'Private equity' now open to the public
Blackstone Group's offering would let average investors take part in trend of buying out public firms.
By Mark Trumbull | Staff writer of The Christian Science Monitorfrom the March 26, 2007 edition
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The realm of financial wizardry known as "private equity" is becoming increasingly public.
The latest twist: Average investors on Main Street can buy into the trend – although they will want to consider the risks as well as the potentially rich rewards.
Privately owned buyout shops now control a sizable slice of US industry, from Albertson's supermarkets to Hospital Corp. of America. These outfits, which aren't listed on any stock exchange, have fueled a surge of corporate acquisitions in the past year.
They claim to be practicing a superior form of capitalism, freed from the constraints and regulations faced by publicly traded firms.
What's indisputable is that their presence has been growing.
Now the Blackstone Group, one of the largest private-equity players, has announced plans for a common-stock offering.
The move doesn't mean Blackstone will become a tame, ordinary company. It will still be in the private-equity business. But the move is a sign that private equity is carving out a mainstream niche for its rebel task of radically reshaping companies.
"It's a new phase," says Pavel Savor, a finance expert at the University of Pennsylvania's Wharton School in Philadelphia. "I think it will be a trend," he adds, with some other large buyout firms offering stock to the public as well.
On its surface, the Blackstone news sounds odd.
This is a firm, after all, that for two decades has been investing big bucks to buy publicly traded companies and manage them under its wing. Early this year, it clinched what is nominally the biggest private-equity deal ever – a $39 billion buyout of the real estate company Equity Office Properties.
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