Blackstone to Spin Off Financial Advisory Business

Blackstone to Spin Off Financial Advisory Business

Business to be Combined with PJT Partners, Paul J. Taubman to Become Chairman and CEO

New York, October 10, 2014. Blackstone (NYSE:BX) today announced that its Board of Directors has approved a plan to spin off its financial and strategic advisory services, restructuring and reorganization advisory services, and its Park Hill fund placement businesses and combine these businesses with PJT Partners, an independent financial advisory firm founded by Paul J. Taubman. The parties expect the transaction to close in 2015.

The new entity will be an independent, publicly traded company, which will be led by Mr. Taubman, 53, as Chairman and Chief Executive Officer. Prior to founding PJT Partners, Mr. Taubman spent 30 years at Morgan Stanley where he served as Co-President of the Institutional Securities Group. Prior to becoming Co-President, he was the Head of Global Investment Banking and Head of its Global Mergers and Acquisitions Department. Since leaving Morgan Stanley, Mr. Taubman, acting independently, has advised corporate clients on some of the largest M&A transactions in recent years and began building an elite team of senior bankers to form PJT Partners.

Link inside the post

Upon completion of the spin-off, Blackstone's current unitholders will initially own approximately 65% of the new entity. Blackstone's advisory employees will roll their Blackstone units into the new company and, combined with Mr. Taubman and his partners, will initially own approximately 35% of the company. Mr. Taubman will serve as Chairman of the Board of Directors of the new company, which will also include four independent directors.

Stephen A. Schwarzman, Blackstone's Chairman, CEO and Co-Founder, commenting on the announcement, said, "Blackstone began as an advisory firm nearly 30 years ago. The decision to spin off these businesses is possible because of our success in growing them over the past 30 years. As the largest alternative asset manager in the world, and with our investing areas considerably broader and larger than even a few years ago, we have not been free to aggressively grow our advisory businesses further out of concern for potential conflicts. The separation of our investing and advisory areas will create new growth opportunities for both businesses."

Mr. Schwarzman continued, "Paul is one of the preeminent investment bankers in the world. He has had an impressive career over three decades as a strategic advisor to Fortune 500 corporations and as a senior Wall Street executive at one of the most respected financial institutions. With this experience, along with his recent success founding and growing an independent financial advisory business and his proven ability to attract top talent to his new firm, I am confident that Paul will help create the best advisory business on the Street. And, while we will truly miss the daily interaction with our advisory colleagues, we look forward to working with them as clients in the future."

http://blackstone.com/news-views/press-releases/de...

Comments (60)

Oct 10, 2014

Dam pretty big news

    • 1
Oct 10, 2014

PJT is a boss

    • 2
Oct 10, 2014

Very exciting, but not surprising given the conflict of interest. The new firm sounds like it will be very strong with Taubman at the helm.

It looks like the new firm will have ~$380-400mm of revenue ($380 is BX alone; not sure how much PJT brings in himself) which is more than Greenhill and in-line with Moelis and Evercore. Assuming a similar valuation, this new BX firm could be worth ~$1.5Bn once it starts trading.

Not sure how much of the 35% of the firm Taubman himself will own, but wouldnt be surprised to see a significant stake...i.e. his stake will probably be worth $100mm+. Insane....

    • 2
Oct 10, 2014

Pretty baller

Oct 10, 2014

great deal for Taubman

Oct 10, 2014

So basically the best thing that ever happened to Taubman was MS cutting him loose.

    • 1
Oct 10, 2014
Dingdong08:

So basically the best thing that ever happened to Taubman was MS cutting him loose.

Dalio, Bloomberg, Dimon, and Lloyd are nodding their heads in agreement...

    • 1
Oct 10, 2014

I guess retirement was not fun anymore...not a new firm but still a big responsibility to handle.

http://www.bloomberg.com/news/2014-01-14/ex-morgan...

Oct 10, 2014

Wondering what will happen to BX stock as I own it.

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Oct 10, 2014

what do you think the spun off firm will be named?

Oct 10, 2014

PJT advisory

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Oct 10, 2014

What impact, if any, will this have on BX advisory incoming analysts?

Oct 19, 2014
JDR94:

What impact, if any, will this have on BX advisory incoming analysts?

It's likely to help given they're allowed to take on more business, thus needing more staff. The wildcard is the hiring structure, which I am wholly unfamiar with: if HR or the intake system suffers a disconinuity, then there could be a problem. If you're already in talks, it would be prudent to consolidate any relationships immediately so that you stay on the radar.

Oct 21, 2014

They're not going to do additional FT recruiting seeing as they are already starting SA presentations at their target schools.

