As Blackstone Barrels Toward Trillion-Dollar Asset Goal, Growth Is In, Value Out

Blackstone Group Inc.

BX -0.77%.

has become an investment hub, with successful bets on undervalued companies. In the next phase of its expansion, the company is focusing on companies with high growth prospects, even if you have to pay for it.

С

Jonathan Gray

When he took the helm at Blackstone in 2018, he urged the firm’s leaders, who collectively manage $619 billion in assets, to develop broad-based beliefs and invest in companies or assets that could benefit from these trends.

This new approach has led the New York-based company to invest billions of dollars in high-growth companies, including in the technology sector, to which it previously paid less attention.

He took Blackstone out of its traditional comfort zone of underperforming by cutting costs and improving the company’s efficiency and increasing juice profits with the help of large amounts of debt.

The growth spurt has affected nearly every part of the sprawling company, including its real estate, credit and hedge fund businesses. Of the assets of the major acquisition fund, a large portion is in

Bumble Inc,

BMBL 2.98

which Blackstone acquired in 2019 in a deal that valued the dating app’s owner at $3 billion. The value of that stake has increased nearly fivefold, with the company’s market capitalization of about $14 billion after its IPO in February.

Mr. Gray’s thematic approach and resulting focus on growth show how the 51-year-old CEO’s successor

Steven Schwartzman.

bets that the company will manage $1 trillion in assets by 2026.

Investing means looking to the future, but the future is moving faster now, he said in an interview. You want to know which cases will benefit from this change.

The main goal is to get people from different parts of the company to think about the same issues and discuss them with each other.

Headquarters in midtown Manhattan. Blackstone currently manages $619 billion in assets.

Blackstone has long been interested in identifying growth areas, but under Mr. Gray it has become clearer what it won’t buy, he said.

Joseph Baratta,

Global Head of Private Equity within the company. In addition to retail, established media and telecommunications providers are on the list, as well as companies that use single-use plastics.

There are certain types of companies we will not invest in, no matter how cheap they are, Baratta said.

This strategy is not without risk. The assets that the company accumulates may be among the first to be affected if, for example. B. Recent interest rate hikes continue as the economy emerges from a pandemic crisis.

Competitors such as.

Apollo Global Management Inc.

have largely resisted the temptation of a growth strategy, preferring to invest in hard-to-reach areas such as gaming and physical retail. But even Apollo, traditionally focused on value, has closed more technology-related deals in its recent buyout funds. The firm also attracted two firms with excellent controls that focus on growth-oriented transactions.

Themes that have guided Blackstone’s recent investments include the shift to e-commerce and the technological evolution of the life sciences industry.

The company has created a new business unit specializing in life sciences investments, including support for late-stage new drugs – the latest target for a traditional leveraged buyout. He rented a

John Korngold,

Growth investments by veterans General Atlantic builds new businesses by taking minority stakes in growth companies.

Blackstone, which had virtually no presence on the West Coast, opened an office in San Francisco and hired executives and consultants from technology companies such as

Amazon.com Inc.

и

Snowflake Inc.

UNOSH 1.90

And in November, she hired

Jennifer Morgan,

The former co-CEO of software giant SAP SE will lead a team that helps the company’s 200+ portfolio companies accelerate their growth through digital transformation.

Investing is looking to the future, but the future is moving faster today, says Blackstone’s Daily Leader.

Blackstone is not alone. More and more competitors and equity investors are betting on growth as the decade-long bull market drives up the prices of all forms of investments, leaving fewer and fewer reserves of value. The two-year moving average of purchase price multiples for U.S. acquisitions reached a record 12.8 times before interest, taxes, depreciation and amortization in 2020, according to an analysis by McKinsey & Co. This is up from 11.9 times in 2019 and 10.2 times in 2015.

Sir, I want to thank you for your support. Gray’s thematic orientation is born of personal experience. He led Blackstone’s $26 billion deal to

Hilton Hotels Corp.

HLT -0.99

on the eve of the financial crisis. As the hotel chain’s operations suffered from the subsequent economic downturn, outside observers often called the deal a failure. Instead, Hilton became one of the most successful private equity investments of all time, eventually generating more than $14 billion in profits, more than triple Blackstone’s original investment.

Gray said his experience has taught him that the efforts of Blackstone and Hilton’s management may not have been sufficient if the company does not benefit from a long-term growth trend in global travel, a proposition that underlies the investment.

All along, it was important to choose the right neighborhood, not the house, Mr. Grey said.

(Mr. Gray’s love of hotels never lets him down, as evidenced by this month’s agreement between Blackstone and Starwood Capital Group to acquire

Extended Stay America Inc.

FIRST 0,26

betting that a rare bright spot in the hotel industry will continue to flourish during Covid-19).

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He also led the company’s first foray into industrial bearings in 2010, betting on the global rise of e-commerce. Blackstone is currently the largest owner of e-commerce warehouses, with a portfolio of approximately $100 billion of 880 million square feet of such properties worldwide.

Two highly successful real estate deals helped Mr. Gray move up in the private equity giant.

An example of the application of its growth-related themes across the business is Blackstone’s investment in a biotech company in April 2020.

Alnylam Pharmaceuticals Inc.

ALNIE 2.94%

The $2 billion deal included a $1 billion investment led by Blackstone Life Sciences as part of future total royalties for the cholesterol drug.

The debt also enabled Alnylam to obtain a term loan of up to $750 million, and Blackstone purchased shares in the company for $100 million. The Company’s properties are also owned by Alnylam’s landlord, BioMed Realty, which includes 91 life science research properties. Last year, Blackstone agreed to sell the company from one fund to another in a deal that values BioMed at $14.6 billion.

Growth failures have affected nearly all of Blackstone’s businesses, including real estate, credit and hedge funds.

Please email Miriam Gottfried at Miriam.Gottfried@wsj.com.

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