In January, Blackstone announced that it would acquire GSO, an alternative asset manager specializing in leveraged finance. The acquisition will give Blackstone one of the biggest credit platforms in the industry. GSO’s $10 billion in assets augments the $11 billion that Blackstone already has in corporate debt operations.
Blackstone got a good deal, paying just $620 million initially; it will pay an additional $310 million over five years depending on earnings targets. That values GSO at just 9% of assets under management. That is far less than Blackstone’s own valuation despite GSO’s having suffered a 40% fall in its stock price since launch.
"We all wanted GSO," says a Morgan Stanley source. Most peeved, however, must be Merrill Lynch, which bought a 20% stake in GSO in May 2006 at what was probably a higher price – the terms of the minority stake were not disclosed. Blackstone’s long-standing relationship with the GSO principals no doubt played a part in the partnership decision.
An increasing number of acquisitions are being made in the alternative investment sector. Erika Cramer, advisory director at financial services M&A boutique Silver Lane Advisors, says that over the past three years, deal flow has tripled.
