Blackstone Not Quite There Yet

The Blackstone Group (BX) is expecting to hold a first close on its new private equity fund “any day now,” according to a source familiar with the situation.

The buyout behemoth originally planned to circle $8 billion of its $20 billion target back on April 11, but then pushed it back to June 27. Blackstone missed that deadline too, with a recent Dow Jones report suggesting that it would close on between $6 billion and $7 billion last Friday. Well, no deal — although I’ve got reason to believe that this postponement will be the last one. I’m also hearing that the $6-$7 billion figure is correct, but that the firm was actually south of $6 billion just a couple of weeks ago.

All of this leads to an obvious question: Why is Blackstone Group having trouble raising new capital? Before I answer, please note that plenty of firms would sell their summer associates to have this type of “trouble.”

Ok, now some answers:

  1. Blackstone has told prospective investors that it doesn’t really need the capital yet, because new deal-making has been slower than originally expected. It’s also said that it will hold a series of rolling closes, as it’s done before. The result is that certain LPs are paying attention to other firms with tighter timelines. They’ll invest in Blackstone, but there’s no reason to rush things.
  2. Fund-raising is tough all over, particularly for mega-buyout firms.
  3. Certain limited partners have balked at certain terms in the original Blackstone LPA, including fee splits and PIPE deals (i.e., Deutche Telekom). Normally Blackstone could push all that aside, but we are in a rare moment where LPs actually have a bit of leverage…