“What it takes: Lessons in the Pursuit of Excellence” by Stephen Schwarzman.

I love reading business books. I find them hugely rewarding; a great mix of business insights, history, and inspiring stories of success in the face of great odds (or luck).

I chose Schwarzman’s book as I have heard Blackstone’s name a lot over the last few decades but never really spent much time investigating. They always seem to be lingering in the background of world events, a huge player that was secretly moving the pieces on the global chess board. A group that world leaders, that US Presidents, would call to ask for advice and/or favours. They seemed worthy of investigation.

Schwarzman takes the reader on a journey through his life from working the weekends in his father’s linen store to attending Yale (where he joined the Skulls and Bones society and rubbed shoulders with the likes of George W Bush) and then onto Harvard Business School. There is also an interesting detour into the Army Reserves around the same time that the Vietnam war was reaching its end (he did not see active service but was trained by many that did). Throughout, he tells a tale of always being ready to challenge authority and drive people and organisations to change for the better.

He joined Lehman Brothers and quickly gained a reputation as an excellent manager of M&As (Mergers and Acquisitions), overseeing the $488m merger of Tropicana and Beatrice Foods, on the way to becoming their head of M&As at the age of only 31.

However, he was determined to go it alone and break free from the corporate structures he felt were holding him back. In 1985 he formed Blackstone in conjunction with his former boss Peter Peterson. In 1987 they secured funding from the likes of General Motors and Prudential as well as many Japanese investors in order to begin their own private equity business. Initially, investment was slow so Blackstone ran a successful M&A service on the side to keep the lights on – but the real money to be made was in the private equity side of things.

Blackstone would make money in two ways, from a yearly flat management fee on the assets under their control and in an agreed share of the profits made each year by the fund. Needless to say, they were very successful and by 2020 were by far the largest private equity firm in the world. In becoming so Schwarzman and his team had used a combination of good investor relations, leveraged buy-outs and a 2007 stock market floatation to generate enough cash to plough back into the business and keep it growing.

Private equity has a bad reputation in some circles and Schwarzman acknowledges this and makes a strong defence of the industry. He claims that far from ‘asset stripping’ the firms they manage they aim to build something stronger – take over a company, refashion it, and sell it on once it is in a better place. He cites their turn around of the Hilton hotel chain as one such example, which had been languishing behind the competition with tired hotels and terrible service but now boasts excellent facilities across the globe and is an industry leader. He also makes the claim, again with some merit, that the funds he is investing are very often from large public sector pension funds – Blackstone’s success benefits millions of teachers, firefighters and nurses across the USA. He is especially proud of the returns he can bring to these people and sees the work they do as a vital service to the public.

It is a fascinating read and a great insight to an industry that many know little about but which controls so much of the economy around us.

If you have students that would be interested in learning more, especially grasping with key concepts like private equity, leveraged buyouts and mergers and acquisitions then there is a free lesson to support their learning here.

Hope it helps.