The magnificent seven hundred

26 March 2007

The private equity firm may be floated with a valuation of over $50m per employee. In early 2000 AOL was valued at only $13.5m per head. Operating in an intensively competitive industry, Blackstone lacks the protective moat to justify this high price.

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Extracts from Blackstone's IP

We currently have 57 senior managing directors and employ approximately 335 other investment and advisory professionals… We believe that the depth and breadth of the intellectual capital and experience of our professionals are key reasons why we have generated exceptional returns over many years for the investors in our funds..

The asset management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, brand recognition and business reputation. Our asset management business competes with a number of private equity funds, specialized investment funds, hedge funds, corporate buyers, traditional asset managers, commercial banks, investment banks and other financial institutions. A number of factors serve to increase our competitive risks:

a number of our competitors in some of our businesses have greater financial, technical, marketing and other resources and more personnel than we do;

several of our competitors have recently raised, or are expected to raise, significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternative investment strategies seek to exploit…

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