Last updated: 12:41 / Friday, 10 October 2014
To avoid conflicts of interest

Blackstone to Spin Off Financial Advisory Business

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Blackstone to Spin Off Financial Advisory Business
  • The new entity will be an independent, publicly traded company, which will be led by Mr. Taubman, 53, as Chairman and Chief Executive Officer
  • Upon completion of the spin-off, Blackstone’s current unitholders will initially own approximately 65% of the new entity
  • "We have not been free to aggressively grow our advisory businesses further out of concern for potential conflicts"
  • Blackstone’s advisory businesses generated approximately $380 million of revenue for the twelve months ending June 30, 2014
  • "The separation of our investing and advisory areas will create new growth opportunities for both businesses”

Blackstone has 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.

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.”

Added Mr. Taubman, “This is a unique opportunity to combine the legacy, scale and scope of a well-established business while capturing the entrepreneurial energy of a new firm to better serve clients. Further, by eliminating the potential conflicts that existed as part of the world’s largest alternative asset manager, these three businesses will now be positioned for significant growth. The new enterprise will include the leading restructuring franchise on the Street, a market-leading fund placement business and a strategically important advisory practice. By combining resources, we have an opportunity to establish a new leader in the advisory space and the premier destination for talent.”

Excluding capital markets revenues attributable to Blackstone’s Financial Advisory segment that will not be part of the transaction, Blackstone’s advisory businesses generated approximately $380 million of revenue for the twelve months ending June 30, 2014.

The transaction is intended to be tax-free to Blackstone and Blackstone’s unitholders. The completion of the transaction is subject to the satisfaction or waiver of certain customary closing conditions, including the effectiveness of a registration statement with the U.S. Securities and Exchange Commission, the receipt by Blackstone of an opinion from its tax counsel as to the tax-free nature of the transaction and certain regulatory approvals. The transaction will not be subject to a vote of Blackstone’s common unitholders. There can be no assurance that the transaction will ultimately be consummated, or, as to its timing in the event the transaction is consummated.

Simpson Thacher & Bartlett LLP is acting as legal counsel to Blackstone in this transaction. Weil, Gotshal & Manges LLP is acting as legal counsel to PJT Partners.

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