Blackstone’s Top Dealmaker Says Now Is The Most Difficult Period He's Ever Experienced

  • Firm is nearing $5 billion deal for long-dated fund: dealmaker
  • Small, unlevered companies are most attractive to Blackstone

Joe Baratta, Blackstone Group LP’s top private equity dealmaker, can’t be too cautious right now.

“For any professional investor, this is the most difficult period we’ve ever experienced,” Baratta, Blackstone’s global head of private equity, said Tuesday, speaking at the WSJ Pro Private Equity Analyst Conference in New York. “You have historically high multiples of cash flows, low yields. I’ve never seen it in my career. It’s the most treacherous moment.”

Private equity managers have tussled with a difficult reality for several years. The same lofty valuations that created ideal conditions to sell holdings and pocket profits have made it exceedingly difficult to deploy money into new deals at attractive entry prices. Several executives, including Blackstone Chief Executive Officer Steve Schwarzman, have pinned those conditions squarely on the Federal Reserve’s near-zero interest rate policies.

Baratta, 45, said Blackstone isn’t finding value in large leveraged buyouts of publicly traded companies. Instead, the New York-based asset manager is targeting smaller companies with low leverage, he said.

‘Net Sellers’

The firm is still selling more assets than it’s buying, according to President Tony James.

“We’re net sellers on most things right now -- prices are high,” James said in a Bloomberg Television interview Tuesday. “Interest rates are so low and there’s so much capital sloshing around the world.”

Blackstone finished gathering $18 billion for its latest private equity fund last year. The firm also has an energy private equity vehicle, which finished raising $4.5 billion last year.

Blackstone is close to striking its first deal by a new private equity fund, called Blackstone Core Equity Partners, Baratta said. The vehicle will have a 20-year life span, double the length of a traditional private equity fund.

The core equity fund, which has gotten $5 billion so far, will deploy $1 billion to $3 billion per deal, said Baratta. The transaction the firm is working on is valued at about $5 billion including debt, he said, without elaborating.

Blackstone, founded by Schwarzman and Peter G. Peterson in 1985, managed $356 billion in private equity holdings, real estate, credit assets and hedge funds as of June 30.

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