Blackstone To Spin-Off Advisory Arm

Oct 13 2014 | 10:09am ET

Before it was a private-equity powerhouse, the Blackstone Group was a boutique investment bank. But the firm has now decided to exit its original business line with a plan to spin-off its corporate advisory unit.

The New York-based firm said Friday that it would merge its financial advisory unit with PJT Partners, the mergers and acquisitions advisory run by former Morgan Stanley executive Paul Taubman. Among the businesses being split from Blackstone is its placement agency, Park Hill Group, which raises money for hedge funds and private equity firms.

Blackstone began as a corporate advisory firm in 1985. Firm co-founder and CEO Stephen Schwarzman, who will be the new company’s largest shareholder, albeit one without voting rights, said that the decision comes “not without mixed emotions. But advisory is a shrinking part of Blackstone’s business, accounting for just over 5% of its revenue in the 12 months ended June 30. Indeed, it is Blackstone’s smallest business line—and getting smaller, as competition and conflicts of interest stemming from Blackstone’s other units have hampered its efforts to win business.

“Our folks were not getting hired by our competitors,” Blackstone spokeswoman Joan Solotar said. “The number of transactions that the advisory folks were told to stand down on has grown exponentially. That was becoming increasingly just a constraint on the business.”

“We’re taking great pains to ensure this company is launched as an independent enterprise,” Taubman said.

About 350 Blackstone employees will move to the new business, joining PJT’s roughly one-dozen professionals. Blackstone’s current advisory head, John Studzinski, will not be among them, remaining with Blackstone is an undefined role.

The company will be roughly 65% owned by Blackstone’s shareholders, of whom Schwarzman is the biggest, with the rest owned by employees of the spun-off entity.

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