Blackstone Group bx said Wednesday that it raised $21.7 billion for the world's biggest private-equity fund, just as a global credit crunch slows leveraged buyouts.
The fund is more than triple the $6.45 billion pool Blackstone raised five years ago and tops the $20 billion amassed by Goldman Sachs in April. Shares of New York-based Blackstone, which sold stock in an initial public offering in June at $31.50, rose 37 cents to $25.27 after it announced Wednesday that it is closing Blackstone Capital Partners V, meaning it isn't accepting new investment.
Blackstone has used the fund to buy companies from Nielsen to Hilton Hotels, helping fuel a record $707.8 billion in private-equity transactions this year, data compiled by Bloomberg show. The pace of deals has slowed by a third since June, as investors who'd snapped up the loans and bonds used to fund leveraged buyouts refused to buy debt for takeovers including Alliance Boots and ServiceMaster.
"The credit markets may be shut for now, but they won't be shut forever," says Steven Kaplan, a professor at the University of Chicago who studies private equity.
"The private-equity firms have a ton of money, and they're not going away," he says.
Blackstone, which started to plan the fund in 2004, has already committed to spend two-thirds of the money, the firm said in the statement. A private-equity firm typically takes several years to invest the money in an individual fund.
Blackstone's $4.75 billion IPO, the biggest in the USA this year, and co-founder Stephen Schwarzman's high profile — he held a birthday party in February that featured Rod Stewart among the entertainers — have drawn scrutiny previously unseen around private equity. Congress is weighing measures that may more than double the amount of taxes buyout firms pay.
Virgin Media on Tuesday postponed a planned sale of the company, and Cadbury Schweppes last month delayed the sale of its U.S. drinks division as banks struggle to find investors willing to buy an estimated $400 billion in debt related to leveraged buyouts, according to Baring Asset Management.
Schwarzman and co-founder Peter Peterson started their firm 22 years ago and now control companies with more than 500,000 employees and $90 billion in annual sales. The firm's deals this year include the $19.9 billion purchase of Sam Zell's Chicago-based Equity Office Properties Trust and the $20 billion takeover last month of Hilton, the No. 2 U.S. hotel chain.