'Private equity' now open to the public
Blackstone Group's offering would let average investors take part in trend of buying out public firms.
from the March 26, 2007 edition
Page 2 of 3
Having espoused the virtues of close private ownership, why does Blackstone want to go public? That's a question still being debated, days after the firm's March 22 announcement that it was taking preliminary steps toward a stock offering.
But Blackstone did make clear that it was not abandoning its heritage. Its managers will still retain control of the deals they do.
And they will still have a big personal stake in the success of those deals. In fact, according to news reports, Blackstone plans to spin off only about 10 percent of the company.
The new shareholders, moreover, won't be buying any direct stake in Blackstone holdings such as Equity Office Properties. Rather, they will be buying a portion of management's returns on those deals.
Word of the initial public offering comes amid a boom in private-equity deals that has made the buyout shops the subject of attention, both good and bad.
To supporters, the deals are helping companies in a range of industries take risky but profitable steps that they would not do under the more cautious mind-set of public ownership.
But critics say the buyouts benefit the private-equity partners – and the managers of the target company who often join them – more than they help the economy at large.
"We don't have any interest in seeing Chrysler sold to a locust," Joerg Hofmann, an official with the German labor union IG Metall, told the Berliner Zeitung, according to Reuters, in response to news that DaimlerChrysler may sell its American division to a group backed by private equity.
It's not just labor unions who have doubts. The value-conscious investor Warren Buffett, whose shrewd investments have made him the world's second-richest man, has singled out private-equity firms as part of a class of "hyper-helpers" who end up diluting the returns that small investors can reap from the economy.
But the buyout kings have their fans, too. The best dealmakers, they say, have an eye for business strategy, not just on how to do quick flips in the market.
RSS feed
