Blackstone Ipo

1. What do you think about the recent developments it describes, i.e. public private equity and investment by sovereign wealth funds.

My initial thought is that by going public Private Equity firms are transforming from a niche business to a broad offering. This is somewhat reminiscent of the Citibank and Travelers Group merger a decade ago, which promised to offer a broad range of financial services offering under one umbrella. However, in a short span of 10 year, that business model has come full circle as Citigroup announced this week that they are splitting into two separate entities. So it would be interesting to see if the benefits of going public would outweigh the niche business model PE firms enjoyed and which resulted in them consistently beating the market return.

I am impressed by the performance of the Blackstone group and also the lean structure they have maintained. They certainly are an expert in the business they operate in, so it would be interesting to note that the access to additional capital would certainly help them do the same thing on a larger scale. I hope, as they expand they would be able to keep the same focus as they have shown in the past.

2. Would the firm would be better with a public listing? Are all the reasons quoted in the case valid? Why would a private equity firm want to “go public”?

The following benefits could prompt a PE firm to go public,

a) Access to inexpensive capital & wider group of investors,

b) Partners having longer term interest in the firm due to changes in compensation package linked to stocks,

c) Stock becomes the currency of exchange and acquisition

d) Gaining more reputation and longevity than private firms due to indefinite length of stocks.

The reason quoted in the case are valid, however I do see one major drawbacks for PE firms going public. Public firms are subject to more stringent rules and...