Blackstone to Spin Off Its Advisory Business With TaubmanKiel Porter, David Carey and Devin Banerjee
Blackstone Group LP, the world’s largest alternative-asset manager, is spinning off its advisory group into a stand-alone company to compete with the likes of Evercore Partners Inc. and Moelis & Co.
Paul J. Taubman, who started PJT Partners in 2013 after three decades with Morgan Stanley, will merge his firm with Blackstone’s advisory unit into a new, public entity that he will lead, according to a statement today from New York-based Blackstone. Taubman, along with employees of PJT and the Blackstone unit will own 35 percent of the new boutique; Blackstone’s current shareholders will own the remaining 65 percent.
Blackstone is separating the division, which advises on mergers and acquisitions, corporate restructurings and also includes fund-services business Park Hill Group, in an effort to reduce conflicts of interest with its money management business. The firm oversees almost $300 billion across private equity, credit, real estate and hedge funds, about three times what it managed at the end of 2009.
“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,” Blackstone Chairman Stephen Schwarzman said in the statement. “The separation of our investing and advisory areas will create new growth opportunities for both businesses.”
While Blackstone’s advisory division has worked with firms including PepsiCo Inc., Procter & Gamble Co. and American International Group Inc., it’s missed out on some of the biggest deals in recent years.
The group was unable to advise Lehman Brothers Holdings Inc. on its record bankruptcy because Blackstone’s real-estate division, led by Jonathan Gray, was interested in buying some of its assets, said Joan Solotar, Blackstone’s head of external relations and strategy.
“This allows the business to grow faster than it ever had within Blackstone,” she said in a telephone interview. The firm also sees the potential to unlock the unit’s value as publicly held advisory businesses trade at higher earnings multiples than Blackstone, she said.
Moelis, which went public in April and had similar revenue last year to Blackstone’s advisory business, trades at about 19 times earnings with a market capitalization of $1.7 billion, according to data compiled by Bloomberg. Blackstone trades at less than half that multiple.
Blackstone rose 0.9 percent to $30.04 at 12:26 p.m. in New York. The stock has declined 4.6 percent this year. None of Blackstone’s competitors, such as Carlyle Group LP and Apollo Global Management LLC, have corporate advisory units.
Taubman, 53, oversaw investment banking at Morgan Stanley before departing following three years of dual leadership of Morgan Stanley’s investment bank with longtime competitor Colm Kelleher, who became sole head. The two clashed over how aggressively to pursue additional business with clients whom the bank was assisting with capital-markets deals, people familiar with the matter said in 2011.
Taubman started PJT Capital in 2013 as part of his role as an adviser in Verizon Communication Inc.’s $130 billion buyout of partner Vodafone Group Plc.’s 45 percent stake in Verizon Wireless, the largest U.S. mobile carrier.
In the firm’s early years, Blackstone co-founders Schwarzman and Peter Peterson relied heavily on merger advisory work to pay the bills until the private-equity operation got off the ground. Today, advisory is the smallest of Blackstone’s five units. Last year, it accounted for $420.2 million, or 6.4 percent, of firmwide revenues and $75.7 million, or 2.1 percent, of economic net income, which includes cash and noncash earnings.
PJT has advised on two deals with a total value of almost $76 billion this year, according to data compiled by Bloomberg. That puts it much higher in the league table than Blackstone, which has advised on 11 deals worth about $4 billion, according to the data.
John Studzinski, who heads the merger and acquisitions advisory business at Blackstone, will continue to work with the group through the spinoff. After that, he will remain a senior managing director at Blackstone and as a member of the executive committee. Tim Coleman, who leads the restructuring team, and Park Hill Chief Executive Officer Daniel Prendergast will stay in their current jobs.