We've seen that Private Equity (PE) Groups like Blackstone don't do public. Until now.
Yep, PE is on the move again, this time planning to embed themselves in the public markets, listing on the big exchanges.
Blackstone has volunteered to take the lead.
Wall St stirred by prospect of Blackstone IPO
http://biz.yahoo.com/ft/070316/fto03162 ... .html?.v=1
While the details of the offer are unclear, Blackstone is understood to be in the advanced stages of preparation with the help of its advisers at Goldman Sachs
Goldman Sachs ("long-term greedy") is right there with this one as well. That should raise some red flags.
Private equity may open its doors
One of the industry's most powerful players may be considering an IPO - which would give everyday investors access to the exclusive world of private equity.
http://money.cnn.com/2007/03/16/markets ... /index.htm
Such a move would likely trigger a wave of IPOs among private equity firms, experts said.
An IPO by a major private equity group has been expected for some time. Several of the biggest firms face the issue of succession as their top dealmakers near retirement. A successful public offering would give senior partners a profitable exit as well as help companies attract new talent. Publicly traded shares could also give private equity firms, which face a competitive environment for deals, an edge when it comes to vying for targets.
If Blackstone goes public, it will be able to use its shares to make acquisitions, putting it on the same ground as corporate buyers, Sherman said. "It's a new form of currency with which to do acquisitions," he said.
No, they aren't "opening their doors," you idiots. They are opening yours.
More on that. Now, why would PE want to make the pedestrian move of an IPO when they don't even need the money? I’d surmise the following:
1. So their Founders and Chiefs are able to cash out their stakes in the Firm without legal impediments when they retire -- a golden retirement parachute that they do not have as a private group. They seek to retain all the benefits of private equity while also acquiring the benefits of public listing. That is, they are well pensioned while the public's pensions are used as Vegas money feeding their growth.
2. They know that exchanges are merging into global entities and thus wish to have exposure to global pools of investor capital and added leverage in acquiring targeted companies. It enables them to outcompete public corporations for mergers and acquisitions, anywhere, anytime. They also need to harmonize (and synergize) with the likes of John Thain (“former” Goldman Sachs) at the NYSE, as well as the other big merging exchanges. Will Private Equity eventually gobble up all publicly listed companies, forcing public exchanges to list in the end, only private equity groups and/or companies that have been "re-educated" by public equity? See * below, at end of post.
3. Going “public” gets us all buying into this dirty, dark world. We become a part of it. If it's mainstream, it's normal, it's OK, it's natural. Thus, Private Equity makes psychological inroads into the public sphere, basically threatening: "Join us, since you can beat us."
4. Public relations. It’s part of their image makeover attempting to dispel our suspicions about their secrecy and insularity and power.
5. Co-optation of wall street elites and legitimization of the private equity process and paradigm. A form, perhaps, of synarchy (in the Chinese Qing Dynasty sense).
Blackstone IPO would represent a flip-flop
[Not really -- Gouda]
Wall Street is abuzz, asking why a leader in private buyouts would itself go public.
http://www.latimes.com/business/investi ... &cset=true
As money has gushed in from investors seeking huge returns, private equity funds and their close cousins — hedge funds — have revolutionized Wall Street in recent years, becoming forces in corporate mergers, securities trading and global finance.
"What was once a niche vehicle is now mainstream," said David Fann, chief executive of PCG Asset Management, a La Jolla-based private equity consulting firm. "Private equity and hedge funds are now mainstream."
Blackstone and gold-plated rivals such as Carlyle Group and Kohlberg Kravis Roberts & Co. raise money from pension funds, college endowments and wealthy individuals to buy publicly traded companies. They restructure the companies — often laying off scads of employees in the process — with the aim of selling them in IPOs.
Detractors say they strip-mine companies by saddling them with crushing debt while making enormous payouts to themselves.
Marc Morgenstern, a San Francisco lawyer and veteran dealmaker, said going public would allow Blackstone's founders to seamlessly cash out their stakes when they retire and would let the firm compensate employees with stock options.
It also would give Blackstone a war chest with which to buy other private equity firms, or for emergencies if the market turns down.
"It's always a good idea to take money off the table when you can, and you don't always know when you can," Morgenstern said.
Morgenstern and others said that Blackstone did not need the money to do deals, and that that probably was not its primary motivation in going public.
Remember Davos 2007:
* John Thain, chief executive of the NYSE Group, offered up some sobering words Friday about the explosive rise of private equity, which has swept many publicly traded companies off of the world’s major exchanges. He said, in effect: They’ll come back to us.
Half of last year’s initial public offerings on the New York Stock Exchange, which the NYSE operates, represented private equity firms exiting their investments, Mr. Thain said, making buyout shops “our biggest customers.”
http://dealbook.blogs.nytimes.com/2007/ ... te-equity/