Blackstone becoming the new Berkshire Hathaway?

The final week of February has proven to be an interesting week for the finance and business news. One interesting topic is about how Blackstone Group is looking into becoming the next Berkshire Hathaway. Blackstone’s private-equity head, Jeff Baratta, has been in talks with its biggest investors about creating a “coalition of the willing.” Jeff Baratta wants to be able to expand its range in buying. The private-equity firm would like to be able to purchase companies and hold on to them longer than the normal time period of five to 10 years.

According to Jeff Baratta, “I don’t know why Warren Buffet should be the only person who can have a 15-year, 14% sort of return horizon.”

However, Blackstone Group is not alone in this belief as well. There have been several large private-equity banks that think the same way as well. Blackstone is trying to figure out a way to purchase large companies in a partnership with large investors that are outside of their existing funds. Basically, Blackstone will not be using existing funds to purchase large companies with a partnered investor.

As for how Blackstone is going to achieve this, they are looking at the Berkshire Hathaway and 3G Capital purchase of H.J. Heinz. Berkshire Hathaway and 3G bought Heinz for $23 billion, where 3G did not use a fund to invest but instead invited Warren Buffet to participate. Currently, 3G Capital and Berkshire are not receiving any pressure to sell the company within a specific time or date. With the companies that Blackstone buys and sells, they would like to give $2.50 for every $1 invested within three to six years through expansion and improving performance of the companies.

According to Jeff Baratta, “To do that you have to find a company that you can fundamentally transform, but there are a whole bunch of other companies in the world that would benefit from private governance rather than public governance. Or a more active owner rather than a corporate owner, that have low volatility, good competitive positions, grow with gross domestic product.” Although, Blackstone group along with other private equity can’t target those companies, but is eager to change that.

Fellow monkeys share your thoughts about this. Do you think that larger companies are better off being governed privately? Do you believe in that private-equity banks along with other investors should be able to purchase large companies similar to how Berkshire Hathaway and 3G Capital did? Share your thoughts.

Reference:
WSJ, Thursday, February 26, 2015, Money & Investing Section.

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