Blackstone Looks Like the Next Big Split
This fall's big corporate trend is to split fast-growing businesses from those that are advancing more slowly. Witness eBay spinning off PayPal, Symantec breaking off its slower-growth storage business, and Hewlett-Packard splitting into a hardware company and an enterprise software business. (In H-P's case, to be honest, it's difficult to characterize either of those pieces as "fast growth.")
Companies are trying to find ways to return value to shareholders in an environment where markets are moving higher and break-up announcements are often followed by stock price gains.
Who might be next? One company that could benefit is Blackstone. A person involved with the talks says the firm has weighed a plan to spin off its financial advisory business. It was one of the first private equity firms to become an alternative-asset supermarket, but now its financial advisory division is growing much more slowly than the businesses the company has taken on in the past decade, including real estate, mezzanine lending, hedge-fund management and closed-end mutual funds. At this point, the financial advisory business -- which includes Blackstone's mergers-and-acquisitions advisory practice, its restructuring business and Park Hill, a division that helps other alternative-asset managers raise capital -- could be split off.
After all, revenue for the financial advisory division grew only 14.6 percent last year, to $420.2 million -- compared with 63.9 percent growth for the firm as a whole, on revenue of $6.9 billion. Blackstone stock, which closed at $29.77 on Thursday, is about where it debuted when the company went public in 2007. This year so far, shares are down about 4.8 percent, versus a 5.3 percent gain for the S&P 500 in that period.
If Blackstone were to carry out such a split, it would end a significant chapter in the company's history. In 1985, when Peter Peterson and Steve Schwarzman left Lehman Brothers to found a new type of Wall Street firm, financial advisory was part of that vision.
Who might buy Blackstone's financial advisory business? One possibility, says an insider, is PJT Capital, the boutique company run by former Morgan Stanley banker Paul Taubman. PJT has worked on some of the telecom industry's biggest transactions of late, including Comcast's $45 billion deal for Time Warner Cable.
Ever since the financial crisis, boutique M&A advisory firms like PJT have sprung up all over Wall Street, hoping to turn personal banking relationships and reputations into deal flow. The Wall Street Journal has a great piece on the trend, noting that a consortium of boutiques including not just PJT but also Centerview Partners, Evercore Partners, Perella Weinberg Partners, Greenhill and Moelis have "muscled in" on the big banks and are getting tapped for great deals.
Updates with details on Blackstone plan in third paragraph.
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