1. If you were a fund LP how would you view the structure Blackstone has put in place to go public?
IPO offered Blackstone certain advantages:
- Access to the capital markets, as a new source of funds. - Blackstone could also use its own stock for the acquisitions. - It changed compensation structure and provided more incentives to junior management and help to keep top employees motivated long-term.
Blackstone decided to adopt the MLP structure which allowed to establish a governance structure that would require minimum structure to the existing structure.
As a limited partner I would look negatively at the idea of Blackstone to go public due to the following reasons: - In case Blackstone ever comes under the market pressure it might push them to increase the fees to support returns, especially in the light of the guaranteed dividends. - Availability of the capital and stock for making deals makes them less interested in the funds and LPs lose control they had before over funds and terms funds operate. - Increased costs due to the extensive reporting requirements which again might force the company to increase fees. - Market pressure and expectations might force Blackstone to take different than before approach to risk assessment. - Interests of Blackstone and LPs might not be aligned if Blackstone goes public.
2. As a potential employee how would you view the Blackstone compensation structure against a similar offer from a private equity firm that was not public?
As an employee I prefer an option that does not link me long term to a firm. If in a partnership the structure of my remuneration is salary and a carried interest has a shorter period of time then I prefer this structure. I assume that vesting period of shares takes longer period than it is required to receive a carry (my share in it); this will link me longer term to the firm. I want to...