Blackstone to Spin Off Its Advisory Business With Taubman

By Kiel Porter and David CareyRelated

• Blackstone Announces Tax-Free Advisory Business Spinoff

Blackstone Group LP (BX), the world’s largest alternative-asset manager, is spinning off its investment-banking business into a stand-alone company competing with the likes of Evercore Partners Inc. and Moelis & Co.
Paul J. Taubman, who left Morgan Stanley in 2013 after 30 years, will merge his firm PJT Partners with Blackstone’s advisory unit into a new, public entity that he will lead, according to a statement today from New York-based Blackstone. He and his current partners in PJT will own 35 percent of the new boutique; Blackstone’s current shareholders will own the remaining 65 percent.
Blackstone is spinning off the units, which
include mergers and acquisitions, restructuring and fund services business Park Hill Group, in an effort to reduce conflicts of interest with its money management business. Companies the Blackstone advisory division has worked with include PepsiCo Inc., Procter & Gamble Co. and American International Group Inc.
“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,” Blackstone Chairman Stephen Schwarzman said in the statement. “The separation of our investing and advisory areas will create new growth opportunities for both businesses.”
Blackstone rose 0.4 percent to $29.86 at 9:56 a.m. in New York. The stock has declined 5.2 percent this year.

Early Years

In the firm’s early years, Blackstone co-founders Schwarzman and Peter Peterson relied heavily on merger advisory work to pay the bills until the private-equity operation got off the ground. Today, advisory is the smallest of Blackstone’s five units. Last year, it accounted for $420.2 million, or 6.4 percent, of firmwide revenues and $75.7 million, or 2.1 percent, of economic net income, which includes cash and noncash earnings.
PJT has advised on two deals with a total value of almost $76 billion this year, according to data compiled by Bloomberg. That puts him much higher in the league table than Blackstone, which has advised on 11 deals worth about $4 billion, according to the data.
Park Hill earlier this year recommended that a client sell about $250 million in private-equity investments to another Blackstone unit, two people with knowledge of the matter said in July.