travelport's chief competitor Sabre Holdings Sabre Holdings Sabre Holdings or Sabre, Inc. is an American privately held travel technology company, encompassing several brands in three global distribution system channels: travel agency, airline, and direct to consumer. These areas are serviced by TSG's three main business groups... .) Soon after the Travelport buyout, Travelport spun off part of its subsidiary Orbitz Worldwide Orbitz Orbitz Worldwide, Inc. is an Internet travel company headquartered in the Citigroup Center in Near West Side, Chicago, Illinois. Through its primary web site Orbitz.com, Orbitz Worldwide enables travelers to research, plan and book a broad range of travel products, facilitating 1.5 million flight... in an IPO and bought a Travelport competitor, Worldspan Worldspan Worldspan is a provider of travel technology and content and a part of the Travelport GDS business. It offers worldwide electronic distribution of travel information, Internet products and connectivity, and e-commerce capabilities for travel agencies, travel service providers and corporations... . | |
| United Biscuits United Biscuits __FORCETOC__United Biscuits is a British multinational food manufacturer, makers of the BN biscuits, McVitie's biscuits, KP Nuts, Hula Hoops, The Real McCoy's crisps, Phileas Fogg snacks, Jacob's Cream Crackers, and Twiglets... | 2006 | In October 2006 Blackstone, together with PAI Partners PAI Partners PAI partners is a major European private equity house and is the leading private equity investor in the French market. It is one of the oldest and most experienced firms in the sector with its origins dating back to Paribas Affaires Industrielles, the historical principal investment activity of... announced the acquisition of the British biscuit producer. The deal was completed in December 2006. | |
| RGIS | 2007 | In March 2007, RGIS announced that Blackstone Group purchased a controlling interest in the company, the terms of the transaction were not disclosed. | |
| Biomet Biomet Biomet, Inc. is one of the world leading medical device manufacturer located in the Warsaw, Indiana business cluster. The company specializes in reconstructive products for hips, knees and shoulders, fixation devices, orthopedic support devices, dental implants, spinal implants and operating room... | 2007 | Blackstone, Kohlberg Kravis Roberts, TPG Capital and Goldman Sachs Capital Partners Goldman Sachs Capital Partners Goldman Sachs Capital Partners is the private equity arm of Goldman Sachs, focused on leveraged buyout and growth capital investments globally.... acquired the medical devices company for $11.6 billion. | |
| Hilton Hotels Corporation Hilton Hotels Corporation Hilton Worldwide is a global hospitality company. It is owned by the Blackstone Group, a private equity firm. As of July 2011 Hilton brands encompass 3,750 hotels with over 600,000 rooms in 84 countries... | 2007 | Blackstone acquired the premium hotel operator for approximately $26 billion, representing a 25% premium to Hilton's all-time high stock price. The Hilton deal, announced on July 3, 2007 is often referred to as the deal that marked the "high water mark" and the beginning of the end of the multi-year boom in leveraged buyouts. The company restructured its debt in 2010. |
Initial public offering in 2007
In 2004, Blackstone had explored the possibility of creating a business development companyBusiness Development Company
A Business Development Company is a form of publicly traded private equity in the United States created by Congress in 1980 as amendments to the Investment Company Act of 1940...
(BDC), Blackridge Investments, similar to vehicles pursued by Apollo Management
Apollo Management
Apollo Global Management, LLC is a private equity investment firm, founded in 1990 by former Drexel Burnham Lambert banker Leon Black. The firm specializes in leveraged buyout transactions and purchases of distressed securities involving corporate restructuring, special situations and industry...
. However, Blackstone failed to raise capital through an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
that summer, and the project was shelved. It also planned to raise a fund on the Amsterdam stock exchange in 2006, but its rival, Kohlberg Kravis Roberts & Co. launched a $5 billion fund there that soaked up all demand for such funds, and Blackstone abandoned its project.
By the summer of 2006, Blackstone had a more ambitious goal and secretly began laying the groundwork for an IPO of the firm itself, and managed to keep the project quiet for eight or nine months. On March 22, 2007, Blackstone filed with the SEC to raise $4 billion in an initial public offering. On June 21, Blackstone sold a 12.3% stake in its ownership for $4.13 billion in the largest U.S. IPO since 2002. Traded on the New York Stock Exchange under the ticker symbol BX, Blackstone priced at $31 per share on June 22, 2007. Less than two weeks after the Blackstone IPO, in July 2007 rival private equity firm, Kohlberg Kravis Roberts, filed with the SEC In October 2009, KKR listed its shares on the Euronext exchange and anticipates a listing on the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
.
Since 2008
Since the closure of the credit markets in 2007 and 2008, Blackstone has managed to close only a small number of sizable transactions. In January 2008, Blackstone made a small co-investment alongside TPG Capital and Apollo ManagementApollo Management
Apollo Global Management, LLC is a private equity investment firm, founded in 1990 by former Drexel Burnham Lambert banker Leon Black. The firm specializes in leveraged buyout transactions and purchases of distressed securities involving corporate restructuring, special situations and industry...
in their buyout of Harrah's Entertainment
Harrah's Entertainment
Caesars Entertainment Corporation is a private gaming corporation that owns and operates over 50 casinos, hotels, and seven golf courses under several brands. The company, based in Paradise, Nevada, is the largest gaming company in the world, with yearly revenues $8.9 billion...
