Blackstone to enter investment banking
At the height of the private equity industry's Golden Era in 2007, there was a lot of tension between traditional investment bankers and private equity executives.
The issues were plentiful. Were banks aiming to compete with their financial sponsor clients? Were banks getting the best deals for their private equity clients in terms of underwritings?
A few private equity firms led by KKR decided they had to do something, if only to make a statement. KKR led a movement to start up internal investment banking units. The latest news is that Blackstone has decided to join the ranks. It has secured a license to underwrite securities.
But as the Financial Times notes, "moves into underwriting have raised concerns among private equity fund investors who fear the groups are straying from their core activities. Private equity executives are also voicing concerns about the possibility a group such as KKR or Blackstone could underwrite a public listing of a company jointly owned by a team of private equity investors."
Blackstone's website apparently states that, "Unlike competitors that also provide securities underwriting, trading, research and other ancillary businesses, we are truly conflict-free." For now, it may aim to pick and choose its spots, so as to avoid any conflicts. One executive was quoted: "It is just an arrow in the quiver. It is a way to serve clients in corporate restructuring or in the mergers advisory business or in the private equity portfolio. If it proves interesting, Blackstone may grow it over time."
It will no doubt keep an eye on KKR's more robust investment banking operations.
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