Blackstone Acquires Stake in rival buyout firm BC Partners

Blackstone Acquires Stake in rival buyout firm BC Partners
August 7, 2019

 

The world’s largest alternative investment firm Blackstone Group Inc (BX: NYSE) is investing $560 million (€500 million) to acquire a stake in BC Partners, a big European-US buyout firm managing over €22 billion in assets. The investment is the latest in a series of deals carried out by the US multi-national private equity, financial services, and alternative asset management institution to acquire stakes in buyout firms. Following the news of stake purchase, the stock of Blackstone Group ended Tuesday’s trading at $45.81, up $1.28 or 2.87% from the prior close.

The investment mentioned above will enable the New York-based Blackstone, which specializes in credit, private equity, and hedge fund investment strategies, to receive 10% to 15% stake in BC partners. As is usual with such stake deals, Blackstone will not acquire any voting rights or influence investment plans of BC Partners. However, the agreement necessitates top investment professional to stay with BC Partners over an extended period. Money managers usually invest 1% to 2% of the total capital in a fund, which still implies a huge amount given that BC Partners could attempt to raise more than the current €7 billion fund. In this regard, an investment made by Blackstone will assist the institution’s partners to pay for their stake.

BC Partners was established in 1986 and have offices in New York, London, Paris, and Hamburg. The investment management firm is well known for its leveraged buyouts including the takeover of Suddenlink Communications (now owned by Altice) in 2012, and the 2015 purchase of PetSmart Inc. A week before, the firm announced a deal to acquire a controlling stake in Garda World Security, the largest private security services firm in the world.

BC Partners, which is a privately held entity, plans to invest more than 50% of the investment into its business as it widens its scope of operations by venturing into real estate and credit. The firm is also beginning to set up a new showpiece private equity fund.

With large, proven platforms for investing in credit and private equity, and real estate, Blackstone can assist the firm to develop top-notch relationships and grasp fine practices. Raymond Svider, Chairman of BC Partners, has stated that the firm will gain access to Blackstone’s purchasing group, enabling enterprises it owns to reduce spending money on goods and services.

The stake purchase will give BC Partners with permanent capital, which can be used for long-term investments in business. Notably, the money received from stake sales need not be returned as is usually the case with fund investors.

Regarding the importance of permanent capital, Svider said: “In the context of growing the firm for the next 50 years, what you really want is permanent capital.”

For private equity firms such as BC Partners, divesting a portion of the business has turned out to be a popular strategy to fund growth and give way for succession planning by facilitating younger partners to purchase older firms. Notably, most of the balance portion of Blackstone’s investment will be received by former BC associates.

Neuberger Berman Group’s Dyal Capital Partners, Goldman Sachs’s Petershill are other two major firms in this business. Blackstone also has ownership in firms such as Leonard Green & Partners, Kohlberg & Co, Rockpoint Group, and New Mountain Capital, among others. The investment firm has generated $3.30 billion in 2014 for its debut fund primarily structured to purchase similar stakes.

The stake purchase is anticipated to keep the stock bullish in the short-term.

Technically, the stock is trading above its 50-day moving average. Furthermore, the stock hit a new 52-week high earlier this week. The Chaikin money flow indicator is also in the positive region. As a result, we can expect the stock to move up in the short-term.

bx - technical analysis - 7th Aug 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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