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The Structure and Business of Blackstone - Essay Example

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The Structure and Business of Blackstone

It's a veritable feast for the discerning investor's eyes: 37% compound annual revenue growth, 65% operating margins, $3 million in profit per employee, returns on invested capital in the triple digits. And a cherry on top: the Blackstone Group is arguably the uber-buyout firm. Led by billionaire cofounders Steven Schwarzman and Peter Peterson, Blackstone has gone from relative obscurity to global renown in the span of roughly two decades, parlaying a penchant for deal making and a yen for competition into a war chest that now brims with billions of dollars in investment capital.
Blackstone Capital has extensive expertise in structuring transactions under Regulation D, SCOR, Rule 144A, Reg. A, Reg. S, and other public or private direct offerings, as well as commercial lending, mezzanine financing, commercial paper, and subordinated debt transactions. Their structures provide an exit strategy for investors with short or long-term holding periods.
Basically what Blackstone does is delivers to its client’s necessary capital, for less cost, more efficiently, and strategically structured. It operates from a style, which avails itself of the richness of a variety of investment philosophies and techniques that will ultimately provide superior returns while exposing a particular partnership to lesser risk. It is here, that Blackstone prides itself in creating the innovative financial solutions for its clients. Their primary objective is to maximize value for their clients. Blackstone’s business is organized into four segments: 1) corporate private equity, which focuses on management of the Company’s private equity funds; 2) real estate, which is responsible for management of Blackstone’s various real estate investment funds; 3) “marketable alternative asset management,” which involves management of Blackstone’s various hedge funds, mezzanine funds, and other “alternative” investment vehicles; and 4) The financial advisory group, which comprises the Company’s advisory services business that provides, for example, merger and acquisition analysis and services to other companies. These various funds are generally structured as limited partnerships that are capitalised by limited-partner investors (such as institutional investors and pension funds) and managed by Blackstone, which, through subsidiary holding partnerships, serves as general partner. Blackstone therefore does not own directly either the various portfolio companies in which it’s corporate private equity funds invest or the real estate assets owned by its real estate funds. Rather, Blackstone derives revenue from two principal sources: It earns a “management fee” equal to 1.5% of the value of the assets under management; It earns a “performance fee” or “carried interest” equal to 20% of the profits generated on the capital it invests for limited partners. Blackstone is subject, however, to having its performance fees “clawed back.” That is, the Company is obligated to return performance fees to investors if investments perform poorly. In contrast to those who invest in Blackstone’s various funds, investors in Blackstone itself acquire a stake in Blackstone’s investment management business, hoping that strong performance by the various investment funds will generate performance fees for the Company. 4.2 Southern Cross Healthcare Southern Cross He ...Show more


Blackstone is a self-described “leading global alternative asset manager and provider of financial advisory services”; at root, the Company’s business is to profitably invest other peoples’ money…
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The Structure and Business of Blackstone essay example
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