Return to search

Schwarzman outlines Blackstone’s ‘innovation machine;’ THL’s Josh Nelson discusses ‘valuation correction’

Blackstone is expected to this year hit $1 trillion of assets, thanks mostly to non-stop product creation; catching up with Josh Nelson from Thomas H. Lee Partners.

Happy Fri-yay dealmakers! Aaron here on the Wire.

I don’t know about you, but it sure seemed like things picked up this week, and I am all for it! As the old cliché goes, “news never sleeps.” Well, there are some industries where that is not the case. But I think I speak for everyone when I say, that is most definitely the case with private equity.

Speaking of news, this morning as I was drinking my coffee, I came across an interesting report. Seems as though Apollo is among possible suitors for Just Eat Takeaway.com’s Grubhub, Bloomberg is reporting. According to the report, other PE firms are doing their research and diligence – seems like it will be around a billion-dollar price tag to me. Now I am hungry…

New products. Blackstone is expected to this year hit $1 trillion of assets, a key milestone in the firm’s and private equity’s history, thanks mostly to non-stop product creation, writes Buyouts’ Kirk Falconer.

“You always have to be developing new products where the margins are greater and you can take the leading market share,” CEO Stephen Schwarzman said at the Bernstein 38th Annual Strategic Decisions Conference. “And if you really execute well on that, it’s very difficult for others to be as successful.”

For more on Blackstone’s “innovation machine,” read the full story here.

Valuation correction. I caught up with Josh Nelson from Thomas H. Lee Partners, when he introduced me to new healthcare hire Sam Hendler. (More on that in a moment.)  Nelson and I talked a lot about current market environment and dynamics, and I want to share his insights with you all.

Things can change quickly, and Nelson agreed the market has evolved over the past few months. The last time I spoke to him was for PE Hub’s ongoing PE healthcare spotlight series.

“The public markets are the easiest place to see it,” Nelson said referring to the changing economy. “Clearly there has been a valuation correction there, as many of the public stocks are off meaningful amounts. The private markets are stickier and a little slower on the way up and on the way down, so they have not corrected as much as the public markets. But the trend line is such that where we are seeing transactions and values today is lower than it was at the end of 2021.”

So, what does that mean for THL? Well according to Nelson, it means that the firm is still going to pay “top dollar” for “premium and great assets.”

“We are always thinking: ‘how we can bend the growth curve during our ownership period?’ Even though the prices may be less now than they were at the end of last year, there doesn’t appear to be any bargains,” he said. “This is not a market or an industry where you can buy something and just show up at quarterly board meetings and hope you have a good return four or five years later.”

I asked him if the closure of the IPO market is having any impact on exit planning, and he said that “right now, it is not impacting any of our recent or newer investments.”

“We will hold those for three to five years and follow our value creation plan, and presumably the IPO market for a good business will be available at some point in three to five years, or whenever we are ready to do that,” Nelson said. “For existing business in our portfolio, we did not have anything that was imminent to go public, but I think it is pretty clear right now that the IPO market is not open for most of us. So, we see it more on the other side, which is where we are spending time thinking through about some of the businesses that we liked in our identified sector opportunities that might have been thinking about going public in 2022 and probably don’t have that opportunity so at this point. Can we create a solution that is attractive to the seller, the management team and allow us to create an investment opportunity for ourselves in this market?”

Healthcare hires. This week saw some significant people moves. The afore-mentioned THL brought on Hendler as healthcare vertical team as a managing director, business development. Hendler came over in May from Harris Williams after 18 years there.

“Healthcare is hard and also really important and helping to make healthcare more efficient is going to be one of the most important things we will try to do across the 21st century, not only as investors but as citizens,” Hendler said. “Anytime you are in a market like the current one, it is going to require a certain level of nimbleness and flexibility and that is how we are oriented.”

“The plan here is for me to be a market-facing presence for THL bringing that sector-expertise perspective as well as bringing the relationships I have accumulated over my career to bear for our investment opportunities.”

Read the full story here.

Partners Group made a huge splash, as it brought in former Kindred Health CEO Ben Breier, who famously led the $4.1 billion sale of the healthcare provider to health insurer Humana and private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe in a take-private deal that closed in 2018. He also orchestrated the subsequent sale of Kindred to LifePoint Health, backed by Apollo Global Management, at the end of 2021, at which point he left the company.

I got the opportunity to sit down with Breier over zoom to discuss the move in what was one my most memorable interviews and stories I have written and was lucky to have the exclusive.

“I have been on the portfolio side of the PE world for a couple of decades, developed meaningful relationships with so many of the different people and firms out there,” Breier said. “I also developed my own view on how those people think about the world, adding value and what to do with assets. I am best at execution and operational excellence, with a balanced approach of quality, compliance and deep understanding of the regulatory side.”

Read the full story here.

Operational Excellence. Calling all operators. Do you know a best-in-class operator? If so, submit your nominees to enter Private Equity International’s Operational Excellence Awards 2022.

Submit your entries to OpEx@peimedia.com by Tuesday, June 21.

That is a wrap for both the day and the week. Enjoy the weekend. I know I am going to take advantage of the nice weather and go to the park, play a game of basketball and see if I can still dunk. Until next week…

Cheers,
Aaron