Oct 10, 2014

Not entirely relevant, but reading this made me recall a close family member of mine who worked at Morgan Stanley and was on the hiring committee back in the early 1980s. What's interesting is that he actually interviewed Paul Taubman when Taubman was still an aspiring banker in college.

I remember asking this family member during a family gathering what his impression of Paul Taubman was at the time, and he replied (paraphrasing): "Smart guy. Very quiet and somewhat introverted, but still, a very smart guy. At the time, I thought he would make a great junior banker so I voted 'yes' "

I'm not sure how introverted Taubman really is, but when he and Colm Kelleher were co-presidents at Morgan Stanley, the story supposedly went that Taubman was the quiet, cerebral banker, while Kelleher was the loud, gregarious, cigar smoking sales & trading guy who loved to go out for a drink with his colleagues/subordinates.

As we all know, success in this industry (at the senior level) hinges on relationships and your abilities as a salesman. Extroverts obviously have a leg up in this regard and so it's refreshing to hear success stories such as this.

    • 3
Oct 10, 2014

Blackstone hasn't decided the name yet

Oct 10, 2014

Yes it has. Blackboulder...duh.

Oct 10, 2014
Nabooru:

Yes it has. Blackboulder...duh.

Not going to lie, I chuckled...

Oct 15, 2014

Let's just hope, if they do decide to rename it, they can think of something better than "Blackstone&"

Oct 10, 2014

Doesn't this suck for BX junior bankers? Or do you think the prestige transfers over at par?

Oct 10, 2014
SmokeyG:

Doesn't this suck for BX junior bankers? Or do you think the prestige transfers over at par?

Prestige doesn't matter as much as everyone thinks and in any case Taubman is a freaking baller. He was on the league tables as an individual. That's absolutely insane. And the new firm will still have all of BX's bankers and Taubman will be at the helm.

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Oct 10, 2014

So, you add one of the top bankers in the industry to your team, your team gets to compete for more deals, and that's a bad thing in your opinion because the name might change?

    • 1
Oct 11, 2014

just to play devil's advocate here, you could actually make that argument. losing the Blackstone name is a pretty big deal with how much weight it carries. this could play into recruiting for the buyside as well as the general perception of the group/firm. dont think this one was thought through as carefully as it should've been imo

    • 2
Oct 11, 2014
TheSanchize:

So, you add one of the top bankers in the industry to your team, your team gets to compete for more deals, and that's a bad thing in your opinion because the name might change?

I disagree. The spinoff is negative to junior banks looking to recruit.

The extent to which buyside shops will recruit candidates from a particular bank is directly related to that bank's ability to attract top talent from undergraduate programs. Blackstone M&A/Restructuring had no trouble doing that for obvious reasons. I'm not convinced PJT will have the same success.

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Oct 10, 2014

PJT is a boss

    • 1
Oct 10, 2014

With Paul Taubman on board, I have high hopes for this firm. A top restructuring practice combined with instant access to mega-deals should make for a very well-rounded boutique. I like this combination a lot better than Evercore and ISI, and I wouldn't be surprised if this new company overtook them in terms of market cap.

    • 1
Oct 11, 2014

it won't be called PJT. BX is simply acquiring and merging PJT with its advisory

Oct 11, 2014

my point here is that even if it wont be called PJT it still wont bear the Blackstone name. theyd be smart to name it something like "Blackstone Advisory Group" & not throw the #1 restructuring biz on the street into some newly named entity. if u think im full of it look at the backlash from Merrill when they were integrating names.

Oct 11, 2014

I bet it's going to include both names in the same vein as Accell-KKR, TPG-Axon, etc. Although PJT-Blackstone doesn't quite roll off the tongue...

Oct 11, 2014

The name doesn't matter. As others have said everyone will know who it is and having Taubman head it up will only lend cred to it. When Moelis broke off analysts would have cut off a pinky to join.

Oct 12, 2014

The new business is an odd duck. Even with PJT joining, the M&A business (which is the flagship at other boutiques) is substantially weaker than Moelis and Evercore, leave along Lazard. Each of Moelis and Evercore have 4-5 bankers who can legitimately claim (or were) heads of IBD at bulge bracket firms and 15-20 bankers who can legitimately claim to be top level group heads / brand name bankers. Other than Taubman and Studzinski who is not staying, there are no brand name bankers in that group (which is not to say that the bankers are not high quality, but not particularly high profile). As the case of Moelis and Evercore have shown, one top guy is not enough; you really need a large and strong bench and Blackstone M&A has never really had one, Having spent most of my career in a BB M&A group, I would never have considered Blackstone M&A a competitor; I've worried from time to time about Lazard or Moelis or Evercore or even Greenhill. The flip side is that the restructuring business and Park Hill are the best on the street, but will they be substantial enough over time to compensate for the relatively week M&A business? It really depends on what resources Taubman has to build, and whether the restructuring / Park Hill bankers will subsidize the buildout of the M&A business.

