When we think about alternative investments, probably the first company that comes to our minds is Blackstone. Being the biggest alternative investment company, Blackstone specializes in private equity, credit and hedge fund investment strategies, as well as financial advisory services, such as mergers and acquisitions (M&A), restructurings and reorganizations, and private placements. The company has existed since the mid 80’s and has overcome multiple financial crises during the past decades.
We know the company and what it specializes at, but do we know the head and heart behind it? In this article, Patrick Dwyer will share the history of Stephen A. Schwarzman, the Chairman, CEO and co-founder of Blackstone Group. A man who has been involved in every phase of such an important firm since it was founded in 1985. Mr. Schwarzman has helped the company become a leading global asset manager with $344 billion Assets Under Management.
Stephen A. Schwarzman was born in a Jewish family in Philadelphia and grew up in nearby Abington, Pennsylvania, where he attended public schools. He comes from the working-class family and always help jobs supporting his father’s drapery and linen business. After finishing high school, he went to Yale University during the same period as George W. Bush did, and studied social sciences: psychology, sociology and anthropology, but not economics. Without having a clear mindset about what he was going to do with his career, he met Yale alumnus Bill Donaldson, and after graduating in 1969, he joined Donaldson’s investment banking firm, Donaldson, Lufkin & Jenrette, where he developed a taste for corporate finance and decided to enter Harvard Business School, from which he graduated in 1972.
Later on, Schwarzman joined Lehman Brothers, where he became an expert on mergers and acquisitions and made a favorable impression on the firm’s new Chairman, former Commerce Secretary Peter G. Peterson. Because of his talent and incredible business eye, at age 31, he became Managing Director of Lehman Brothers, chairing the firm’s Mergers and Acquisitions Committee. In 1985, he leaves the company and joins Peterson –his former boss and mentor- to start a new venture called Blackstone Group.
Schwarzman and Peterson started the Blackstone group with only two employees and only $400,000 of their own money, competing with industry giants such as Salomon Brothers, Goldman Sachs and Morgan Stanley. When Blackstone started operating, there was general interest in leveraged buyouts -the buying of companies with borrowed money. Mr. Schwarzman motivated to reach greatness, raised nearly a billion dollars for Blackstone’s first private equity fund, investing in privately held companies -those whose shares are not traded on the public stock exchanges. Thanks to his expertise in a merger-friendly environment, Blackstone prospered.
In 1991, during the real estate market recession, Schwarzman decided to invest in the real estate market, acquiring highly lucrative properties at depressed prices. In the following years, Schwarzman and Blackstone invested in different industries -including healthcare, high tech and communications, concentrating most of his investments in the United States, Britain and Germany.
Besides all its private equity operations, Blackstone manages hedge funds and provides restructuring advice to corporate clients. The firm has assisted in some of the largest mergers ever transacted between Japanese and American companies, and since the late 90’s has been a principal adviser to Sony on its foreign acquisitions.
In 2007, at the height of its success, Schwarzman decided to take Blackstone public, a first for a private equity firm in the United States. Taking the firm public allowed ordinary individual investors to participate in Blackstone’s unparalleled earnings. In the largest initial public offering (IPO) in history, Blackstone entered the market at a value of over $40 billion. At the time, Blackstone controlled nearly 50 companies in different industries.
Mr. Schwarzman is an active philanthropist with a history of supporting education and schools. He is an enthusiastic supporter of the arts and culture, being a longtime director of such major cultural institutions as the New York Public Library – to which he donated over $100 million dollars in 2008 – and the New York City Ballet. From 2004 to 2010, he also served as Chairman of the John F. Kennedy Center for the Performing Arts in Washington, D.C.
He has also been a generous benefactor of his alma mater, Yale University. In 2015, he made a gift to the University of $150 million to establish a new center for cultural programming and student life. An even more ambitious project is the creation of Schwarzman College at Tsinghua University in Beijing, China. Mr. Schwarzman is also a member of The Council on Foreign Relations, The Business Council, The Business Roundtable, and The International Business Council of the World Economic Forum. He is co-chair of the Partnership for New York City and serves on the boards of The Asia Society and New York-Presbyterian Hospital. In 2007, Mr. Schwarzman was included in TIME’s “100 Most Influential People.”
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