Blackstone’s Baratta Says Activists Drive CEOs to Private Equity

Chief executive officers of public companies are increasingly considering deals with private equity firms because of the threat of activist shareholders, Blackstone Group LP’s Joe Baratta said.

“Life as a public company CEO is difficult, and it’s more difficult today than it’s ever been,” Baratta, Blackstone’s global head of private equity, said Wednesday at the Bloomberg Markets Most Influential Summit in New York. “We’re seeing lots of public-company CEOs receptive to conversations with us to have a different form of governance and ownership.”

Blackstone “applauds the activist investment community that’s out there making their lives more difficult and making them have to account for how the business is being governed,” said Baratta, 45.

Several recent deals by private equity firms have been initiated by shareholders agitating for change at companies. Network-security provider Infoblox Inc. agreed last week to a $1.6 billion leveraged buyout by Vista Equity Partners after fielding activist investor Starboard Value. In November, New York-based Blackstone invested $820 million in automated teller machine maker NCR Corp., which was more than one-third owned by hedge funds at the time, including Jana Partners and activist Marcato Capital Management.

Activist investors typically buy a minority stake in a public company and agitate the board and management for changes that they believe will boost shareholder returns.

One reason buyouts of public companies in Europe are “virtually nonexistent” right now is that the culture of shareholder activism hasn’t evolved there as much as in the U.S., Baratta said.

Blackstone, founded by Steve 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. Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at the company.

Before it's here, it's on the Bloomberg Terminal.