    • 1
Oct 12, 2014

Good points. +1

Oct 12, 2014

There is also the question of resources. As a part of BX the advisory businesses benefited from economies of scale as well as the financial might of the private equity side - access to top-notch support professionals (middle and back office, outsourcing teams...etc). Junior bankers will likely lose some of that now.

To eliminate potential conflicts of interest means these possible conflicts existed in the past. For opportunities PE / advisory did not pass up, there was probably mutual benefit (i.e. advisory is named for a deal for a connection to the PE team for a possible deal down the read). This factor may also be tough.

Best Response
Oct 12, 2014

Mergers&

    • 5
Oct 15, 2014
BTbanker:

Mergers&

This deserves so many more SBs.

    • 1
Oct 13, 2014

I know a guy in their M&A group now. What happens to all the junior bankers do you think? Or the guys who just finished internships and are scheduled to start FT in summer 2015?

Oct 13, 2014

just my opinion, but current junior bankers and incoming full time ones will probably see no effect in terms of placement, work, etc. however i think classes to come may see changes depending on how the new firm looks to position itself.

Oct 13, 2014

Any chance this disrupts the upcoming summer analyst recruiting process? Would the firm potentially not take a summer class to ease with the transition?

Oct 14, 2014

I think there is SOME merit to think that there may be some loss in prestige with this spin-off. Not in the sense that people in the industry will think less of you (any finance firm worth its salt will instantly recognise its origins) but the sense that if you apply for elsewhere (say MBA or some other corporate job) it won't instantly jump at you with the wow factor that Blackstone is.

But yeah - hilarious to read about comments saying that analysts looking at exit opportunities in the finance industry will be worse off.

Oct 14, 2014

The main reason this doesn't sound particularly good for analysts is that BX was known to have the best hours on the street. Expect that to change with PJT considering he's ex MS

Oct 14, 2014

Overall I think this is a smart business decision. It could allow PJT/BX bankers to attract more business. Although, they're definitely going to have an uphill battle recruiting the same level of talent. Many people have posted how virtually no one has turned down BX for another firm.

I'm sure PJT/BX will be considered (or already is considered) an elite boutique.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

    • 1
Oct 15, 2014
goodL1fe:

Overall I think this is a smart business decision. It could allow PJT/BX bankers to attract more business. Although, they're definitely going to have an uphill battle recruiting the same level of talent. Many people have posted how virtually no one has turned down BX for another firm.

I'm sure PJT/BX will be considered (or already is considered) an elite boutique.

What's interesting, as alluded to previously, is that I don't think many on the street would mention BX M&A in the same breath as LAZ / GHL / EVR (R&R is another story). Its recruiting platform has consistently benefited from the strength of the BX brand, which has caused students to take BX M&A offers over pretty much anything else, dealflow be damned (not that dealflow matters that much, anyhow). As a consequence, the BX M&A buyside recruiting has performed better than would be expected, strictly speaking. I question whether that trend will hold true, though I'm certain the PJT entity will place plenty well.

PJT has done great as a "kiosk", it will be interesting to see how it competes more directly at the independent advisory klatsch.

Oct 15, 2014

The recruiting platform has benefitted from a combination of factors, only one of which is the BX brand. I think the primary reason why BX continues to attract the very top candidates is simply the strength of buyside placement (if you're primarily interested in HF looks, the BX program has no peers). Obviously this has created a positive feedback loop wherein top candidates choose BX because of top exit opps, BX kids get top exit opps because they're top candidates and the cycle continues. If the next two classes of M&A analysts in the new BX + PJT firm continue to get strong placement, I think it'll be much of the same regarding the strength of the recruiting platform.

Oct 15, 2014

This definitely won't adversely affect BX's advisory business.
BX x PJT = Greatness.

I'm bi-winning. I win here, and I win there.

Oct 17, 2014

Combined entity should be similar to Centerview and Zaoui & Co. but with a restructuring arm. If the deal flow is consistent (and restructuring deal flow should increase because of the conflict-of-interest elimination), compensation should make up for any perceived 'loss of prestige'.

Oct 18, 2014

PJT is a boss

Strength & Honour
Lads pass exams

Oct 28, 2014

Deleted

Oct 29, 2014

so whats the name

Dec 19, 2014
Comment
Jan 5, 2015