The sky is bright, uncontested take-private buyouts are becoming are rare breed and I’m still trying to rationalize how Texas’ loss on Sunday didn’t bust my bracket. In other words, it’s time for some Tuesday Talkback.
First up are some thoughts on the prospective Blackstone IPO. Lawrence writes: “The thing I struggle with is how can KKR and Blackstone now go to a prospect and tell them that the trouble of being public has become too onerous – with a straight face. That argument was once upon a time very compelling. Now it flies in the face of what the suitor has become; public.” I wrote yesterday that take-private buyouts are only short-term salves for the onerous nature of public markets, as such targets will eventually go public again. So the “Blackstone is being hypocritical” argument is faulty. I also meant to add that there are two major complaints about being a public company nowadays: Regulation (i.e., SOX) and meeting Wall Street expectations. The first really is only a legitimate complaint for small companies, as the costs are relatively insignificant for a multi-billion dollar group like Blackstone. The latter could be interesting, however, which is why I asked if Blackstone will be more accountable to its LPs or public shareholders. Will Wall Street understand and accept the J-curve, or will Blackstone feel pressure to execute quick flips?
Adam: “This IPO is just driven by greed and the need for Schwarzman to be officially listed as one of the members of the north of $10 billion Forbes’ club… The same greed is driving CEOs of publicly listed company to go private, as through such an exercise they can increase their salaries and overall compensation without attracting the fury of public shareholders… What about the possibility of activists raiding a publicly listed Blackstone for meager performance, or need to divest some investments?”
Josh: “I keep reading that TPG will be the next to file for an IPO, but wouldn’t Carlyle, KKR or Apollo make more sense? You wrote about the importance of Blackstone being a diversified asset management firm as opposed to a private equity-only firm – but TPG is more the latter than the former.” Agreed Josh, and Scott Sperling of TH Lee Partners made a similar point about his own firm on CNBC last Friday. But I expect most of those firms – including TPG – to at least get into queue by filing S-1s, and then waiting to hear about what qualities the Blackstone buyers are most interested in.
*** Arden on my note last Friday that SoCal is poised to surpass New England as the second-most popular place for VC investment: “A big part of it is obviously deal-flow, but I also think that East Coast VCs are more willing to travel west than vice versa. They also are more likely to put partners on the ground in satellite offices. Just look at firms like CRV and Greylock – they are now purely bo-coastal, if not more tilted toward the West.” Great point Arden. Here’s a more extreme case in point: Spark Capital (which is prepping a new fund) is a Boston-based firm with not a single portfolio company in New England. It’s got a couple in New York and in flyover country, but the most are in California.
*** Melanie: “I’m surprised that Romney didn’t perform better in the Presidential Poll, given his private equity background. Maybe even more surprised that Obama was the leader, given how much private equity investors harp about experience.” Agreed on both counts Melanie – and particularly about Romney. I must be in a Boston/Bain cocoon, because all the big PE folks I speak with seem to be supporting Romney (more a Bain cocoon than a Boston one, actually, since the ex-Gov isn’t too popular in these parts anymore). Perhaps they just didn’t participate…