The Blackstone and Taubman affair

Abigail Hofman
Published on:

Perhaps the most interesting story of the month was the news that Paul Taubman was selling his recently formed corporate finance firm, PJT Partners, to Blackstone, and that Blackstone would spin off its entire advisory arm in to a standalone entity. Ostensibly this is a good thing as Blackstone, which manages over $200 billion of assets in private equity and real estate, is often accused by advisory clients of having conflicts of interest. The new advisory entity will still be 65% owned by Blackstone, so I’m not convinced this new structure answers the conflict of interest criticism. But perhaps I’m missing something.

Taubman, a former Morgan Stanley employee, rose to the dizzy heights of co-president of institutional securities at the investment bank. However, he and the other co-president, Colm Kelleher, didn’t work well together. Chief executive James Gorman was eventually forced to choose one man to lead the division. In November 2012, he plumped for Kelleher.

Taubman looked like the loser, but might yet turn out to be the real winner. In 2013, Taubman ranked as number 11 in the global M&A league table because of two large deals that his ‘kiosk’ advised upon (Verizon/Vodafone and Comcast/Time Warner). That is impressive. I’m sure the fees involved would have been lucrative, bearing in mind Taubman’s low overheads. No doubt Taubman has secured a good price for selling his recently established boutique to Blackstone. I will be interested to see how the re-focused, Blackstone advisory franchise fares. The transaction is expected to close in 2015.

Last month, I wrote about Bill Gross flouncing out of Pimco in the manner of a spurned suitor and into the arms of Janus. I was amused by an article in the Financial Times that talked about Larry Fink, chairman and chief executive of BlackRock, ‘taking a swipe’ at Pimco’s star-manager culture. “We have a team-based investment philosophy, with no centralised CIO or single decision maker,” Fink said on the asset manager’s recent earnings’ call. Some might argue however that at BlackRock itself, all roads lead back to, and revolve around, its founder.

Fink is no fool; he knows that clients have been unsettled by the recent turmoil and exits at Pimco. A senior institutional fund manager told me that he got a call from Fink a few days after Gross left Pimco. Fink said slickly to my mole: “Obviously, if you are re-considering your fixed income portfolio, we are always there for you.”

Another mole whispers that, during this period, Fink also called Michael Diekmann, the chief executive of Allianz. BlackRock is a large shareholder in Allianz, and frosty Fink was apparently complaining that the upheaval at Pimco was not beneficial for the Allianz stock price. Yet Pimco’s problems are probably a promising opportunity for BlackRock, as they should be able to take assets from a competitor. Obviously, it’s not only Blackstone that has conflicts of interest!