Blackstone’s $17 Billion Thomson Reuters Bet May Supersize Deals

Blackstone Deal Marks Biggest Buyout Since Financial Crisis

Blackstone Group LP’s $17 billion deal for a unit of Thomson Reuters Corp., the private equity giant’s biggest bet in a decade, raises the question: Is a deal of this size a one-off, or are buyouts poised to get larger as firms move to deploy record sums of dry powder?

The deal is Blackstone’s largest by enterprise value since it acquired Hilton Worldwide Holdings Inc. for $26 billion in 2007. Big checks were the norm then: From 2005 to 2007, private equity firms led 19 purchases worth more than $10 billion, according to data compiled by Bloomberg.

Those deals produced mostly mediocre returns because of high debt levels, expensive entry prices and the global financial crisis that followed, according to a 2016 study by Bloomberg. Even when events like a credit crunch don’t damp performance, gigantic deals require significant work to move the needle on returns.

Blackstone Heralds an Era of Offbeat Megabuyouts: Gadfly

Three $10 billion-plus deals done by Blackstone either solo or with co-investors during that era show an average return multiple of about 2.7 times invested capital. While that’s higher than the typical industry target of 2.5-times, those returns happened over eight years or more -- longer than traditional buyout hold periods -- thereby suppressing annualized returns.

AnnouncedTargetDeal Value ($bn)BuyersReturn Multiple
2007Hilton26Blackstone3.1x
2005TDC15.3Blackstone, KKR, Permira, Providence, Apax2.2x
2006Nielsen11.3KKR, Thomas H. Lee, Blackstone, Carlyle, Hellman & Friedman, AlpInvest2.7x

Since then, Blackstone has been more circumspect in its investments. Its largest transactions have included:

  • Bradford & Bingley Plc’s loan assets for $14.8 billion in 2017, with a consortium
  • Centro Properties Group’s shopping centers in the U.S. for $9 billion in 2011

Alongside Goldman Sachs Group Inc.’s merchant-banking arm, Blackstone also acquired financial-technology firm Ipreo Holdings LLC for $975 million in 2014.

“We’re not going to see deals for the sake of deals, but the trajectory of size is getting bigger,” Bloomberg Intelligence analyst Paul Gulberg said Tuesday. “Because of expensive asset prices, more dry powder and still-attractive financing, the average size of deals will probably move up higher.”

Bloomberg LP, the parent company of Bloomberg News, competes with Thomson Reuters in providing news, data and information to the financial industry. Peter Grauer, chairman of Bloomberg LP, is a non-executive director at Blackstone.

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