Many Blackstone M&A bankers expected to depart ahead of spin off to Taubman

m11111-.'s picture
Rank: Chimp | 10

Anybody have any thoughts or further info on this? looks like the rx team to stay as is and the m&a team to be completely overhauled, not unexpected but still, 12 of 17 m&a senior mrs not renewing contracts yet seems huge.....

From Reuters:

More than half of the 17 senior managing directors working in Blackstone Group LP's mergers and acquisitions advisory arm may leave as the business is combined with the advisory firm headed by star Wall Street investment banker Paul Taubman, according to people familiar with the matter.

Some of the bankers have decided to move elsewhere or retire, while others have lost out to people doing similar jobs at Taubman's PJT Capital LP, the sources said.

Blackstone agreed last October to spin off its advisory operations in the second half of this year into a new publicly traded company that will be run by Taubman, 54. The operations of the business being spun off include M&A, restructuring and private fund advisory. PJT currently focuses on M&A advisory.

http://www.reuters.com/article/2015/03/18/us-black...

Comments (16)

Mar 19, 2015

It makes sense. Blackstone is top for RX and private fund advisory while PJT's M&A > Blackstone's M&A. Although Blackstone's M&A is still quite good that's why they're retaining most of the employees.

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

Mar 19, 2015

Could anyone explain me what's the point of this acquisition?

What is Taubman shooting for? BX M&A customer relationships or its employees?

"I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature."

Mar 19, 2015
Ambani:

Could anyone explain me what's the point of this acquisition?

What is Taubman shooting for? BX M&A customer relationships or its employees?

Expansion of M&A practice, RX arm and private fund advisory arm to put in on an equal playing field with other elite boutiques like Evercore, Moelis, Greenhill, Lazard.

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

Mar 19, 2015
goodL1fe:
Ambani:

Could anyone explain me what's the point of this acquisition?

What is Taubman shooting for? BX M&A customer relationships or its employees?

Expansion of M&A practice, RX arm and private fund advisory arm to put in on an equal playing field with other elite boutiques like Evercore, Moelis, Greenhill, Lazard.

Could you elaborate? I mean, how exactly is this achieved?

"I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature."

Mar 19, 2015

Taubmann m&a + BX RX + Park hill = elite botique

Mar 19, 2015

BX wanted to sell this business, shopped it around and Taubman bought it. At BX it was the smallest business unit (out of the 5) with annual revenues of ~$420m. It created a lot of conflict of interest scenarios for BX's investment arm. For example, BX M&A was not able to advise Lehman Brothers Holdings Inc. on its bankruptcy because BX's real estate division was interested in buying some of its assets. Similar conflict of interest scenarios with BX's portfolio companies and BX M&A. i.e. BX M&A HAD to be sold in order they can further grow without the hassle of running into these conflict of interest scenarios. BX M&A missed out on some big deals because BX's investment arm always took precedence. They were hoping to grow the BX M&A business faster if they spin it off. Now, I guess the departure of these MDs does not help much with "growing the business" and "unlock its value".

Mar 19, 2015
BenLocust:

BX wanted to sell this business, shopped it around and Taubman bought it. At BX it was the smallest business unit (out of the 5) with annual revenues of ~$420m. It created a lot of conflict of interest scenarios for BX's investment arm. For example, BX M&A was not able to advise Lehman Brothers Holdings Inc. on its bankruptcy because BX's real estate division was interested in buying some of its assets. Similar conflict of interest scenarios with BX's portfolio companies and BX M&A. i.e. BX M&A HAD to be sold in order they can further grow without the hassle of running into these conflict of interest scenarios. BX M&A missed out on some big deals because BX's investment arm always took precedence. They were hoping to grow the BX M&A business faster if they spin it off. Now, I guess the departure of these MDs does not help much with "growing the business" and "unlock its value".

Got it. Thanks!

And what is actually "acquired" when such an acquisition is made?

"I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature."

Best Response
Mar 19, 2015

Without knowing the deal terms or the APA I suspect that this is an asset deal. They created a new public entity into which Taubman moved his firm's assets and BX moved its assets. Taubman, PJT and BX employees will hold 35%, BX shareholders will hold 65%. In such asset deals the assets (-> this is what is "acquired") are usually people, client/customer relationships (assigning engagements, relationships and contracts over from BX to the new public entity), office locations (lease assignments), vendor/3rd party contracts, Back-office infrastructure, etc. In such asset deals you usually have a provision that states that you need to get the consent of each senior person (usually Partner/MD level only) of the acquired firm that they agree to be moved over to the new legal entity. Usually you put a e.g. 75% or so threshold into the APA, i.e. if less than 75% of the senior people consent the deal could fall through/buyer can walk away without any penalty payments. Based on the recent articles it seems some BX MDs already consented (i.e. accepted employment offer from new legal entity) while others haven't. From the Reuters article: "...Among those who already have agreed to work at PJT...". As it gets closer to Closing/Legal Day 1 such APA provisions can be waived if both buyer and seller want to push the deal through and have a mutual agreement that even with a e.g. 60% consent rate they want to close the deal. Here, the news that "...more than half of the 17 senior MDs may leave..." implies a less than 50% consent rate...this is unusual for such asset deals. You usually would like to retain them - with sweat retention bonus payments - at least for a brief transition period (6-12 months) to make sure you don't lose any key client/customer relationships, etc. You can have similar APA provisions you have for people for clients/customers. Depending on the situation you might need to get consent from them so you can assign the existing client/customer relationship to the new entity. Again, this is only true if this is an asset deal. If you buy the entire legal entity then you usually don't need to deal with people/client/customer consent, etc. Based on this Reuters article I guess they made an asset deal. Others are free to weigh in here if they have a different opinion.

    • 2
Mar 19, 2015

"While others have lost out to people doing similar jobs at Taubman's PJT Capital"

I'd say this is playing a major element.

Ambani:

Could anyone explain me what's the point of this acquisition?

What is Taubman shooting for? BX M&A customer relationships or its employees?

Combining his own M&A name with the best RX practice on the street?

Mar 19, 2015

"Since he left a senior role at Morgan Stanley in 2012 to strike out on his own, Taubman has advised on deals with a value of almost $240 billion, and he ranked 12th in the global M&A advisory league tables in 2013 and 23rd in 2014, according to Thomson Reuters data. By contrast, Blackstone ranked 50th in 2013 and 68th last year." Seems like it can only go up from here

Mar 19, 2015

Does this mean we see layoffs at BX M&A on the junior level? Losing half the MDs (if this was unexpected) can't be good for deal flow, and without deal flow, what's the need for analysts?

Mar 20, 2015
thezone:

Does this mean we see layoffs at BX M&A on the junior level? Losing half the MDs (if this was unexpected) can't be good for deal flow, and without deal flow, what's the need for analysts?

No. They are not cutting down on senior personnel. Taubman is hiring from the outside, replacing many of the BX M&A senior people because he can find better. There is no need for a reshuffling at the junior level.

    • 1
Mar 20, 2015

lose some senior BX M&A bankers and replace them with top MS/JPM ones + Taubman's current team and this is a bad thing? MDs are all the same as well as the junior bankers below. i fail to see how this is "huge"

    • 1
Mar 20, 2015
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