The Power Of Blackstone's Fees

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Wall Street banks had 646 million reasons not to cross the Blackstone Group last year. That’s how much the private equity giant paid them in fees for its various deals, according to Dana Cimilluca’s reading of the latest report on fee data from Dealogic. It’s more than any other private equity shop paid to the banks. (The runner-up, at $617 million, was the private equity business of Goldman Sachs, much of which may well have gone back into Goldman’s investment bank.)
Over at Blogging Buyouts, Zac Bissonnette follows this up by asking whether the desire to make nice with Blackstone—or fear of offending the top fee payer—might have influenced Wall Street analyst coverage of the Blackstone IPO.
“One indication of possible bias on the part of analysts may be the divergence between the ratings given by sell-side analysts versus independent research analysts,” Bissonnette writes. He then goes on to demonstrate that divergence.

Thomson/First Call reports that nine analysts cover Blackstone: 4 strong buys, 4 buys, and 1 hold.
Jaywalk Consensus polled 6 independent analysts -- "professional firms that attest to having no investment banking or other potential conflicts that might impact the integrity of their research" -- and found 1 strong buy, 1 buy, and 4 holds.

But is Blackstone's power waning? Cimilluca points out that last year’s fees were lower than the prior year, reflecting the slowdown in M&A in the second half of the year. He speculates that this might have been what emboldened Lehman Brothers and JP Morgan to balk at financing the acquisition of PPH Corp by Blackstone. If you stop paying the piper, you don’t get to call the tunes anymore.
Note to Investment Banks: Cross Blackstone at Your Peril [Deal Journal]
Did investment banking fees influence analyst coverage of Blackstone? [Blogging Buyouts]

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