Evan Vitale Consulting: Blackstone to Spin Off Its Advisory Business

Friday, October 10, 2014

Blackstone to Spin Off Its Advisory Business – New York Times

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Paul J. Taubman has been doing deals on his own since leaving Morgan Stanley at the end of 2012.Credit Tina Fineberg for The New York Times

The Blackstone Group, the giant private equity firm, said on Friday that it would spin off its advisory business in an effort to eliminate potential conflicts of interest.

The advisory business — which includes Blackstone’s mergers and acquisitions practice, its restructuring services team and a group called Park Hill that helps private equity firms and hedge funds raise capital — will merge with a fledgling firm founded by Paul J. Taubman, Blackstone said. Mr. Taubman, a prominent investment banker who has been doing deals on his own since leaving Morgan Stanley at the end of 2012, will run the combined firm as chief executive and chairman.

The move highlights the increased complexity of Blackstone, which was founded by Stephen A. Schwarzman and Peter G. Peterson in 1985 as an advisory boutique. Today, it is the largest so-called alternative asset manager, managing almost $300 billion in assets across private equity, real estate and other strategies.

Mr. Schwarzman said the spinoff was motivated in part by concerns over potential conflicts that can arise in such a multifaceted company. The transaction will focus Blackstone around its investment activities.

“As the largest alternative asset manager in the world, and with our investing areas considerably broader and larger than even a few years ago, we have not been free to aggressively grow our advisory businesses further out of concern for potential conflicts,” he said in a statement. “The separation of our investing and advisory areas will create new growth opportunities for both businesses.”

The tax-free spinoff and merger are expected to be completed next year. Blackstone’s current shareholders will initially own 65 percent of the new company, while Blackstone’s advisory employees, along with Mr. Taubman and his partners, will own 35 percent, Blackstone said.

Mr. Taubman, in a statement, said the merger would “combine the legacy, scale and scope of a well-established business while capturing the entrepreneurial energy of a new firm to better serve clients.”

“By eliminating the potential conflicts that existed as part of the world’s largest alternative asset manager,” he added, “these three businesses will now be positioned for significant growth.”

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