PE Hub has a great post this morning on the annual meeting of the Blackstone Group. Blackstone describes itself as an alternative asset management company with $92 billion under management. However, Blackstone's beginnings were as a private equity fund and they built their reputation doing LBOs.
A few quotes from Blackstone illustrate some important lessons.
- “You almost never screw up by replacing a CEO, but keeping a weak one can be devastating.” Weak management has untold, continuing consequences. When you have a problem with a manager, replace them. The higher in the organization the more resolve you should have to replace them quickly.
- "Blackstone’s largest-ever equity check was in the Hilton Hotels buyout. Its $1.44 billion investment was marked down by 48.68% as of 12/31/08." Write off or write down bad assets. Weak accounting is a black cloud that hangs over a company. Also, if you take the write downs now they are behind you. In sailing they say to reduce sail the first time you think you need to. Write off assets at the first sign of a decline in value or create a reserve.
- “When things do turn, we will be rapid commiters of capital, similar to 2003 and 2004. Until then, we will be very cautious exposing LPs’ capital, with the exception of purchasing debt at significant discounts.” When the economy turns up there is a huge pool of capital now on the sidelines waiting to invest again. When Blackstone makes a new, large investment (say over $500 million) in a company, that will be a signal that Blackstone thinks the economy has turned.
Miami, FL