, although that transaction had been announced during the buyout boom period. Other notable investments that Blackstone completed in 2008 and 2009 included AlliedBarton
AlliedBarton
AlliedBarton Security Services is a security officer company in the United States, made up of the former companies Barton Protective Services, Spectaguard, Initial and Allied Security. It is the largest American owned security company in the United States, employing approximately 50,000 people...
, Performance Food Group
Performance Food Group
Performance Food Group Company is a company that was founded in 1875. Headquartered in Richmond, Virginia, United States, the company distributes a range of food products....
, Apria Healthcare and CMS Computers
CMS Computers
CMS Computers is a distributor of computer components in the UK. Founded in 1993. CMS Computers manufacturer and sell a variety of PC systems, components and accessories to trade....
.
Among the firm's two largest investments since the buyout boom have been The Weather Channel
The Weather Channel
The Weather Channel is a US cable and satellite television network since May 2, 1982, that broadcasts weather forecasts and weather-related news, along with entertainment programming related to weather 24 hours a day...
and the announced acquisition of Busch Entertainment. In July 2008, Blackstone, together with NBC Universal
NBC Universal
NBCUniversal Media, LLC is a media and entertainment company engaged in the production and marketing of entertainment, news, and information products and services to a global customer base...
and Bain Capital
Bain Capital
Bain Capital LLC is a Boston-based private equity firm founded in 1984 by partners from the consulting firm Bain & Company. Originally conceived as an early-stage, growth-oriented investment fund, Bain Capital today manages approximately $65 billion in assets, and its strategies include private...
agreed to purchase The Weather Channel
The Weather Channel
The Weather Channel is a US cable and satellite television network since May 2, 1982, that broadcasts weather forecasts and weather-related news, along with entertainment programming related to weather 24 hours a day...
from Landmark Communications
Landmark Communications
Landmark Media Enterprises LLC is a privately held media company headquartered in Norfolk, Virginia specializing in cable television, broadcast television, print publishing, and internet publishing...
. In October 2009, Anheuser-Busch InBev
Anheuser-Busch InBev
Anheuser-Busch InBev N.V. is a Belgian-Brazilian publicly-traded company, based in Leuven, Belgium. It is the largest global brewer with nearly 25% global market share and one of the world's top five consumer products companies by EBITA....
announced the sale of its Busch Entertainment Corporation theme parks division to Blackstone for $2.7 billion.
The Financial Times
Financial Times
The Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
has reported that Merlin Entertainments
Merlin Entertainments
Merlin Entertainments Group Ltd is a British operator of amusement parks and other attractions. It is the largest such company in Europe, and globally the second largest after Walt Disney Parks and Resorts....
owned by Blackstone Group will file an IPO in the 2nd quarter of 2010. Merlin will be listed on the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
. If true this would be the second of 8 reported IPOs Blackstone Plans, the first being Team Health Holdings, Inc. Blackstone reported at the end of 2009 revenues of $1.8bln, compared to -$349mln revenues in 2008. On August 13, 2010 Blackstone announced it would buy Dynegy
Dynegy
Dynegy Inc. , based in Houston, Texas, United States, is a large owner and operator of power plants and a player in the natural gas liquids and coal business...
, an energy firm, for nearly $5 billion.
In 2010, Blackstone Alternative Asset Management, received Institutional Investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
magazine's 8th Annual Hedge Fund Industry award for Large Fund of Hedge Funds of the Year.
February 2011: Blackstone Group LP agreed to acquire 588 malls of Centro Properties Group
Centro Properties Group
Centro Properties Group, commonly known as 'Centro', is an Australian company which provides retail property ownership and management services. It is a listed company with securities traded on the Australian Securities Exchange. The multinational company owns and operates shopping centres in...
's U.S. shopping centers for $9.4 billion. Whereas Centro's Australian may continue their operation independently.
August 2011: Blackstone Group LP agreed to buy Medical-Biller Emdeon Inc. for around $3 billion. Due to Blackstone Group LP was (the world's biggest) private-equity firm, so tender offer of Emdeon Inc. public company should be done with a cash payment of $19 a share, a 44 percent premium.
Blackstone has moved some of its accounting functions to India
Further reading
- David Carey, John E. Morris (2010). King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone.
See also
- GSO Capital PartnersGSO Capital PartnersGSO Capital Partners is one of the largest credit-oriented alternative asset managers in the world and a major participant in the leveraged finance marketplace....
- Stephen A. SchwarzmanStephen A. SchwarzmanStephen Allen Schwarzman is an American businessman and investor and the chairman and co-founder of the Blackstone Group, the private-equity and financial advisory firm.-Early life and education:...
- List of outdoor industry parent companies
External links
- The Blackstone Group (company website)